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Viewing cable 09SKOPJE13, Macedonia Suffers Minimal Effects from Russian Gas Cutoff

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Reference ID Created Released Classification Origin
09SKOPJE13 2009-01-13 06:39 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Skopje
VZCZCXRO5286
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHSQ #0013/01 0130639
ZNR UUUUU ZZH
R 130639Z JAN 09
FM AMEMBASSY SKOPJE
TO RUEHC/SECSTATE WASHDC 7951
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE 0451
RUEHAK/AMEMBASSY ANKARA 0214
RUCNDT/USMISSION USUN NEW YORK 2361
RUEAIIA/CIA WASHINGTON DC
RUEKJCS/SECDEF WASHDC
RUCPDOC/USDOC WASHDC
RHEBAAA/USDOE WASHDC
UNCLAS SECTION 01 OF 02 SKOPJE 000013 
 
SENSITIVE 
SIPDIS 
 
USAID FOR E&E/EG/EI/JHEIDARIAN/RICHORD 
USDOC FOR 4232/ITA/MAC/EUR/OECA/CSE/JBURGESS 
USDOC FOR 4232/ITA/MAC/EUR/OECA/CSE/CRUSNAK/HSMITH 
AMEMBASSY ANKARA FOR FCS/JFLUKER/SCETINKAYA 
STATE FOR EUR/SCE, EUR/UMB and EUR/RUS 
 
E.O. 12958: N/A 
 
TAGS: ENRG PGOV PREL UP RS MK
SUBJECT:  Macedonia Suffers Minimal Effects from Russian Gas Cutoff 
 
Sensitive but unclassified.  Please protect accordingly. 
 
1. (SBU) Summary:  As a minor consumer of natural gas, Macedonia has 
been affected only minimally by the cutoff of natural gas from 
Russia through Ukraine.   Residential heating quickly transitioned 
to fuel oil and the greatest impact to date has been felt by two 
industrial users -- a steel producer and a pipe maker -- which 
together have placed about 2,000 employees on forced leave.  The GoM 
has responded by promising to provide fuel oil to those companies 
that can switch from natural gas, and seeking an active 
international role.  End Summary. 
 
----------------------- 
Limited reliance on gas 
----------------------- 
 
2.  (SBU) Natural gas has never been a critical energy source for 
Macedonia.  The country is served by one natural gas pipeline, the 
GA-MA (operated by Gasifikacija-Makedonija), which brings product 
originating from Russia, and transferred -- through Ukraine, 
Moldova, Romania and Bulgaria -- to Skopje.  The pipeline entered 
into service in September 1998.  Although the pipeline has a 
throughput capacity of 800 million cubic meters of gas per year, 
current use is only about ten percent of capacity.  In a country 
primarily reliant on electrical power, natural gas is not yet used 
to generate electricity, a task left primarily to coal and fuel oil, 
which accounts for about 70 percent of power generation, and 
hydro-electric, which accounts for another ten percent.  The 
remaining electrical needs are satisfied with imported power.  With 
such slight exposure, some GA-MA officials have said that the 
cutoff's impact on Macedonia will be minimal. 
 
------------------------------- 
Immediate effects of the cutoff 
------------------------------- 
 
3.  (SBU) Natural gas consumption in Macedonia is primarily 
industrial.  Twenty-six businesses rely on gas delivered through the 
GA-MA pipeline.  However, only two of these businesses, Skopje steel 
producer Makstil and pipe maker 11 October, located in Kumanovo, are 
unable to switch to alternative sources such as fuel oil to continue 
operating.  As a result, these two businesses have been forced to 
reduce operations, sending about 2,000 employees home on forced 
leave.  (Note:  Makstil had already been facing difficult times as a 
result of the global economic crisis, and as early as November 
executives had discussed sending employees home on forced leave 
during January holiday season.  End Note.)  Both companies have 
stated that they have no intention to lay off any employees as a 
result of this closure.  The remaining consumers of natural gas are 
industrial users such as Toplifikacija, the private producer of city 
heating in Skopje.  We understand they have switched to the use of 
fuel oil to satisfy energy needs previously met with natural gas. 
There is some anecdotal evidence that the transition has put some 
strain on equipment, but we do not know of people being in the 
cold. 
 
------------ 
GoM Response 
------------ 
 
4.  (SBU) Still, the GoM engaged businesses quickly after the 
cutoff.  On January 6, Prime Minister Gruevski, Deputy Prime 
Minister Stavreski, and Minister of Economy Besimi met with several 
representatives of country's Energy Regulatory Commission and 
industrial users.  Also present was Vlatko Cingoski, Chairman of 
Board of Directors of the state-owned electricity producer ELEM 
(Elektrani na Makedonija), who is widely seen as a trusted adviser 
to the PM on energy issues.  At that meeting, Stavreski offered to 
provide fuel oil from government reserves to companies as needed and 
said that Macedonia would closely follow developments and coordinate 
with other affected countries in the region. 
 
5.  (SBU) The GoM also has sought an active international role.  On 
January 8, Foreign Minister Milososki met separately with the 
Ambassadors of Russia and Ukraine to express GoM dissatisfaction at 
the cutoff and to urge resolution.  Speaking to the press, Milososki 
said that Europe's "energy security, including that of Macedonia, 
must not be brought into question due to a bilateral dispute. In 
 
SKOPJE 00000013  002 OF 002 
 
 
this context, we are faced with a serious diplomatic activity.  We 
are in regular contact with the Czech EU Presidency and regional 
countries."  In fact, DPM Stavreski had by then already discussed 
the issue with the Czech MFA, arranging the participation of 
Minister for European Integration Ivica Boceski and two "energy 
experts" at a planned EU-Russia-Ukraine meeting in Brussels on 
January 9. 
 
6.  (SBU) Comment:  We agree with the assessment that the impact on 
Macedonia of the gas cutoff will be minimal.  An extended closure 
could have serious effects on steel producer Makstil and the 11 
October pipe factory, and even the temporary loss of 2,000 jobs is 
significant in this small economy with high (33 percent, officially) 
unemployment.  However, the effects of the cutoff in Macedonia are 
not nearly as dramatic as those felt elsewhere.  We have received no 
reports of disruptions in residential heating, and most industrial 
gas users have successfully transitioned to fuel oil, a product for 
which Macedonia has sufficient refining capacity fed by crude oil 
pipeline from the Greek port of Thessaloniki.  End Comment. 
 
REEKER