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Cablegate: Energy: Greeks See Baku Ready to Cooperate, Ankara

VZCZCXRO1310
PP RUEHBW
DE RUEHTH #0438/01 0811131
ZNY CCCCC ZZH
P 211131Z MAR 08
FM AMEMBASSY ATHENS
TO RUEHC/SECSTATE WASHDC PRIORITY 1508
INFO RUEHAH/AMEMBASSY ASHGABAT 0131
RUEHAK/AMEMBASSY ANKARA 5100
RUEHMO/AMEMBASSY MOSCOW 0987
RUEHRO/AMEMBASSY ROME 4349
RUEHKB/AMEMBASSY BAKU 0199
RUEHSF/AMEMBASSY SOFIA 1593
RUEHUP/AMEMBASSY BUDAPEST 0523
RUEHVI/AMEMBASSY VIENNA 1019
RUEHBW/AMEMBASS BELGRADE 0005
RUEHKV/AMEMBASSY KYIV 0028
RUEHBM/AMEMBASSY BUCHAREST 0964
RUEHSW/AMEMBASSY BERN 0507
RUEHTH/AMCONSUL THESSALONIKI 1836
RUEHIT/AMCONSUL ISTANBUL 2005
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 03 ATHENS 000438

SIPDIS

SIPDIS
NOFORN

E.O. 12958: DECL: 03/19/2018
TAGS: ENRG GR
SUBJECT: ENERGY: GREEKS SEE BAKU READY TO COOPERATE, ANKARA
STANDING IN THE WAY


Classified By: Ambassador Daniel Speckhard for Reasons 1.4 (b,d)

1. (C) Summary. Minister of Development Folias told the
Ambassador he had found a spirit of "excellent cooperation"
in Baku during his March 17 trip there. Folias was
particularly pleased to hear from Baku that Azerbaijan had
"lots of gas", some of which was available immediately.
Unfortunately, his trip to Baku threw a stark light on the
transit dispute between Baku and Ankara, which left Folias a
bit unsettled. At the Ambassador's urging, Folias instructed
his staff to set up quickly a visit for the Minister to
Ankara. On Russia, Folias noted he wanted to build strong
energy relations with as many energy suppliers as possible.
This is simply good business sense, he claimed. He noted
that the next meeting of the South Stream inter-governmental
working group would take place in another ten days. Folias
also promised to continue making headway in rationalizing
Greece's arcane, Byzantine and opaque procurement rules. End
Summary.

- - - - - - -
Baku Readout
- - - - - - -

2. (C) Folias provided a fairly glowing readout of his visit
to Baku, saying his meetings were held in a "very good
spirit" and praising the "excellent cooperation" he found.
He met with the Azerbaijani President, Prime Minister, as
well as with the Minister of Industry/Energy, and the Deputy
Foreign Minister. He also had a meeting with SOCAR. Folias
noted his trip was the fulfillment of a promise Prime
Minister Karamanlis had made to President Aliyev during the
November 2007 TGI ceremony at the Turkish-Greek border.

3. (C) Folias said he had told his Azerbaijani counterparts
that he wants long-term cooperation based on concrete
arrangements. These should focus, in the energy field, on
setting up the mechanics necessary to safeguard Greece's
energy supplies. He noted that "The Azeris are as keen to
work with us as we are with them. Moreover, they have a huge
supply of gas." Folias said Azerbaijani officials had told
him that the country had gas for 100 - 200 years, and that it
had extracted 28 bcm of gas this year alone.

4. (C) Folias noted he had told the Azerbaijanis that, in
the short-term, Greece very much wanted to secure an
additional 1 bcm of gas supply from Baku to cover immediate
Greek needs. "They are ready to supply this", he said.

5. (C) Folias noted that his visit was about establishing a
broad framework of cooperation with the Azerbaijanis: "Energy
was not the only item on our agenda." He noted that the two
sides had investigated cooperating in establishing joint
ventures between small and medium-sized enterprises in the
tourism and trade industries. The Greek side had offered its
assistance in helping Baku set up: a food quality control
organization; a standardization organization; and an
alternative energy organization. Lastly, Athens was offering
its shipping industry expertise.

- - - - - - - - - - - - - - - - - - - - - - - - -
The Fly in the Ointment: Turkey's Transit Demands
- - - - - - - - - - - - - - - - - - - - - - - - -

6. (C) Folias said that, while his meetings in Baku gave him
hope, he left with increased concern about Turkey. He
reminded the Ambassador of the Turkish cut-off in Greece's
initial TGI gas supplies this winter. "Luckily the winter in
Greece was not too cold. We were able to make up for the
cut-off in gas supplies from Turkey through additional
supplies through Bulgaria and Algeria, but this initial stage
of TGI did not go the way we had planned it." The Minister
went on: "We have to be secure. If you're trying to do

ATHENS 00000438 002 OF 003


long-term planning out to 2020, you need concrete, reliable
information."

7. (C) Folias' concerns over Turkey were heightened in Baku,
where he heard from numerous sources about the transit
impasse between Baku and Ankara. Folias was considering
calling a four-way meeting of the TGI member states plus Baku
in order to flesh out a four-way TGI A inter-governmental
agreement. "We're all married through TGI, now we need to
make the marriage work." Folias said the key challenge was
"how to convince Turkey to be happy solely as a transit
country" in view of Turkey's goal to "trade 15% of the gas
coming from Azerbaijan." Folias said he used to think of
Azerbaijan and Turkey as being as close as a "finger and its
nail," but was now concerned this relationship appeared to be
growing distant.

8. (C) The Ambassador praised Folias for the multiple actions
he had taken to support TGI recently, including a trip to
Italy in late January, helping ratify the GoG-GOAJ bilateral
energy IGA in February, and finally his trip to Baku. He
said we recognized Folias' concern over the cut-off but
encouraged him to look at this as only a reason to continue
the strategy of diversity in supplies and routes and as an
opportunity for working with Turkey to develop a more robust
agreement. The Ambassador also noted the role we played and
will continue to play in encouraging Turkey to maintain gas
supply to Greece. He asked Folias whether he was now
considering a trip to Ankara, which seemed particularly
useful in the current circumstances. Folias said he had
hoped to visit Ankara on his way back from Baku, but that he
had had to cut his trip short in view of the difficultwith Russia
- - - - - - - - - - - - - - - - - - - -

9. (C) The Ambassador asked about the state of Greek
cooperation with Russia on energy, noting that the USG
recognized that this relationship was strong and did not want
to undermine it. Our concern was simply when Russia used its
monopoly power to pressure Greece. We were particularly
concerned that Russia not link issues such as the extension
of the current Russian supply agreement to other, separate
issues.

10. (C) Folias emphasized that he wanted to have productive
energy relations with as many supplier countries as possible.
"Greece does not have an energy supply surplus." His policy
was to have at least two major gas suppliers. "What happens
if a terror attack destroys one supply pipeline?" His
highest priority with Russia was to extend to 2040 the
current supply agreement that is set to expire in 2016. He
said he saw "no strings attached" in his negotiations with
Gazprom and Russian authorities.

11. (C) Folias noted that Russian Deputy Energy Minister
Yannofskiy had been in Greece March 13 for discussions. The
two sides had set up a "technical secretariat" to consider
Greece's participation in South Stream, which was to meet
again in another 10 days. On oil, the Burgas-Alexandroupoli
company had been set up and held two board meetings, but now
the company needed to work up a feasibility study for the
pipeline.

12. (C) Folias ended the discussion on Russia by saying "we
know Russia is not happy with TGI. But we've told them that
Greece must support its EU partners as a conduit of Caspian

ATHENS 00000438 003 OF 003


gas. We simply cannot undercut our international
reputation."

- - - - - - - - - - - - - - - - - - - - - -
Ambassador Urges Folias not to Support TAP
- - - - - - - - - - - - - - - - - - - - - -

13. (C) The Ambassador urged Folias not to support the
Trans-Adriatic Pipeline of EGL and promised to supply Folias
with information backing up the USG's belief that TAP would
not serve Greece's interests. Folias thanked the Ambassador
in advance for the information.

- - - - - - - - - -
Procurement Issues
- - - - - - - - - -

14. (C) The Ambassador also discussed Greek procurement. He
thanked Folias for recent moves to simplify Greece's
procurement procedures, noting the good work of the
Development Ministry's Secretary General for Procurement,
Dimitris Skiadas. He urged the GoG to continue these efforts
by establishing a clear list of documents U.S. firms could
submit in order to meet the requirements of Greek law.
Currently, there are required documents available to Greek
firms from the Greek government that simply did not have
equivalents in the United States. Folias called Skiadas on
the phone during the meeting, who assured the Minister that
the final list of alternative documents would be published in
May. Folias also said he wanted to go to an on-line
procedure for tendering as the best way to assure fairness,
transparency, and efficiency. He promised to create a system
that would protect the proprietary information supplied by
all bidders. He also stated that he would like to reduce the
level of detail in specifications and requirements in order
to give authorities more discretion and responsibility in the
process.
SPECKHARD

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