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C O N F I D E N T I A L SECTION 01 OF 03 ROME 000558 
 
NOFORN 
SIPDIS 
 
FOR ENERGY SECRETARY CHU 
DOE ALSO FOR A/S DAVID SANDALOW 
 
E.O. 12958: DECL: 05/20/2019 
TAGS: ENRG EPET OVIP PREL IR RU IT
SUBJECT: G8 ENERGY MINISTERIAL: SCENESETTE...


Classified By: CHARGE ELIZABETH DIBBLE FOR REASONS 1.4 B AND D 
 


¶1. (C/NF) Summary:  Your 23-25 May visit to Rome will provide 
opportunities to interact with senior Italian officials on 
priority USG energy issues.  On European energy security, 
Italy's very close relationship with Russia often causes it 
to resist efforts to reduce dependence on Russian energy 
sources.  We hope you can urge a broader reevaluation of 
energy sources and technologies.  In particular, Italy's 
decision to return to nuclear power will -- if carried out -- 
reduce this dependence; you should raise worrisome 
indications that U.S. firms will be unfairly denied the 
opportunity to participate in this multi-billion dollar 
project.  Italy is a laggard in the EU on the use of 
renewable energy, but its market may grow the most in the 
near future.  You can support the use of U.S. technology in 
this area.  Italy's parastatal energy company Eni is active 
in Iran and wants to expand its operation in that country; 
the USG is strongly opposed to this expansion of ""business as 
usual"" at a time when Iran is continuing its own nuclear 
program in defiance of UN and IAEA requirements that it 
sustpend enrichment activities. 
 


¶2.  (C/NF) Because of the strong influence of organized 
crime, Italian seaports are vulnerable to use for the 
shipment of illicit nuclear materials.  DOE's Megaports 
program could significantly reduce this threat, but at least 
two USG efforts to launch Megaports in Italy have faltered 
owing to Italian red tape.  We would like to make another big 
push on this high USG priority, and your intervention could 
be critical in getting high-level Italian support for this 
effort.  End Summary. 
 


INTERACTION WITH ITALIAN POLICY MAKERS 
------------------------------------- 
 

¶3.  (C/NF)  During the 23-25 May 2009 G8 Energy Ministerial 
in Rome,  you will have at least one bilateral meeting with 
Claudio Scajola, the Italian cabinet minister with 
responsibility for energy affairs.   This meeting, and other 
potential side meetings with Italian officials during the 
Ministerial are key opportunities to press a number of top 
USG energy concerns with the Berlusconi government. 
 


EUROPEAN ENERGY SECURITY 
----------------------- 

¶4. (C/NF) Prime Minister Silvio Berlusconi's close personal 
ties with Vladimir Putin and the very strong corporate ties 
between Italian energy parastatal ENI and Russia's Gazprom 
often put Italy squarely at odds with USG efforts to reduce 
Europe's  dependence on Russian energy.  That dependence has 
been reflected in Italian policy vis--vis Russia. The 
Italian government has been overtly apologetic for Russian 
power projection in its so-called Near Abroad - notably 
against Georgia last August. Italy opposes further expansion 
of NATO, and, finally,  Italy's energy policy too often 
reflects Russian, rather than European, priorities.  For 
example, the Italian government is deeply ambivalent about 
the EU's Nabucco Caspian pipeline, while ENI is poised to 
help GAZPROM construct Black Sea and Baltic Sea pipelines 
that will deepen EU's dependence on Russia. ENI, 30 percent 
owned by the Italian Government, often dictates GOI energy 
policy and uses its influence, through the GOI, to block EU 
energy market liberalization plans. Italy is taking some 
steps in the right direction: the Turkey-Greece-Italy 
pipeline project could bring Europe gas from the Caspian, and 
Liquid Natural Gas projects promise further diversification. 
It would be helpful if you could raise with Italian officials 
long-standing USG concerns about European energy security, 
emphasizing that increasing the flow of Russian gas around 
Ukraine is not the same as a policy seeking a true diversity 
of energy sources, routes and technologies. 
 


NUCLEAR ENERGY 
-------------- 
 

¶5. (C) Minister Scajola announced in May 2008 that Italy 
would pursue the start of construction of new nuclear power 
 
ROME 00000558  002.4 OF 003 
 
 
plants by the end of the current legislature (2013). The 
uncertain cost of fossil fuels, the need to meet emission 
targets, and a desire for greater energy security appear to 
be the motives behind this return to nuclear power (Note: 
Italy's previous nuclear power plants were decommissioned 
after the Chernobyl accident led to a series of three 
referenda in 1987 that had the practical effect of banning 
nuclear power generation. End Note) Solid government 
majorities in both chambers of parliament should facilitate 
the passage of legislation to address the issues of nuclear 
waste and plant siting. These issues, however, are likely to 
remain thorny problems for the GOI.  U.S.-based companies 
Westinghouse and GE are interested in selling their nuclear 
power plant technology to Italy, but they face stiff 
competition from foreign rivals whose governments are heavily 
lobbying the GOI. For example, intense French pressure, 
possibly involving corrupt payments to GOI officials, led the 
way for the February agreement by Italian and French 
electricity parastatals ENEL and EdF to form a 50-50 
consortium to build nuclear power plants in Italy and 
elsewhere. The agreement foresees the construction of four 
French Areva design nuclear plants in Italy by 2020 and, 
more disturbingly for U.S. firms, may establish French 
nuclear technology as the standard for Italy's return to 
nuclear power.  The GOI has assured us that GE and 
Westinghouse can still compete for nuclear business, as Italy 
intends to build up to 10 plants as part of its energy 
security plan.  Post continues to work for a level-playing 
field for U.S. companies (see ref A).  You could usefully 
underline to Italian officials that we expect U.S. firms to 
be given a fair opportunity to bid for contracts in Italy's 
nuclear power program.  You might also note that Italian 
behavior since February has produced the impression that 
other bidders -- including U.S. firms --  ""need not apply."" 
 


LIMITED BUT GROWING USE OF RENEWABLES 
----------------------------- 

¶6. (SBU) Although Italy has some of the most generous 
subsidies for renewable energy in Europe, more solar energy 
is produced in gloomy Germany than in sunny Italy.  Experts 
attribute this to NIMBYism and difficulties in dealing with 
Italian bureaucracy, noting that the premium that Italians 
pay for renewable energy subsidies compared to Germans can 
even be considered a quantitative measure of the cost of 
Italian red tape.  That said, Italy is now attracting 
attention as a growing renewables market, as Germany and 
Spain rein in their subsidies, and Italy's remain in place$wQz!4k2Q)CQgIQj'Qthe Laboratory to the Market."" 
 


TRYING AGAIN ON DOE's MEGAPORTS 
---------------------------- 

¶7. (C) With seaports, particularly those in southern Italy 
under the influence of organized crime,  it is especially 
important that Italy be included in DOE's Megaports project. 
Italian ports send large numbers of containers to the United 
States, and some Italian ports are major transhipment 
centers.  In 2007 about 3 million containers were shipped 
from or through Gioia Tauro, probably the port of most 
concern owing to organized crime influence.  Among these were 
40,000 shipments to the U.S.  (See Reftels C and D.) 
Megaports would provide a critically important safeguard that 
might prevent the shipment to the United States of nuclear 
materials by terrorists. The USG has tried twice before to 
launch Megaports in Italy -- on both occasions our efforts 
were thwarted by the Italian bureaucracy.  The GOI showed 
little enthusiasm for the project, and consistently failed to 
name a senior ""point person"" for implementation.  As a 
result, Megaports-Italy was crushed by Italian interagency 
squabbling and red tape.  We 
are set to make another major push on this critical USG 
priority.  In order to avoid the pitfalls that killed our 
 
ROME 00000558  003.10 OF 003 
 
 
earlier efforts, we are seeking early, high-level GOI buy-in. 
 We want the GOI, at very senior level, to commit to 
Megaports implementation, and to formally designate an 
Italian cabinet minister who will be responsible for 
implementation. 
 


¶8. (C) Your meeting with Minister Scajola represents an 
important opportunity to move Megaports forward in Italy. 
Scajola is one of the GOI's most powerful Ministers, and is 
considered personally close to Prime Minister Berlusconi. We 
recommend that you tell Minister Scajola that nuclear 
materials security is a top priority of the Obama 
administration, and that Megaports represents an important 
opportunity for Italy to do something tangible in support of 
President Obama's efforts to protect the world from nuclear 
terrorism.  You may also wish to point out that Megaports 
will help Italian ports meet the requirement for 100 percent 
radiation screening (by 2012) of all U.S.-bound containers; 
without Megaports, Italian ports could lose business to 
competing European ports that are currently implementing 
Megaports.  For the Berlusconi government to take this issue 
seriously, key Italian officials must hear this directly from 
Washington, particularly from yourself. 
 


IRAN 
---- 

¶9. (C) You should be aware that Italian parastatal energy 
company Eni is active in Iran, and is currently considering 
an expansion of its operations in that country.  On May 18, 
Eni officials broached the possibility of this expansion with 
USG officials in Washington and were told that the USG 
strongly opposes any such expansion. 
 


POLITICAL AND ECONOMIC BACKDROP 
---------------------------- 

¶10. (C) Prime Minister Silvio Berlusconi continues to enjoy 
record popularity numbers; he possesses a commanding 
parliamentary majority that gives him a degree of political 
security unprecedented in post-war Italy. Berlusconi's 
standing has been bolstered by positive public perceptions of 
his response to the devastating April 2009 earthquake in the 
Abruzzo region.  We expect him to stay in power at least 
until the next scheduled national election in 2013. 
 
¶11. (C) Prudent (some would say stodgy) banking practices 
allowed Italy's banks to avoid the global financial sector 
melt down. Italy's banks simply did not engage in sub-prime 
lending, and they did not buy the toxic assets that caused so 
much trouble in the U.S. and elsewhere.  But Italy has not 
been able to avoid the pain of the worldwide recession that 
has followed the financial crisis. Italy's economic growth 
rate -- which was relatively low even before the crisis -- 
has dropped precipitously owing to sharp contractions in its 
export markets and falling domestic demand.  Unemployment is 
expected to exceed 8 percent this year and to rise further in 
¶2010.  Government tax revenues are, not unexpectedly, off 
sharply.  Moreover, according to the IMF, an already large 
government debt is expected to hit 121 percent of GDP this 
year.  Both factors reduce the government's ability to 
provide for stimulus measures. 
 


COMMENT 
------- 

¶12. (C) On a variety of important issues, your interactions 
with Italian officials provide an opportunity to advance 
important U.S. interests.  Because Megaports is a DOE 
project, it is especially important for you to ask Minister 
Scajola for GOI support.  Absent such a request it will be 
very difficult for Embassy Rome to push Megaports forward in 
Italy.  It is also very important for you to remind the GOI 
that we expect U.S. firms to be given a fair opportunity to 
bid on nuclear power projects in Italy, given what we have 
seen to date on the selection process. 
DIBBLE