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Cablegate: Nordstream Road Show Comes to Tallinn

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RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHTL #0121/01 0881525
ZNR UUUUU ZZH
R 281525Z MAR 08
FM AMEMBASSY TALLINN
TO RUEHC/SECSTATE WASHDC 0573
INFO RUEHMO/AMEMBASSY MOSCOW 2589
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 02 TALLINN 000121

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DEPT FOR EUR/ERA, EUR/NB AND DAS BRYZA
DOC FOR ITA LEAH MARKOWITZ
DOE FOR TYLER TILLER
MOSCOW FOR ALI JALILI

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SENSITIVE

E.O. 12958: N/A
TAGS: ENRG EINV PREL ECON EUR EN
SUBJECT: NORDSTREAM ROAD SHOW COMES TO TALLINN

Ref: Tallinn 28

1. (SBU) Summary: In a 3-hour presentation hosted by the
German embassy in Tallinn, presenters from WinGas, BASF and
the UN Economic Commission for Europe both promoted and
defended the NordStream gas pipeline project. They used a
variety of arguments to claim that NordStream will be a
cheaper, safer, cleaner and more reliable source of gas for
Europe than the alternatives. They dismissed renewable
energy sources as a viable alternative to fossil fuels, and
equally dismissed any on-shore alternatives to NordStream.
Participants were skeptical, but the event was at the very
least an effort by NordStream consortium partners to repair
some of the PR 'disaster' they experienced here after last
fall's rejection of the project by the Government of
Estonia (GOE). End Summary.

2. (U) At a March 19th seminar titled "Some Key Global
Energy Issues and their Relevance for Europe" the German
Embassy in Tallinn hosted speakers from several companies
involved in the NordStream gas pipeline project. In a
format they have taken to the other Baltic countries
several times in the past six months, speakers presented
scientific literature, economic projections, and forecasts
of future EU energy demands in support of the project's
safety, viability, and long-term inevitability.

RUSSIA: A MORE RELIABLE SUPPLIER THAN...IRAN?

3. (U) In addition to one Swiss Nordstream official, the
consortium was represented at the dinner by Dr. Ernst
Schwanhold, (former Economic Minister in the German state
of Westphalia) now of BASF Corporation which is a 20
percent owner of NordStream, and Dr. Gerhard KQnig of
WinGas (a 50/50 joint venture with Wintershall and
Gazprom). (Note: WinGas plans eventually to be a
downstream customer of NordStream. End Note.) The third
speaker, a regular on the NordStream Road Show, was Dr.
Sead Vilogorac of the UN Economic Commission for Europe
(UNECE) in Geneva. No one came from Gazprom.

The team came prepared to address the gamut of concerns
about the NordStream pipeline. Their lines of argument
basically went like so:

-- NordStream is not just a Russo-German project, it's a
European project;
-- Building off-shore is cheaper, safer, and cleaner than
building on-shore;
-- An off-shore pipeline allows higher pressure (180-200
bar) without building compressor stations every 100km, as
needed for on-shore pipelines;
-- Building compressor stations would add cost, and emit
more CO2 in the construction process;
-- Gas is cleaner than coal, oil, etc. for energy
production;
-- Projected future EU demand for gas is so great that
Europe will need all the NordStreams it can get, and soon;
-- Renewables are nice to talk about, but won't work, are
too costly, are basically a pie-in-the-sky proposition;
and:

4. (U) In a new twist on the complaint that the undersea
route will cut out countries such as the Balts and Poland
from access to the pipeline or transit fees, the NordStream
team argued that an off-shore route will be "free from
individual national interests" and thereby safer. Just for
good measure, their final argument was repeated more than
once: Where else will Europe get its gas from? Iran?
Algeria? Iraq? In the words of Dr. Vilogorac of UNECE,
"Only OPEC and Russia are reliable suppliers."

"WHAT'S IN IT FOR US?"

5. (SBU) The audience was interested and lively;
questioners emphasized the particular concerns of countries
in the region. The Polish embassy asked about Yamal II as
an alternative to NordStream; the answer: twinning Yamal I
on-shore would be more expensive than building NordStream
off-shore (see above). The Estonian MFA's energy director
asked about the environment impact of possible spills or
other accidents during construction. The speakers had no
answer other than to speculate that the same legal
framework would apply as with any other pipeline in the

TALLINN 00000121 002 OF 002


North Sea or the Mediterranean. (Note: The MFA contact
later told us he heard no new information from this
"propaganda" session, and was unconvinced that WinGas and
BASF truly understand the scope of what the NordStream
project will entail. End Note.) To the Lithuanian
embassy's concern about possible supply interruptions,
WinGas and BASF simply said that they have found Gazprom to
be a very responsible partner. (Note: WinGas is 50 percent
owned by Gazprom. End Note) Finally, the British embassy
asked simply: "What's in this for Estonia?" With a
straight face, Dr. Schwanhold of BASF replied that
"European solidarity" was the main payoff for Estonia,
adding that someday there might also be the possibility of
a reverse pipeline to carry gas from the terminus at
Griefswald back into the Baltics. The sole NordStream
official in the group added that there was not one project
on the Trans European Network (TEN) list that equally
benefits all member states, but nevertheless all should
support them for the good of the Union.

6. (SBU) Comment: For all the skepticism among the
audience, the forum was productive, and was exactly the
kind of open debate that had not happened in the run-up to
Estonia's decision to decline permission for an
environmental impact study in Estonia's economic zone.
WinGas and BASF representatives freely admitted that
NordStream badly fumbled the PR aspects of the project last
year, and felt that with better optics and communication,
could have lessened opposition to the project in Estonia.
The companies' arguments - while note entirely convincing -
were at least a step towards more dialogue on the issue.

7. (SBU) Comment, cont'd: It was curious that BASF and
WinGas did not seek more attention for the event, but
instead cloaked it under the guise of an embassy-sponsored
discussion of "energy security, energy efficiency and
climate protection." This may be an indication of their
lingering wariness of public opposition to NordStream
leftover from last fall. The German Embassy's Commercial
Counselor confirmed that this event went quite well from
the German point of view. The questions in Tallinn mirrored
the questions that had been asked on stops in Riga and
Vilnius. It remains to be seen if NordStream consortium
partners, or even Gazprom itself, will continue to make
similar, or more ambitious, attempts to address the many
persistent concerns in the region with this project. End
Comment.

DECKER

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