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FM AMEMBASSY PRISTINA
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UNCLAS SECTION 01 OF 03 PRISTINA 000481 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/SCE, EUR/PGI, INL, DRL, PRM, USAID 
 
E.O. 12958: N/A 
TAGS: ECON ENRG PGOV KV SR
SUBJECT: KOSOVO: LACK OF MOVEMENT BY BELGRADE ON ENERGY IN NORTHERN 
KOSOVO RISKS POLITICAL CONFLICT 
 
REF:   A) PRISTINA 471 
       B) PRISTINA 465 
 
PRISTINA 00000481  001.2 OF 003 
 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
¶1. (SBU) SUMMARY: More than a week ago, the Kosovo Energy 
Corporation (KEK) finished repairs on two power lines that supply 
electricity to northern Kosovo, and informed the Valac sub-station 
operators that it is ready to restore power disconnected on October 
18 for technical reasons.  At the same time, KEK has made repeated 
approaches to Serbian government officials about moving forward with 
an Energy Service Company (ESCO) agreement, which would allow KEK to 
regularize non-paying customers in the north.  Despite these good 
faith efforts, employees of the Serbian utility company EPS have 
refused to reconnect power to the north.  Instead, EPS has begun to 
take steps that KEK and GOK officials believe are designed to 
establish itself as the only electricity provider, which would 
violate Kosovo law and undermine Kosovo's sovereignty there.  In 
effect, it appears EPS, with support from Serbian parallel 
structures in the north and certain quarters in Belgrade, are 
prepared to transform a technical/commercial issue into a political 
dispute.  Allowing the current electricity stalemate to continue 
threatens to strengthen the perception that northern Kosovo can be 
partitioned.  The GOK is prepared to accept our guidance as to the 
best way forward, but there is growing discontent within the Kosovo 
government about yet another element of the northern municipalities 
slipping away from Kosovo's control.  We believe it is important to 
press the more practical elements within the Serbian government to 
move quickly to conclude an ESCO agreement before severe winter 
weather sets in.  If Belgrade refuses, we should be prepared to 
counter efforts to separate northern Kosovo from Kosovo's electrical 
grid.  END SUMMARY 
 
NORTHERN KOSOVO STILL WITHOUT ADEQUATE POWER 
-------------------------------------------- 
 
¶2. (SBU)KEK has completed all maintenance and repairs necessary to 
ensure operation of all three 110 kV power lines from the south to 
Valac sub-station in northern Kosovo, including repair of a boiler 
leak in one of the generating units Kosovo A Power Plant (Ref A). 
Nonetheless, northern Kosovo remains without a reliable 24/7 power 
supply despite repeated efforts by KEK's Managing Director (MD) and 
employees to reconnect it to Kosovo's electrical grid.  The reason: 
EPS employees at the Valac sub-station have consistently refused to 
cooperate with KEK.  According to KEK, since October 16 EPS 
employees at Valac sub-station have rebuffed attempts by KEK to 
constructively address the power situation in the north on at least 
10 occasions.  KEK has also told us that Valac sub-station operators 
have become increasingly rude in their responses to KEK's 
entreaties, refusing to recognize KEK as having any role in northern 
Kosovo. 
 
FROM UNCOOPERATIVE TO INDEPENDENT 
--------------------------------- 
 
¶3. (SBU) Shortly after KEK cut power to the north on October 18 for 
technical and weather-related reasons, EPS employees at Valac 
reconfigured the sub-station to allow it to route limited 
electricity to the north via a 110 kV line from Novi Pazar, Serbia 
(Ref B).  At the time, this was justified as an emergency measure 
designed to meet "humanitarian" needs given the absence of power 
from the south.  KFOR had told us that the north has been subject to 
a "2 on and 4 off" blackout schedule on the little power that has 
been made available through the Novi Pazar line as well as from 
KEK's Ujmani hydro station in Zubin Potok.  With KEK now able to 
supply power to the north, there is no longer a "humanitarian" 
justification for Valac's reconfiguration and the north's connection 
to the Serbian electrical grid. 
 
¶4. (SBU) Increasingly, KEK and senior GOK officials interpret the 
lack of cooperation from EPS employees at Valac as a 
Belgrade-orchestrated attempt to obtain "electrical sovereignty" 
over the north.  Ministry of Economy and Finance Shala expressed 
such concerns to the Ambassador on October 23.  President Sejdiu 
echoed them in an October 30 exchange with the Ambassador, 
highlighting the inconsistency between criticisms from Serbian 
parallel structures and Serbian Ministry of Kosovo officials over 
 
PRISTINA 00000481  002.2 OF 003 
 
 
KEK's failure to provide 24/7 power to the north and their apparent 
willingness to receive inadequate power from Serbia.  KEK's 
suspicions have also been aroused by statements from EPS employees 
at Valac, who have told KEK directly that they will not cooperate 
without explicit orders from Belgrade to do so. 
 
EPS: ACTING LIKE A PRIMARY PROVIDER 
----------------------------------- 
 
¶5. (SBU) Although EPS is unable to supply adequate power to 
customers in northern Kosovo, the utility is actively and 
aggressively urging energy efficient practices to reduce usage, 
including disconnecting illegal and wasteful kiosks and cutting out 
smaller villages from receiving any power at all.  There is also an 
effort by a Serbian government-controlled public enterprise to 
reactivate a steam-powered central heating facility in north 
Mitrovica, which would greatly reduce the demand for power once the 
pull of electric heating is removed from the system.  These actions 
not only reduce demand, they also erode the perception that there is 
a power deficit north of the Ibar.  Combined with the continued 
disconnection of northern Kosovo from KEK's services, they reinforce 
the impression EPS appears to be promoting to customers that it will 
replace KEK as the utility provider in the north. 
 
WAITING FOR THE NEXT SHOE TO DROP 
--------------------------------- 
 
¶6. (SBU) We understand EPS has begun advertising in local 
Serbian-language media that it will soon begin billing and 
collection will in north, and there have been reports that EPS 
employees are now visiting homes and reading meters.  As far as we 
know, EPS has not yet attempted to actually collect money for 
electricity, but if EPS did so it would be in direct violation of 
Kosovo law.  Per UNMIK Regulation 2004/22, KEK is the sole licensed 
distribution system operator and public supplier of electricity 
within Kosovo.  To date, no other entity has been licensed to 
perform these activities.  The refusal to reconfigure Valac coupled 
with actual bill collection in the north by EPS would certainly 
reinforce concerns within KEK and the GOK that EPS, with Belgrade's 
backing, is seeking to establish itself as the sole electricity 
provider in the north. 
 
¶7. (SBU) As part of its ongoing negotiations with EPS about 
regularizing bill collection in the north, KEK has proposed that a 
Serbian-based company register in Kosovo as an Energy Service 
Company (ESCO) to provide metering, bill collection, and other 
services on behalf of KEK.  Such an arrangement would be legal and 
facilitate successful resolution of the final phase of KEK's efforts 
to ensure all its customers pay for the electricity they receive. 
(Note: It is something we have quietly encouraged for months. End 
Note) While there have been declarations of interest by Belgrade 
government officials in such an agreement, since October 18 talks 
with KEK have been repeatedly delayed, raising questions about the 
sincerity of those calling for an agreement.  KEK officials are now 
scheduled to meet with Serbian Assistant Minister for Kosovo Dragan 
Petkovic and Ministry of Energy State Secretary Nikola Rajakovic in 
North Mitrovica on November 4 to discuss the ESCO agreement. 
 
 
FROM A COMMERCIAL TO A POLITICAL DISPUTE 
---------------------------------------- 
 
¶8. (SBU) The continued refusal of EPS employees to reconnect power 
from the south, actions by EPS that appear designed to establish 
itself as the only electricity provider, and further delays 
establishing an ESCO agreement all undermine Kosovo's sovereignty. 
It increasingly appears that Serb parallel structures, with the 
support of some in Belgrade, appear intent on turning a technical 
and a commercial issue into a political dispute designed to add 
electricity to a growing list of areas (e.g., customs, courthouses, 
hospitals, schools) where GOK is unable to assert its control, and 
hence sovereignty, in northern Kosovo.  If this is what Belgrade and 
parallel structures are up to, it will reinforce perceptions north 
of the Ibar that partition is a viable option.  The Prime Minister 
has told us he would rely on our advice to navigate Kosovo through 
the current situation, but his concerns and those expressed by 
Sejdiu and Shala highlight a growing concern throughout the GOK that 
 
PRISTINA 00000481  003.2 OF 003 
 
 
the north is slipping away as Serbia, brick-by-brick, builds 
institutional walls between the north and the rest of Kosovo. 
 
THREE SCENARIOS 
--------------- 
 
¶9. (SBU) From our perspective, the current electricity stalemate 
could play itself out in one of three ways. 
 
-- First, Belgrade could enter into genuine negotiations with KEK 
and move quickly to conclude an ESCO agreement before severe winter 
weather sets in while EPS refrains from taking illegal actions 
designed to establish itself as an electrical service provider in 
the north. 
-- Second, increasingly cold weather and rolling blackouts in the 
north could lead to a genuine humanitarian crisis.  Such a crisis 
could force EPS/Serbian Ministry of Energy officials back to the 
negotiating table to facilitate the reconnection of power lines from 
the south and signing of an ESCO agreement.  It might also prompt 
European handwringing and pressure on KEK and the GOK to cede 
effective control over electricity in the north. 
-- Third, Serbian hardliners could ignore the stress placed on the 
population by rolling blackouts of increasing duration, refuse to 
reconnect the lines from the south, decline an ESCO agreement, and 
attempt to wait out the winter until the bitter end.  They would 
emerge in the spring having, in effect, added energy to the list of 
services in the north that are "disconnected" from Kosovo and its 
institutions. 
 
COMMENT 
------- 
 
¶10. (SBU) Either of the second two scenarios involve serious 
political and security risks.  Only the first is consistent with our 
long-term objectives in Kosovo.  This argues that we must press the 
more practical members of the Serbian government to resist the urge 
to illegally collect fees for energy in the northern part of Kosovo. 
 Moreover, we must urge them to move on an ESCO agreement that has 
been on the table for months, and to instruct EPS to facilitate the 
reconnection power from the south.  At the same time, if Belgrade 
refuses to engage KEK constructively, we must be prepared to resist 
efforts to separate the north from Kosovo's electrical grid.  This 
may require countenancing an effort by KEK to regain control over 
the Valac sub-station (the hub of power lines in the north, 
including the Novi Pazar feeder), an action likely to spark a 
confrontation.  But if we allow the situation to drift, retaking 
Valac sub-station will quickly become the only viable solution to 
maintaining Kosovo's electrical sovereignty over the north. 
 
DELL