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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHVI #0941/01 2090839
ZNR UUUUU ZZH
R 280839Z JUL 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 3071
INFO RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 VIENNA 000941 
 
SIPDIS, SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ENRG PGOV AU
SUBJECT: Nabucco Gas Pipeline: Next Steps 
 
REF: VIENNA 596 AND PREVIOUS 
 
Sensitive but Unclassified - Protect Accordingly. 
 
¶1. (SBU) SUMMARY: Austrian government and industry contacts are 
optimistic that the Nabucco consortium can build on positive 
momentum from the July 13 Intergovernmental Agreement (IGA) signing. 
 The GoA has reaffirmed its support for Nabucco at the highest 
levels, while continuing to negotiate over participation in South 
Stream.  Post will continue to support U.S. participation in Nabucco 
commercial opportunities, particularly steel:  the consortium is 
also considering steel pipe from suppliers in Japan and India, who 
may have access to concessional financing).  END SUMMARY. 
 
The Legal Path Forward 
- - - - - - - - - - - - 
 
¶2. (U) Nabucco Gas Pipeline International CEO Reinhard Mitschek (an 
OMV executive) said that with the IGA successfully completed, the 
consortium will now focus on concluding Project Support Agreements 
with all signatory countries.  Mitschek has said publicly that the 
IGA will provide a "stable legal framework" by: 
-- reserving 50% of the pipeline's capacity for consortium 
shareholders, with the remaining 50% on offer to third-party 
shippers; 
-- establishing a standard tariff methodology; and 
-- guaranteeing equal access for all market participants. 
Mitschek argues that the IGA gives a strong "comfort margin" to gas 
producing countries, encouraging them to supply Nabucco. 
 
¶3. (SBU) Negotiation of PSA's will likely proceed more smoothly than 
the IGA, predicts a contact in Austria's Ministry of Economy 
(cabinet advisor Gerhard Langeder).  Langeder does anticipate that 
environmental impact studies (required for each of the transit 
countries) will be time-consuming and might raise local issues. 
 
Ramping Up at Nabucco = Commercial Opportunities 
- - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶4. (SBU) An OMV/Nabucco Company contact (spokesperson Christoph 
Dolezal) told us the pipeline investment decision will come in the 
first quarter of 2010 at the earliest.  A sign of management 
optimism is the fact that the Nabucco Company has begun hiring 
numerous commercial, technical and legal experts (a total of 200-250 
employees in the coming months).  Dolezal mentioned that Nabucco has 
hired Richmond-based Penspen Engineering, who have begun to plan the 
pipeline route in detail. 
 
¶5. (SBU) Dolezal outlined the next commercial steps for the Nabucco 
pipeline: 
-- marketing transport capacity via the Open Season Process, 
-- formal financing negotiations (with financial institutions such 
as European Investment Bank, European Bank for Reconstruction and 
Development and International Finance Corporation as well as export 
finance institutions). 
The Nabucco Company is in advanced discussions to buy steel/steel 
components from Japan and India; he said the Nabucco Company would 
also welcome export guarantees from the USG and Canada. 
 
Environmental Concerns 
- - - - - - - - - - - - 
 
¶6. (SBU) Our MinEcon contact indicated that environmental groups 
could delay the pipeline by lobbying and filing complaints.  There 
is growing resistance to the pipeline from European Green parties 
and environmental NGOs, who oppose natural gas as non-sustainable. 
In the face of such resistance to new fossil fuel infrastructure, 
the GoA is "marketing" Nabucco as a source of energy 
security/diversification and pointing out that natural gas will be a 
key part of Austria's energy mix until at least 2040.  The GOA plans 
to reassure environmentalists that its support for Nabucco will not 
lessen its promotion of energy efficiency and renewable energies. 
Our Nabucco contact added that after Austria, Turkish groups have 
registered the most environmental concerns, with less concern 
expressed in eastern European transit countries. 
 
Implications for TGI and South Stream 
- - - - - - - - - - - - - - - - - - - - 
 
¶7. (SBU) OMV/Nabucco Company see the IGA as giving the Nabucco 
project a competitive advantage over the Turkey-Greece-Italy (TGI) 
pipeline -- because the IGA provides Azerbaijan a safe legal 
framework for supplying gas -- and predict that Nabucco will 
"prevail" over TGI.  Our OMV and Nabucco Company contacts believe 
that the Nabucco and TGI projects are ultimately incompatible -- as 
they are competing for the same gas resources, particularly in 
Azerbaijan -- unlike South Stream with its guaranteed access to 
Russian gas. 
 
¶8. (SBU) The GoA and OMV remain interested in participating in South 
Stream as an additional source of gas for the Baumgarten hub. 
 
VIENNA 00000941  002 OF 002 
 
 
Bilateral negotiations between Austria and Russia on a South Stream 
agreement are ongoing but "progress is slow" according to contacts. 
COMMENT:  While contacts are not optimistic that a deal can be 
reached in time for the visit of Chancellor Werner Faymann to Moscow 
this fall, we surmise that the GoA has no objections to South Stream 
and would probably like to reassure Russians of Austria's commitment 
to long-term cooperation. 
 
Interest in Continued USG Engagement 
- - - - - - - - - - - - - - - - - - - 
 
¶9. (SBU) OMV/Nabucco contacts hope for continued U.S. diplomatic 
engagement, particularly with regard to pledges by the Iraqi 
government on the occasion of the IGA signing ceremony.  NOTE: Iraqi 
PM Nouri al-Maliki said it could deliver up to 15 bcm for Nabucco, 
and a Northern Iraq gas field consortium which includes OMV has said 
it could provide 10 bcm of that amount).  With this Iraqi gas, along 
with 8 bcm from Azerbaijan and 10 bcm from Turkmenistan, (as wel as 
some gas from Egypt), OMV contacts indicate hey could potentially 
fill Nabucco without refernce to future gas from Iran. 
 
¶10. (SBU) Dolezal told us OM would welcome U.S. support for Nabuccovis-a-vis Azerbaijan and that Nabucco representaties would also 
welcome the appointment of MatthewBryza as new U.S. ambassador to 
Azerbaijan (as rported in the media) since Bryza has been a 
"valuable" partner in the past.  But Dolezal also emphasized that 
his company would concentrate on relations with gas traders, 
shippers and suppliers for the pipeline in the future rather than on 
negotiations with governments on the gas supply issue.  Langeder 
said that the GOA would welcome a visit by Special Envoy Morningstar 
to Austria. 
 
COMMENT 
- - - - 
 
¶11. (SBU) The GoA regards the Nabucco pipeline project as an 
"insurance policy against future gas crises" (Foreign Minister 
Spindelegger), and its high-level support was epitomized by the 
participation of Chancellor Faymann at the IGA signing ceremony in 
Ankara.  Nonetheless, as Western Europe's longest-standing importer 
of Soviet/Russian gas (since 1968), the GoA and OMV will continue to 
reassure Russian counterparts that Austrians value their energy ties 
to Russia/Gazprom. 
 
¶12. (U) Post continues to facilitate U.S. company participation in 
Nabucco-related tenders and would support higher-level engagement by 
relevant agencies.  END COMMENT. 
 
HOH