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DE RUEHFR #2248/01 3461322
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R 111322Z DEC 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 5034
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 PARIS 002248 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ECON SENV EUN
SUBJECT: EU ENERGY SECURITY STRATEGY SEMINAR 
 
REF: BRUSSELS 01761 
 
¶1. (SBU) Summary.  Participants in a December 1 EU Presidency 
seminar in Paris on energy security concluded that EU goals on 
energy security, energy efficiency, and the fight against climate 
change are mutually reinforcing.  The financial crisis and economic 
downturn has boosted EU solidarity and justifies a greater EU 
leadership role in coordinating investment and infrastructure 
improvements.  Achieving energy security requires big money, 
political sensitivity, and dialogue to create a stable legal 
framework that minimizes risks of supply and demand shocks.  All 
agreed the EU should speak with one voice in relations with non-EU 
suppliers and transit countries, though how to get there was 
unclear.  End summary. 
 
¶2. (SBU) Economic, development, and industry ministers from France, 
Italy, Lithuania, Sweden, Poland, Greece, and the Czech Republic 
discussed strategy options for a common EU energy security policy at 
the December 1 French EU Presidency seminar.  Key speakers included 
Malcom Wicks, U.K. Prime Minister's Special Representative on 
International Energy Issues; Nobuo Tanaka, Executive Director, 
International Energy Agency; Plutarchos Sakellaris, Vice-President, 
European Investment Bank; Andris Piebalgs, European Commissioner for 
Energy; Anne Laperrouze, European Parliament Member and Reporter of 
the Second Strategic Energy Review.  Industry majors (Total, RTE, 
E.ON Rhurgas, Dow, Dalkia/Veolia) participated.  Three round-table 
discussions focused on the EU's long-term security of supply, energy 
crisis prevention and management, and member states' contribution to 
European energy security. 
 
EU VISION OF ENERGY SECURITY 
 
¶3.  (SBU) Participants agreed that policies for energy security, 
energy efficiency, and the fight against global warming are mutually 
reinforcing.  France's Grenelle measures on environmental 
protection, the EU Strategic Energy Review, the Energy-Climate 
Package, and the ultimate goal of a single, integrated European 
energy market comprise a coherent policy foundation with concrete 
targets.  The vision should not be shaken by the financial crisis or 
recession.  Instead, there is an opportunity to integrate structural 
policies such as energy security initiatives into stimulus packages 
and EU macro-economic policies.  French State Minister for 
Sustainable Development Borloo heralded the "energy transition" of 
the twenty-first century that will bring far reaching long-term 
changes in production and consumption modes. 
 
INVESTMENT 
 
¶4.  (SBU) In the short term, the financial crisis and economic 
recession will impact energy investment.  Low oil prices mean 
inadequate rates of return for new projects.  The real issue is 
medium term investment as "the era of cheap oil is over."  If 
investors take on significant renewable energy (RE) or nuclear 
projects, they need EU-wide regulatory predictability and 
transparency, IEA DG Tanaka concluded. 
 
INFRASTRUCTURE PRIORITIES 
 
¶5.  (SBU) General consensus emerged on infrastructure priorities 
taken from the EU Energy Security and Solidarity Action Plan of the 
Second Strategic Energy Review.  Key areas are: electrical 
interconnections and new supply corridors, external energy 
relations, oil and gas stocks and crisis response solidarity 
mechanisms, energy efficiency, and the best use of EU's indigenous 
energy resources.  Participants also supported the Commission's 
infrastructure aims (reftel), notably the need to build up links 
with the Baltic countries.  The Deputy Minister of Economics for 
Lithuania stressed that "energy transition" means reconstruction of 
its internal electricity grid and network strengthening, at a 
projected cost of 1.7 billion euros.  Other urgent priorities 
include an EU LNG action plan and addressing the rising demand for 
diesel fuel that is straining European refining capacity. 
 
¶6.  (SBU) Total, Dow, and Polish and French transmission system 
operators argued that EU project development should consider 
relative costs, flexible contracts, and exploiting sources where 
they make sense.  Notable problem areas relate to the establishment 
of sufficient gas volume and transit conditions for the southern 
corridor, social acceptability for high voltage lines, windmills, 
and nuclear strategies in Northern Europe. 
 
ENERGY EFFICIENCY 
 
¶7.  (SBU) Discussion on efficiency focused on energy conservation 
measures, buildings, energy labeling, and cogeneration.  The EIB 
Vice-President said equity would generally be available in Europe 
for the energy sector.  In 2009-2020, the EIB's energy budget would 
remain at its current 6 billion euros p.a., with 20 percent 
earmarked for RE projects.  (Note: We assume in real terms.  End 
note.)  Several financial organizations and the EIB are proposing a 
new financing initiative for ECOFIN consideration that would help 
 
PARIS 00002248  002 OF 002 
 
 
mobilize large-scale capital markets funding for projects promoting 
energy efficiency, the clean use of fossil fuels, combined heat and 
power, and renewables.  Attendees stressed that regulatory measures 
aimed at energy efficiency must not translate into higher prices for 
consumers.  Energy must be efficient and affordable. 
 
ROLE OF EU 
 
¶8.  (SBU) Former IEA Director Claude Mandil noted that member state 
concerns over foreign ownership and energy dependence were not 
raised during the seminar.  EU leadership in energy security is 
needed to promote coherence among rules, procedures, safety, and 
security regulations, including the nuclear sector.  Tanaka spoke of 
a "Green New Deal." (Comment: On the margins, Tanaka told us the 
U.S. needed to convince China that the new green economic 
development model was commercially viable.  If demand of emerging 
economies shifts to RE and clean technologies, industry and 
investment will follow.  Setting a carbon price would incite 
investment in carbon capture and storage technologies. End comment.) 
 Participants agreed the EU should map out infrastructure projects 
in RE production to ensure indigenous energy sources are maximized, 
and a fair balance among long-term interests is achieved.  There is 
nothing wrong with imports or interdependence, it's a question of 
minimizing risk, Mandil concluded.  (Comment:  In an embassy 
follow-up meeting with Mandil on December 10, he expressed 
deep-seated doubts about solidarity mechanisms, citing the Germans 
and the Czechs who see some member states as energy freeriders who 
fail to take adequate budget measures to build up their energy 
sectors.  End comment.) 
 
EU EXTERNAL RELATIONS 
 
¶9.  (SBU) On Russia, an expert from the EU-Russia Center said too 
much political pressure is counterproductive.  Russia feels 
threatened by EU efforts to diversify its clients.  Export 
conditions dictate that Russian gas must be sold on the European 
market.  By 2012 Russia will face reduced export capacity owing to 
rising domestic and emerging economy demand, maturing old fields, 
and delays in the Shtokman gas project.  Total CEO De Margerie 
clarified that Russia is both a large consumer and exporter. 
Helping the Russians become energy efficient and encouraging 
investment in the EU are good moves.  De Margerie believes it is 
vital the EU go beyond import-export contracts, to pursue exchanges 
in research and development with Russia.  The EU needs to speak with 
one voice when dealing with third-party countries such as Russia. 
 
POLITICAL CHALLENGES 
 
¶10.  (SBU) De Margerie urged prudence in public statements on oil 
market issues, saying EU leaders make matters worse by "unjustified 
declarations" regarding terrorist threats and "crisis" that only 
fuels market anxiety.  He reminded participants there have been very 
few supply interruptions in Europe in the previous decades.  He is 
more worried about maintaining current oil production capacity, 
which is near its maximum level because access is increasingly 
difficult and costly.  EU Leaders should promote a technical 
dialogue with consumers, producers, and international oil companies. 
 Minister Borloo said the EU must articulate its EU energy security 
strategy.  Public action is critical to promote social acceptability 
but also since the energy market "will not regulate itself". 
 
EU CZECH PRESIDENCY 
 
¶11. (SBU) In 2009, the EU Czech Presidency intends to include 
infrastructure improvements, energy security, and solidarity 
mechanisms in conventional energy sources among its priorities. 
Flexibility is key in the event of supply disruptions, the Czech 
Deputy Minister for Industry and Commerce said.  Part of the 
solution is in fostering arrangements with the Caspian countries and 
key transit countries (Ukraine and Belarus), as well as continued 
dialogue with the Russians. 
 
¶12.  (SBU) Comment:  The one-day seminar was largely a brainstorming 
session on how to get Europe's energy house in order, with lots of 
talk about the need for a medium and long term investment and 
regulatory framework that will facilitate "energy transition." 
Although solidarity and interdependence were the bywords, the 
Lithuanian Deputy Minister's focus on the cost of network upgrades 
needed to achieve his vision of "solidarity" was a reminder that 
speaking in one voice will remain a challenge. 
 
PEKALA