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	UNCLAS        SECSTATE 02532
BRUSSECX:
    ACTION: ECON UECON
    INFO:   PAO UDCM UCUST UFCS PR POL UPAO UNAS UPOL UAGR
            UAMB DCM FCS AMB UAID DAO

DISSEMINATION: ECON
CHARGE: PROG

VZCZCBSO368
PP RUEHBS
DE RUEHC #2532/01 0092308
ZNR UUUUU ZZH
P 092255Z JAN 09
FM SECSTATE WASHDC
TO RUEHBS/USEU BRUSSELS PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 6810
RUEHAH/AMEMBASSY ASHGABAT PRIORITY 0579
RUEHKB/AMEMBASSY BAKU PRIORITY 7885
RUEHPG/AMEMBASSY PRAGUE PRIORITY 9396
ALL EUROPE COLLECTIVE
INFO RUEHTA/AMEMBASSY ASTANA PRIORITY 1616

UNCLAS SECTION 01 OF 02 STATE 002532 
 
SENSITITVE BUT UNCLASSIFIED 
 
E.O. 12958: N/A 
TAGS: CR ENRG EPET EU TK
SUBJECT: EU'S CASPIAN DEVELOPMENT CORPORATION 
 
SUMMARY 
------- 
 
¶1.  (SBU) The European Commission (EC) has proposed the 
creation of the "Caspian Development Corporation (CDC)," 
which it believes will accelerate Caspian natural gas and 
infrastructure development, specifically from 
Turkmenistan.  The Commission has proposed an expedited 
World Bank feasibility study on the CDC and related 
concepts.  The Commission has requested that the U.S. 
actively support their request for a World Bank 
feasibility study and the Deputies Committee has 
considered the idea and approved.  Posts, particularly 
USEU, Embassy Ankara and Embassy Prague, may draw on the 
points below in Para 5 to communicate U.S. support for a 
feasibility study on the CDC concept. 
 
BACKGROUND 
---------- 
 
¶2.  (SBU) The European Commission (EC) has proposed the 
creation of the "Caspian Development Corporation (CDC)," 
which it hopes will accelerate Caspian gas and 
infrastructure development by aggregating gas demand from 
European buyers and presenting Turkmenistan - and possibly 
other producers - with a single credit-worthy European 
client.  The Commission hopes that a single buyer 
providing demand and price guarantees will encourage 
upstream development and the construction of transport 
infrastructure across the Caspian.  The CDC will need to 
comply with EU competition regulations or receive a 
derogation.  Additionally, the CDC can set a precedent for 
EU Member States unifying their negotiating efforts to 
strengthen their bargaining leverage with Russia's 
Gazprom. 
 
¶3.  (SBU) European and U.S. companies say that, if 
structured correctly, the CDC could encourage upstream 
development of Turkmenistan's substantial gas resources 
and the construction of the necessary infrastructure to 
move gas across the Caspian westward.  Companies do not 
anticipate that the CDC, as currently envisaged, would 
negatively impact their upstream projects in the Caspian 
region.  However, U.S. firms have expressed concern about 
the level of governmental involvement in the CDC and want 
to ensure that European companies do not receive any 
privileged status and that the CDC does not become a means 
for subsidized or preferential sales into the European 
market. 
 
¶4.  (SBU) The EC is proposing an expedited World Bank 
feasibility study to examine options to better coordinate 
Europe's efforts to promote Caspian gas production and 
infrastructure development, including the creation of the 
CDC.  If the CDC concept is confirmed, the study would 
further develop the concept, including its actual 
structure and financing.  The Commission has asked Turkey 
to request the study, which the European Investment Bank 
would then fund.  Despite the fact that studies do not 
need formal U.S. approval, the European Commission has 
requested active U.S. support for a World Bank study. 
 
TALKING POINTS 
-------------- 
 
¶5.  (SBU) Agencies and Posts - particularly USEU, Embassy 
Ankara and Embassy Prague - may draw on the following 
points to communicate U.S. views on the CDC concept: 
 
-- We support efforts to promote Europe's energy security 
through the diversification of energy supplies. 
 
-- We support efforts that will encourage Turkmenistan and 
other Caspian countries to develop their gas reserves and 
send them to Europe through a Southern Corridor for gas. 
 
-- The United States supports the European Commission's 
proposal for an expedited World Bank feasibility study to 
examine, define and refine the CDC concept and/or a 
similar concept that enhances coordination.  We have 
expressed our support to the World Bank. 
 
-- The proposed World Bank study could help guide the CDC 
concept and ensure it supports Commission goals without 
impeding private sector resource development. 
-- Free market forces and the private sector should be the 
primary means through which gas is produced, transported 
and purchased.  Accordingly, we urge the Commission to 
follow through on its stated commitment to include the 
private sector in the CDC initiative from start to finish, 
ensuring the CDC affirms transparency, competition and 
market mechanisms.  We must be mindful of this being a 
substitute for commercial activity. 
 
-- EU and international firms that choose not to 
participate in the CDC should in no way be discriminated 
against in competing for natural gas resources.  The CDC 
should not be a mechanism for selling gas on a subsidized 
or preferential basis. 
 
-- We cannot not support CDC if it becomes directly 
involved in upstream development, as private companies 
with the financial, technical and operational expertise to 
bring new resources online are best positioned to 
accomplish develop energy resources.  The Commission 
should stress to Turkmenistan the need for private 
upstream investment. 
 
-- We welcome updates on the CDC study and look forward to 
cooperating with the EC on improving European energy 
supply diversification and development of a Southern 
Corridor for energy. 
RICE