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UNCLAS SECTION 01 OF 02 BRUSSELS 000519 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ENRG EPET EUN
SUBJECT: COMMISSIONER PIEBALGS OUTLINES THE EU'S ENERGY 
SECURITY PLANS 
 
¶1.  (U) Summary. At an April 2 Brussels hearing on energy 
security organized by the European Parliament's Industry and 
Energy Committee, EU Energy Commissioner Andris Piebalgs 
outlined how the EU intends to ensure its energy security by: 
1) organizing its external energy supply, 2) promoting energy 
efficiency, 3) managing its energy mix and 4) implementing 
its internal energy market.  The Commissioner said he had 
fully taken on board all recommendations by the European 
Regulators Group for Electricity and Gas (ERGEG) with regard 
to the lessons learned from the latest Russia-Ukraine gas 
dispute.  Piebalgs announced a new draft regulation on 
security of gas supply to be presented in June, mentioned 
that a call for projects to be funded under the EU economic 
recovery plan will be published in May, and said recovery 
funds should be committed to these projects by 2009/2010.  He 
said the EU's energy security was not under the control of 
third countries: "Security of supply is in our hands." 
Piebalgs called the EU's internal energy market "our (the 
EU's) strength, not our weakness" and was very optimistic 
about EU energy security in the medium term.  End Summary. 
 
INCORPORATING LESSONS LEARNED FROM THE RUSSIA-UKRAINE CRISIS 
¶2. (U) Commissioner Piebalgs announced a new draft Regulation 
on security of gas supply to be presented in June.  He said 
the Commission was incorporating all of ERGEG's 
recommendations on "the lessons to be learned" from the 
Russia-Ukraine crisis into the new draft legislation, i.e. 
the need to: 1) improve coordination in national emergency 
planning, 2) set up regional coordination of network access, 
3) improve gas interconnections between markets, 4) include 
emergency scenarios in infrastructure planning procedures and 
5) increase transparency through monitoring and early 
warning.  The Commissioner quoted from a letter (dated Feb. 
10, 2009) that was sent to him by ERGEG's President John 
Mogg, who said that the disruption of gas supplies to Europe 
as a result of the Russia-Ukraine dispute had demonstrated 
"'the profound lack of transparency in gas flows and in 
emergency arrangements across the EU and beyond.'"  "There 
was enough gas available in the EU, but it didn't go where it 
was needed, because the gas market was not transparent", 
Piebalgs said. 
 
¶3. (U) The Commissioner told participants that the new 
legislation would enhance solidarity and responsibility in 
the EU's natural gas market.  In this context, Piebalgs said: 
"it wouldn't be a bad idea to introduce the "N-1 rule" for 
the EU's natural gas market." (Note: The "N-1" rule is a 
provision in EU rules on the security of electricity supply. 
It states that the network should continue to function in the 
event that any one individual failure has occurred in a 
specific part of the network.  End Note.) 
 
4 (U) Piebalgs said the EU's security of supply was not under 
the control of third countries: "Security of supply is in our 
hands." and he told participants to be "very optimistic" 
about EU energy security in the medium term.  "In the short 
term, however, we will probably still have some challenges 
ahead of us."  He called the EU's internal energy market "our 
(the EU's) strength, not our weakness."  The Commissioner 
told parliamentarians to oppose the introduction of 
regulation that would oblige EU member states to hold minimum 
stocks of natural gas.  He said such requirements would 
increase the cost of energy and would be an unnecessary 
burden on tax payers.  If the market is well interconnected, 
well-regulated and transparent, the gas will flow, he added. 
 
ENHANCING ENERGY SECURITY 
¶5. (U) Piebalgs said that by 2020 the EU will depend on 
imports for at least 50 percent of its energy supply and that 
therefore diversification was needed.  He not only stressed 
the need for diversification of supply through the 
development of alternative pipelines such as Nabucco, but 
emphasized liquefied natural gas (LNG) as "one of the best 
alternative options for diversification," stating "LNG gives 
us the most flexibility in case something happens." 
Throughout the hearing, various speakers stressed the 
importance of LNG supply for the EU's energy security.  Dr. 
Fatih Birol, Chief Economist of the IEA, said there would be 
no shortage of LNG supply for Europe.  Because of the 
development of unconventional gas sources (shale gas) in the 
U.S., American demand for LNG would be minimal for years to 
 
BRUSSELS 00000519  002 OF 002 
 
 
come.  A number of speakers stated that, with limited 
investment, gas pipelines in the EU should be made 
"bi-directional", which would allow LNG terminals (i.e. in 
Spain or Greece) to supply Europe with gas whenever required. 
 
TRANSIT: RUSSIA, NABUCCO, NORD STREAM, SOUTH STREAM 
6 (U) Commissioner Piebalgs said the EU was ready to invest 
in transit infrastructure, provided the costs for transit 
would not be too high, the transit country would have a 
stable regime, and the energy market was transparent and 
well-functioning.  Piebalgs also said he preferred investment 
in existing transit infrastructure, rather than in building 
new infrastructure, which would be much more expensive.  When 
asked about the status of the Nabucco project, the 
Commissioner emphasized the need to ensure good relations 
between Azerbaijan and Turkmenistan.  He described Turkey's 
"transit status issue" as "complicated" in view of Turkey's 
candidacy for EU membership and the fact that the EU had not 
yet opened Energy Chapter negotiations with Turkey.  To 
ensure Nabucco's success, Piebalgs said "an attractive 
transit regime" was needed for the project. 
 
¶7. (U) In response to questions about the EU's relations with 
Russia and the Nord Stream pipeline, the Commissioner said: 
"we need to look at it (EU-Russia relations) in all its 
complexity.  Russians also have a view and they have a right 
to have one.  Russia favors Nord Stream, because they haven't 
had good relations with Belarus or Ukraine.  So they have a 
point! And we need to take their views into consideration." 
On the construction of the Nord Stream pipeline, Piebalgs 
thought it "realistic" that the first stage of the pipeline 
would be operational by 2012, provided the countries affected 
would agree with the environmental study they had recently 
received.  Lazlo Varro, Senior Vice President of the 
Hungarian MOL group, a private investor in the Nabucco 
pipeline, told participants that the EU should impose 
anti-dumping measures on the Nord Stream and South Stream 
projects, because Russian Prime Minister Putin had promised 
both projects unlimited funding.  "We are competing against 
pipelines that get unlimited funding from a third country. 
If this would happen with Chinese toilet paper, we would 
already have anti-dumping measures in place!" he said. 
 
INVESTMENT IN ENERGY INFRASTRUCTURE UNDER THE EU RECOVERY PLAN 
¶8. (U) With regard to the 4 billion euros the EU intends to 
spend on energy projects as part of its economic recovery 
package, Piebalgs said a call for proposals will be released 
in May and funds should be committed by 2009/2010.  Green MEP 
Claude Turmes (Luxembourg) and Varro strongly criticized 
projects to be selected under the package.   Varro said the 
EU was going to pay off the energy companies that five years 
ago had refused to build cross-border interconnections to 
reinforce their position on national energy markets.  Turmes 
said: "the Commission is bribing the same multinationals who 
have watered down the 3rd energy package." 
 
ENERGY EFFICIENCY, ALTERNATIVE ENERGY SOURCES 
¶9. (U) When speaking about the importance of energy 
efficiency, Commissioner Piebalgs said: "Growth in energy 
consumption is like poison in terms of climate change."  He 
suggested that the same amount of funding that is currently 
invested in the construction of new nuclear plants be 
invested in energy efficiency.  With regard to the EU's 
energy mix, Piebalgs said the EU should not judge whether a 
source of energy is good or bad. "Energy is used for the 
public benefit.  We should simply lay down conditions for the 
different sources of energy, like setting a price for CO2 
emissions," he said. 
 
¶10. (U) Claude Turmes told participants that at least 20 
percent of Europe's gas supply could come from biomass.  With 
regard to energy efficiency, Turmes stressed that massive 
renovation of Eastern European buildings could lead to huge 
gains in terms of Europe's security of gas supply.  Varro 
illustrated this point by explaining how a Communist-style 
building block in Hungary, after a pilot renovation project, 
required 85 percent less natural gas for its heating. 
 
 
Murray 
.