VZCZCXRO7331
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHYE #0235/01 0920949
ZNY CCCCC ZZH
P 020949Z APR 09
FM AMEMBASSY YEREVAN
TO RUEHC/SECSTATE WASHDC PRIORITY 8903
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 04 YEREVAN 000235 
 
SIPDIS 
 
E.O. 12958: DECL: 03/25/2019 
TAGS: ECON ENRG ETRD EAID ZS ZJ ZL RU MD UP AM
SUBJECT: BSEC ENERGY MINISTERS SEEK COOPERATION WITH EU, 
FIND RUSSIAN RESISTANCE 
 
Classified By: CDA Joseph Pennington.  Reasons 1.4 (b/d) 
 
SUMMARY 
 ------- 
¶1. (C) A meeting of Black Sea Economic Cooperation (BSEC) 
organization energy ministers in Yerevan March 20 underscored 
the desire for stronger energy cooperation with the EU, but 
also showed that Russia remains intent on impeding such an 
initiative. In working group meetings Russia successfully 
blocked attempts to move toward a more substantive plan of 
action. The US, Georgian and Armenian delegations met to 
discuss the idea of an Armenia-Georgia Electricity 
Interconnection Working Group, which would help move the 
Georgia and Armenia power systems to synchronous operation 
and help improve regional energy cooperation and security. 
Azerbaijan did not participate in the event. End Summary. 
 
BSEC MEETS IN YEREVAN 
--------------------- 
 
¶2. (C) Energy ministers from the member states of the 
Organization of the Black Sea Economic Cooperation (BSEC) met 
in Yerevan on March 20. In attendance at the meeting were 
delegations from Armenia, Bulgaria, Georgia, Greece, Moldova, 
Romania, Russia, Serbia, Turkey, and Ukraine, as well as 
observer delegations from the Czech Republic, the United 
States, the Energy Charter Secretariat, the Black Sea 
Economic Commission, the World Bank and the European 
Investment Bank. The purpose of the meeting was to discuss 
proposals for a joint BSEC-EU Plan of Action in Energy and to 
adopt a Yerevan Declaration on Energy Cooperation. 
 
RUSSIAN OBSTRUCTION 
------------------- 
 
¶3. (C) The March 20 meeting of ministers followed two days of 
often explosive and contentious meetings of the BSEC Working 
Group on Energy. Delegations worked long into the night to 
produce a proposal for a joint BSEC-EU Action Plan on Energy 
as well as on the text of a Yerevan Declaration on Energy 
Cooperation in the BSEC Region.  Tensions filled the room as 
the Russian delegation fought each statement and quibbled 
about the motives of the Europeans and other delegations. 
Their lobbying succeeded in producing a watered-down Action 
Plan and Declaration that offered little in terms of real 
substance or practical solutions. 
 
¶4. (C) It was clear in the Working Group meetings that most 
states wanted to proceed with EU initiatives and to 
strengthen the partnership between BSEC and the EU.  The 
Russians continued to be contentious throughout the meeting, 
saying that the Europeans did not want partnership, but 
domination; that the Action Plan was not about agreement; 
that it was too early to discuss an Action Plan; that the EU 
proposals demonstrated their ambitions and were too political 
in nature; and that there was too much emphasis on EU 
standards.  The Russian delegation was even opposed to the 
term "Action Plan," favoring a change of the name of the 
document to a more muted "Suggestions about an Action Plan." 
 
¶5. (C) Many of the Russian comments were not accepted by 
other participants.  The Russian representative complained 
that cooperation seemed to be more about following EU 
political approaches and standards rather than cooperation of 
two organizations.  Ultimately the participants agreed with 
the Greek proposal for a "Proposal for BSEC-EU Action Plan." 
Russia also didn't see the reason for taking stock of ongoing 
regional initiatives like the European Neighborhood Policy 
(ENP) and the Eastern Partnership (EaP).  However, all other 
delegations and the EU Ambassador insisted that taking stock 
of ongoing initiatives is very useful, especially since many 
member countries are parties to these initiatives.  The 
Armenian delegation was clearly fractured, or at least played 
both sides of the fence. The Armenian Chairman of the Working 
Group agreed with the points of the EU Ambassador while the 
Prime Minister's representative supported the Russian 
positions. 
 
¶6. (C) The Russian objections were ultimately successful, as 
the delegations became tied up in trivial changes, and no 
real progress was made in terms of practical ways to improve 
cooperation among the BSEC member states. 
 
MINISTERS MORE COOPERATIVE 
-------------------------- 
 
¶7. (C) By contrast, the March 20 meeting of energy ministers 
was relatively placid, with declarations by individual 
ministers clearly indicating support for greater cooperation 
and concrete results. The statements of the delegations were 
largely similar, supporting the need for more secure energy 
 
YEREVAN 00000235  002 OF 004 
 
 
supplies and transit routes; diversification of supplies and 
alternative sources; lower prices for consumers; and support 
for interconnections in gas and electricity to the European 
market, among other themes.  Many participants expressed 
concerns about the potential impact of the global economic 
crisis on attempts to implement international projects. 
 
NATIONAL DECLARATIONS 
--------------------- 
 
¶8. (C) National declarations revealed country-specific 
concerns: 
 
- Bulgaria stressed its interest in close ties with BSEC 
nations, stating its solid interest in supporting BSEC. The 
Bulgarian representative specifically expressed support for 
three Black Sea initiatives: the Nabucco gas pipeline, a LNG 
terminal in Bulgaria, and the Russia-Bulgaria SouthStream 
trans-Black Sea natural gas pipeline. 
 
- Georgia reiterated its strategic importance as an energy 
corridor, both for Caspian hydrocarbons as well as for 
regional power transmission. Georgia expressed specific 
support for Nabucco, and for developing power 
interconnections with Armenia, Turkey and Azerbaijan. 
 
- Greece, an observer, encouraged the BSEC member states to 
improve communications in order to develop planning and trade 
in energy and other sectors. It stressed that as an EU 
member, its role in BSEC was to support other nations' 
development in line with EC requirements. 
 
- Moldova supported BSEC as it promotes the greater 
transmission linkages the nation is seeking to develop in the 
near future. Moldova envisions itself an important link for 
transmission of power between Russia, Ukraine and Romania. 
 
- Romania expressed its desire to fulfill EU objectives for 
energy system development and international trade, stressing 
the importance of compliance with environmental concerns. 
Romania also stressed the need for all countries to diversify 
supplies and transmission/transit routes for energy security. 
 To do so, countries need to use the BSEC process to 
understand opportunities and develop infrastructure to meet 
internal and regional needs. Romania expressed that BSEC 
needed to move beyond agreements to develop joint, tangible 
undertakings. 
 
- The Russian delegation, led by its ambassador to Armenia, 
stressed that it is developing its energy infrastructure in 
accordance with the Russian Energy Strategy, which is 
compatible with the energy interests of the G8: 
Diversification of routes; energy efficiency; market 
development; and environment/ecology.  Russia is heavily 
engaged in the development of transportation infrastructure, 
especially in oil and gas, and with the diversification of 
supply routes.  Referring to recent "problems," Russia 
mentioned that it seeks mechanisms for early problem 
detection and prevention so that it can warn downstream 
nations of potential supply issues as soon as possible. 
Russia further stated that the Energy Charter (which it has 
not ratified) is not sufficient to resolve problems, and that 
a better mechanism for information exchange and joint 
resolution of international energy issues is needed. Russia 
seeks long-term contracts for countries to attain access to 
Russian supplies.  In terms of projects, Russia mentioned a 
new pipeline that will connect the Caspian with Europe, and 
that it is developing SouthStream with Greece, Serbia and 
Bulgaria for the benefit of all of Southern Europe.  Russia 
said it is committed to renewable energy, and cited a project 
to use hydrogen-powered transport for the 2014 Winter 
Olympics in Sochi. 
 
- Serbia is strongly interested in developing its gas and 
power markets for international investments, citing that it 
will have fully liberalized both by 2015. Serbia is focused 
on efficiency, securing supplies, environmental issues, and 
EU directives. Serbia is very hopeful for SouthStream, as it 
intends to develop 800 million cubic meters of gas storage 
for its own use and the use of neighboring Montenegro and 
Bosnia/Herzegovina. Serbia mentioned the importance of a 1319 
km oil pipeline project from Romania to Italy that transits 
Serbia and will provide fuel for Southern Europe.  It is also 
investing in 3000MW of new power production, renewable energy 
sources and energy efficiency, in anticipation of amendments 
to its energy law later this year that will encourage such 
innovations. 
 
- Turkey expressed its support for BSEC, citing it as the 
appropriate forum to address regional energy and economic 
challenges. Turkey is happy with all its neighbors, claiming 
 
YEREVAN 00000235  003 OF 004 
 
 
to have "good relations" with all of them, and it plans to 
increase dialogue and cooperation with all due to its 
strategic position as a transport and transit nation.  The 
region will benefit and achieve greater stability through 
stronger economic linkages and the diversification of energy 
supplies and routes. Turkey said that the US role in the 
Black Sea region is significant, but did not explain why or 
how. Turkey also voiced its strong support for Nabucco as the 
best near-term option for gas supply diversification for 
Europe, as the 30bcma is needed for Europe and is not in 
competition with any other planned pipelines. Turkey said it 
looks to BSEC to help resolve technical issues and solve 
regional problems. In a sidebar with representatives of the 
Turkish Ministry of Energy, officials affirmed to the USAID 
representative from Embassy Tbilisi a commitment to develop 
renewable energy such that it represents 20 percent of its 
electric capacity, including some 10 GW of wind power, by 
¶2015.  In addition, plans are in high gear to develop some 
3.5 to 5.5 GW of nuclear power generation by 2018. (Note: 
Turkish officials did not specify where these plants were 
located or whether they might compete with Armenia's plans 
for a replacement nuclear power plant, the feasibility of 
which will most likely depend on being able to sell 
electricity to Turkey. End Note). 
 
- Following its disputes with Russia in late 2008, Ukraine 
stressed a need to rethink energy policies from both European 
and regional perspectives. Ukraine stated that cooperation is 
only possible when political and economic conditions are 
stable. Ukraine counseled the Black Sea countries to be more 
active and involved in the stimulation of new technology 
development, looking to neighboring EU countries and beyond 
as examples. 
 
¶9. (C) Armenia cited its development and adoption of a new 
Energy Security Strategy as the keystone to its strong 
commitment to the development of its energy systems.  This 
strategy has four pillars: nuclear; renewables and energy 
efficiency; diversification of supplies and routes; and 
Regional Cooperation, especially through bodies like BSEC. 
Diversification represents a challenge for Armenia, yet the 
new gas connection with Iran represents a step towards gas 
security. In terms of cooperation, Armenia mentioned a new 
MOU with Iran on energy cooperation and parallel power system 
operations, and plans for the development of two new 440 kV 
lines to Iran and Georgia. It closed voicing strong support 
for BSEC. 
 
¶9. (C) International bodies and observer nations were then 
asked to speak. One of the most interesting comments was made 
by the representative of the Energy Charter Treaty 
Secretariat. Representing 53 member countries, the Energy 
Charter Treaty sees itself in a support role to BSEC and 
other international bodies. The representative turned to the 
January energy crisis (Ukraine/Russia) and affirmed the 
Energy Charter Treaty was not at fault (especially as Russia 
has not ratified). He did agree, however, that these events 
have prompted interest in revisiting (but not renegotiating) 
the 1994 treaty with fresh eyes to strengthen support among 
member states and allow the treaty to better respond to 
international energy disputes. Regarding BSEC, the Energy 
Charter representative stated that BSEC coordination is 
important in promoting appropriate international energy 
policy dialogue toward EU objectives. 
 
ARMENIA-GEORGIA INTERCONNECTION 
------------------------------- 
 
¶10. (C) After the Plenary Session, representatives from the 
US Missions in Georgia and Armenia met with the Deputy 
Ministers of Energy of the two countries.  In this sidebar 
meeting, the USG floated the idea of an Armenia-Georgia 
Electricity Interconnection Working Group, to which USAID in 
each country would provide technical assistance and training 
for specific activities of mutual interest. The Working Group 
would look to the future synchronous operation of the 
Georgian and Armenian power systems and examine a set of 
technical, regulatory, and market issues that need to be 
considered in such a future scenario. The US proposed that 
the three governments sign a memorandum of cooperation, and 
passed out a draft prospectus for the Delegations to take 
back to their respective Ministers for review. 
 
COMMENT 
------- 
¶11. (C) We are encouraged by the interest in energy 
cooperation by the BSEC members, who clearly have strong 
motivation to improve their energy security, diversify their 
sources and improve efficiency.  The Russian delegation 
seemed to come to the meeting prepared to block any 
substantive initiative or concrete action towards cooperation 
 
YEREVAN 00000235  004 OF 004 
 
 
with the EU.  It also seemed to have on its agenda promotion 
of its bilateral projects with individual countries in order 
to undermine multilateral initiatives of BSEC member 
countries.  Of particular note, Russia expressed its interest 
and intent to develop mechanisms for enlisting European 
allies against transit countries in the event of future 
supply disruptions, such as the one that occurred in its 
dispute with Ukraine in January.  End Comment. 
PENNINGTON