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Cablegate: Regional Approach to Energy Cooperation in Northeast Asia

VZCZCXRO2914
RR RUEHVK
DE RUEHUL #0009/01 0020623
ZNR UUUUU ZZH
R 020623Z JAN 08
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC 7911
INFO RUEHMO/AMEMBASSY MOSCOW 8409
RUEHBJ/AMEMBASSY BEIJING 3664
RUEHKO/AMEMBASSY TOKYO 3798
RUEHUM/AMEMBASSY ULAANBAATAR 1618
RUEHBK/AMEMBASSY BANGKOK 7061
RUEHFR/AMEMBASSY PARIS 1583
RUEHSH/AMCONSUL SHENYANG 3555
RUEHVK/AMCONSUL VLADIVOSTOK 1362
RHEHNSC/NSC WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC 1751
RUEKJCS/SECDEF WASHINGTON DC//ISA/DSCA/DUSDAT//
RHHMUNA/CDR USPACOM HONOLULU HI//J5//
RHMFISS/COMUSKOREA CC SEOUL KOR
RHMFIUU/CHJUSMAGK SEOUL KOR

UNCLAS SECTION 01 OF 03 SEOUL 000009

SIPDIS

STATE FOR EEB/ESC/IEC/ENR, INR AND EAP/K
STATE ALSO FOR IO/EDA - DE OTALVARO
NSC FOR TONG
DOE FOR INTERNATIONAL AND FE
USDOC FOR 4440/MAC/EAP/OPB/ITA/TA
COMM CENTER PLEASE PASS SCJS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG PREL ESCAP ZO RS MG JA KN KS
SUBJECT: REGIONAL APPROACH TO ENERGY COOPERATION IN NORTHEAST ASIA
ADVANCES SLOWLY

REF: SEOUL 3610

1. (U) SENSITIVE BUT UNCLASSIFIED.

SUMMARY
-------

2. (SBU) Korea hosted a meeting of the Senior Officials Committee on
Energy Cooperation in North-East Asia (SOC) on Jeju Island, December
13-14. The group approved efforts spearheaded by South Korea to
produce a set of energy outlook reports for countries in the region,
and endorsed a modest proposal to identify potential regional energy
projects. Despite South Korean, and to a lesser extent, Russian,
enthusiasm for this multilateral forum, the regional approach to
energy cooperation is making only very slow progress, and currently
amounts to little more than a venue for Korean-Russian dialogue.
Coincidentally, the SOC followed close on the heels of a bilateral
Korean-Russian consultation on energy held in Moscow (reftel). End
summary.

A REGIONAL APPROACH TO ENERGY COOPERATION
-----------------------------------------

3. (U) The Senior Officials Committee on Energy Cooperation in
North-East Asia (SOC) is the progenitor of, and steering committee
for, the Intergovernmental Collaborative Mechanism on Energy
Cooperation in North-East Asia (the Mechanism), which falls under
the aegis of the UN Economic and Social Commission for Asia and the
Pacific (UNESCAP). The first SOC established the Mechanism at its
November, 2005 meeting in Ulaanbaatar, aiming "to facilitate energy
cooperation and trade to enhance energy security in North-East
Asia." A Working Group on Energy Planning and Cooperation (WG-EPP)
carries out the mandates of the SOC and has met four times since
May, 2006. The Jeju meeting was the third SOC, following the
Ulaanbaatar meeting and one in Khabarovsk in December 2006. The
next SOC will be held in November, 2008 (see para. 13 below).

GOVERNMENT-BUSINESS DIALOGUE GETS UNDER WAY
-------------------------------------------

4. (U) Immediately prior to the SOC, representatives of the
participating governments held the first in a series of planned
dialogues with energy companies and sectoral experts. The December
11-12 "Government-Business Dialogue on Energy Cooperation in
North-East Asia" (GBD) recommended a joint government-business study
group to identify and assess the economic feasibility of energy
cooperation projects. Proposed joint studies included potential
projects in the coal sector; the possible export of electricity from
Russia to China, North Korea, and South Korea, as well as from
Mongolia to China; and exploration of oil and gas fields in
Mongolia.

SENIOR OFFICIALS: WHO CAME, WHO DIDN'T, AND WHY
--------------------------------------------- --

5. (U) The Jeju SOC meeting was attended by senior government
officials from Mongolia, Russia and Korea. Mongolia sent a 3-person
delegation led by Tserenpurev Tudev, State Secretary at the Ministry
of Fuel and Energy. The 5-person Russian delegation was led by
Vladimir Saenko, Deputy Director of the Department for State Energy
Policy at the Ministry of Industry and Energy, and included a
Foreign Ministry representative. Korea's official delegation was
huge.

6. (U) In contrast, China and Japan were represented only by
experts (or "resource persons") rather than officials: Gao Shixian,
Director of the Center for Energy Economics and Development Strategy
at China's Energy Research Institute; Zhou Shuhui, a researcher at

SEOUL 00000009 002 OF 003


the PetroChina Planning and Engineering Institute; and Hiroyuki
Ishida, Senior Economist at the Institute of Energy Economics,
Japan. Though North Korea had participated in several earlier
meetings of the Mechanism, it was not represented in Jeju. ESTH
Chief attended to represent the United States, which was invited as
an observer. UNESCAP staff served as the secretariat.

7. (SBU) One participant stated privately that Japan's absence at
the official level reflected a policy decision to avoid groups that
have North Korea as a member. He added that China's absence
appeared to indicate a lack of conviction that a multilateral
approach would be more fruitful than a bilateral Sino-Russian
dialogue. (Comments by both Russian and Chinese participants
underscored that price is a major sticking point in Sino-Russian
energy talks.) North Korea's absence from a meeting hosted in South
Korea could be expected, but it had also stayed away, without
explanation, from the September 2007 meeting of the WG-EPP held in
Irkutsk.

8. (SBU) Another participant pointed out that Japan's interest in
regional energy integration involving large-scale infrastructure
projects, such as a pipeline connecting Sakhalin to Hokkaido, had
waned in light of Russia's demonstrated willingness (e.g. in
relations with Ukraine and Belarus) to turn off the tap to gain
leverage. Adding to Japan's lack of enthusiasm, he said, is the
forecast of diminishing energy demand growth due to Japan's
declining population, and the lack of a nation-wide grid for a
pipeline to feed into.

9. (SBU) Comment: Given these regional dynamics, and notwithstanding
Mongolia's high-level involvement, to a large extent the meeting
devolved into a Korean-Russian conversation about regional energy
policy. (Coincidentally, Russia and Korea had held bilateral talks
on energy cooperation in Moscow on December 11-12, reported reftel.)
End comment.

MODEST ACCOMPLISHMENTS, MODEST SHORT-TERM GOALS
--------------------------------------------- --

10. (U) Over the two days of the meeting, the Senior Officials and
"resource persons" made presentations on their national energy
situations and policies. They also endorsed the preliminary results
of the Energy Outlook, focused on China, Mongolia, South Korea, and
Russia, prepared by the Korea Energy Economics Institute (KEEI) in
cooperation with research institutions in the three other countries.
(Though North Korea did not participate in the preparation of the
Outlook, KEEI presented its own assessment of North Korea's current
energy balance and its long-term needs.) The final version of the
Outlook is expected to be completed in the spring of 2008. In the
reference case, it predicts that total primary energy demand in
Northeast Asia will grow from 2.8 billion tons of oil equivalent
(TOE) in 2004 to 4.7 billion TOE in 2020. The study assesses that
increased regional cooperation could result in increased efficiency
(e.g. through shorter transmission lines), resulting in a 3.7
percent savings in total energy consumed by 2020.

11. (U) The SOC adopted a Work Plan for 2008 to guide the activities
of the WG-EPP. The main short-term goal is the preparation of a
report examining the region's energy production potential and a
development plan. It also endorsed the recommendation of the GBD to
develop a joint government-business mechanism to assess the economic
feasibility of energy cooperation projects, and directed the WG-EPP
to prepare an implementation plan that avoids duplication of work
done by other institutions. The WG-EPP will meet in late April,
2008, in Chiang Mai, Thailand, with another meeting planned for the
second half of 2008.

12. (U) The SOC also reviewed KEEI's proposed "5-year strategy for

SEOUL 00000009 003 OF 003


energy cooperation in North-East Asia," but decided that further
consultations within member states were needed.

13. (U) The next meeting of the SOC, and the second GBD, are planned
for late November 2008. A venue was not announced.

14. (U) Copies of the documents of the Third SOC are being pouched
to IO/EDA, EEB/ESC, EAP/K, Beijing, Ulaanbaatar, Moscow, Tokyo and
Bangkok. The assessment of North Korea's energy outlook has been
forwarded to EAP/K electronically.

COMMENT
-------

15. (SBU) South Korea is clearly the driving force behind the
UNESCAP energy cooperation initiative. (Korea was reelected to
chair the WG-EPP; KEEI was reelected the "nodal institution" doing
most of the intellectual work while providing financial and
technical assistance to research institutions in other member states
if needed for joint studies.) At the same time, Russia's enthusiasm
for the group (if not for actual commitments) was evident. Two
participants separately asked ESTH Chief for an analysis of why
Russia was so gung-ho in this regional forum. (One possible
explanation is an effort to counter the negative impressions of
Russia's reliability as a business partner created by its
widely-reported disputes with trading and investment partners in the
energy sector.) Nevertheless, in the absence of clearer indications
from Russia about what it is willing to supply, and in the absence
of greater engagement from China, the regional approach to energy
cooperation appears unlikely to make much of an impact in the
near-term. End comment.

VERSHBOW

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