Search

 

Cablegate: (C) Delivering Tough Messages to Eni Ceo Paolo

VZCZCBSO474
PP RUEHBS
DE RUEHRO #0525/01 1151428
ZNY CCCCC ZZH
P 241428Z APR 08
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC PRIORITY 0233
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHBW/AMEMBASSY BELGRADE PRIORITY 0347
RUEHMO/AMEMBASSY MOSCOW PRIORITY 4422
RUEHBS/USEU BRUSSELS PRIORITY 4626
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 04 ROME 000525

SIPDIS

DEPARTMENT FOR EUR DAS BRYZA
DEPARTMENT FOR E EURASIAN ENERGY COORDINATOR STEVEN MANN
NSC FOR DEPUTY NSA JEFFREY
DEPARTMENT FOR P STAFF
USEU FOR SPECIAL ENVOY GRAY

E.O. 12958: ...

SUBJECT: (C) DELIVERING TOUGH MESSAGES TO ENI CEO PAOLO
SCARONI ON RUSSIA AND IRAN

REF: A) ROME 451 B) 07 STATE 16018

Classified By: ECONOMIC MINISTER COUNSELOR TOM DELARE
FOR REASONS 1.4 B AND D

1. (C) SUMMARY: During his May 5-6 visit to Washington, Post
believes it would be helpful to U.S. interests if Eni CEO
Paolo Scaroni is told very clearly of serious USG concerns
about 1) his company's close collaboration with Russia's
Gazprom and 2) his company's continuing involvement in Iran.
Eni is now a major collaborator in what many see as Gazprom's
efforts to dominate the European energy market; Eni hopes to
build Gazprom's South Stream pipeline, a project that
threatens to scuttle the USG- and EU-supported Nabucco
project. Eni recently gave Gazprom increased access to North
African natural gas fields. Eni maintains long-standing
investments in Iran. Post is preparing to push the new
Berlusconi government to use its equity stake in Eni and
moral suasion to force Eni to make major changes in its
involvement with Gazprom and Iran. Scaroni has returned from
previous visits to Washington with the impression that Eni's
business activities were not matters of grave concern for us.
It would be very useful if he returns from this trip with
raised awareness about USG unhappiness with his company.
Scaroni has appointments with U/S Jeffery and U/S Levey, and
tentative appointments with Acting U/S Fried, and Deputy NSA
Jeffrey -- Embassy Rome recommends that these tentative
appointments be confirmed. END SUMMARY.


--------------------------------------------- ---
SCARONI HOPES TO ""MAKE ENI'S CASE"" IN WASHINGTON
--------------------------------------------- ---

2. (SBU) On March 4, 2007, Ambassador Spogli spoke on energy
security to a group led by Giulio Tremonti, the man widely
expected to be Silvio Berlusconi's Economy Minister. The
Ambassador spoke of the dangers of over-reliance on Gazprom
and of the need to diversify Europe's sources of energy. The
Italian energy giant (and parastatal) Eni, was not mentioned
explicitly in the speech, but Eni knew we were talking about
them. Eni reps contacted us immediately, asking for the
chance to ""clarify misunderstandings"" about their
relationship with the Russians. REF A reports on the briefing
an ENI Vice President gave to Econ Counselor. Eni CEO Scaroni
later called the Ambassador and asked for help in getting
Washington meetings for May 5-6. Scaroni traveled to
Brussels April 16 as part of the same effort to ""clear up
misunderstandings.""


------------------------------------
WHAT SCARONI NEEDS TO HEAR: USG UNHAPPY WITH GAZPROM
COLLABORATION, AND IRAN SUPPORT
------------------------------------

3. (C) Post would like to push the new Berlusconi government
to force Eni to act less as a stalking horse for Gazprom
interests. Eni (which is 30 percent owned by the Government
of Italy) seems to be working in support of Gazprom's efforts
to dominate Europe's energy supply, and against
U.S.-supported EU efforts to diversify energy supply. We
think we have a chance of turning that around. Giulio
Tremonti has told Ambassador Spogli that ""Eni has gone too
far"" in its collaboration with Gazprom.


------------------
IMMEDIATE CONCERNS
------------------

4. (C) Of immediate concern is Eni's proposed construction of
Gazprom's South Stream Black Sea pipeline, a project that
threatens to scuttle Nabucco, the USG- and EU- supported
effort to bring Caspian gas to Europe. Eni is much more than
a mere contractor on this project -- on South Stream it is a
50/50 equity partner with Gazprom. A senior Eni official
recently told us that due to difficulty in reaching
agreements with Serbia and Romania, Eni thinks there is now
only a 60 percent chance that South Stream will actually be
built (see REF A). We think that a strong statement of USG
unhappiness with the project might further increase the odds
against Eni building this pipeline.


5. (SBU) Eni will argue that South Stream does not threaten
Nabucco. We have pointed out to Eni that Putin himself seems
to think that it does. (See Eurasia Daily Monitor, 5 March
2008). Also, Gazprom CEO Alexi Miller stated on February 25,
2008 that South Stream ""obviates"" the need for Nabucco. Our
position on South Stream's impact on European energy
diversification was clearly stated by DAS Bryza on February
26, 2008: ""South Stream definitely does not strengthen
diversification. It strengthens dependence on one supplier.""
(See interview with DAS Bryza on USEU web page.)


6. (SBU) Eni recently announced an agreement with Gazprom
under which Eni would give the Russians access to natural gas
fields in North Africa in exchange for increased Eni access
to gas fields in Russia. COMMENT: North African natural gas
is often seen as an opportunity for Italy and Europe to
diversify away from dependence on Russian gas. Giving
Gazprom control of North African fields clearly does damage
to EU energy diversification efforts.


-----------------------------------
AND THEN THERE IS IRAN....
-----------------------------------

7. (C) Eni has been in Iran for decades. It currently
provides natural gas that is used to pressurize Iranian
petroleum wells. Eni has escaped U.S. Iran Sanctions Act
punishment because of a U.S.-EU understanding that in effect
exempted countries with ""old"" investments in Iran that do not
expand their operations. Eni's continued presence in Iran
has been an irritant in the U.S.-Italian relationship, and
without doubt helps the Iranian regime. We would like to see
Eni leave Iran. Scaroni is likely to say that one of the
alternatives to Russia as an energy supplier is Iran. A firm
expression of USG unhappiness with Eni's current relationship
with Iran is thus very important.


-----------------------
SCARONI IS TAKING WASHINGTON'S TEMPERATURE
-----------------------

8. (C) Scaroni traveled to Washington February 2007 and met
with officials at State and Treasury, including DEPSEC
Kimmitt (see Ref B). Most of the discussions during this
visit were focused on Iran. We have heard from contacts here
that the purpose of Scaroni's trip was essentially to take
Washington's temperature and to make sure he had an
understanding of where our ""red lines"" were regarding his
company's Iranian operations. Scaroni reportedly came back
from that trip convinced that his company was in no danger of
crossing any U.S. red-lines. He almost certainly has a
similar purpose in this upcoming visit; his staff tells us he
wants to talk about Russia, Iran, and about Eni's recent deal
with Venezuela.

9. (C) Eni clearly has been trying to monitor USG reactions
to its moves. On January 30, 2008, Eni VP for international
affairs Enzo Viscuzi asked a senior USG official about USG
reaction to Eni's involvement in the South Stream project,
and asked if the USG is ""mad at Eni."" We expect Scaroni to
pose similar questions during this trip.


----------------------
SCARONI, BERLUSCONI...AND RUSSIA
----------------------

10. (C) Paolo Scaroni was made head of Eni in 2005 by
then-Prime Minister Silvio Berlusconi, so there is a good
chance he will remain head of Eni after Berlusconi again
becomes Prime Minister in May. But Tremonti's comment about
Eni having ""gone too far"" may indicate discontent about
Scaroni at high levels in the Berlusconi camp. Recent press
reports indicate that Scaroni will stay on after the change
in government, but this has not been confirmed. Whether or
not he stays, our work on this issue will be complicated by
Silvio Berlusconi's close relationship with Vladimir Putin.
Putin stopped off in Italy to visit Berlusconi on April 17,
2008 (en route home from Libya). Contacts in the Foreign
Ministry tell us that they expect Berlusconi to take direct
control of most important aspects of the Italy-Russian
relationship.


--------------------
SCARONI -- CORRUPTION ALLEGATIONS
--------------------

11. (U) Scaroni's bio is available on the Eni web site, but
officials meeting with Scaroni should also know that
according to press reports, in 1992 he pleaded guilty to
bribery (kickback) charges in connection with an electrical
power station project in Brindisi. This was part of the
massive ""Tangentopoli"" scandal that brought down Italy's
post-war political parties. Scaroni was reportedly sentenced
to one year and four months in prison, but apparently served
no time.


12. (SBU) Other reports of Eni corruption are much more
recent: Eni owns a 25 percent share in the TSKJ consortium.
TSKJ is under investigation by the SEC due to alleged

SIPDIS
improper payments to Nigerian officials. Also, in March
2008, British and Italian authorities launched a corruption
probe regarding the sale of a large mobile phone system in
Italy. Officers of the Italian energy parastatal ENEL
allegedly received kickbacks from the Egyptian firm that was
allowed to buy the system. Scaroni was CEO of ENEL at the
time of this sale.


------------------------
SUGGESTED TALKING POINTS
------------------------


13. (U) Post suggest the following talking points for use
with Eni CEO Paolo Scaroni:

-- The U.S. government remains deeply concerned about Eni's
involvement in Iran.

-- Our displeasure with Eni has been intensified in recent
months by the way in which your company is collaborating with
Gazprom's efforts to obtain a dominating position on the EU's
energy supply.

-- The USG strongly supports EU efforts to diversify the EU's
sources of energy supply. We are encouraging the development
of the Nabucco pipeline, a project that will bring Caspian
gas to the EU. But your company is poised to build Gazprom's
South Stream pipeline, a project seen by many as a Russian
effort to scuttle Nabucco.

-- We are also concerned about your role in giving Gazprom
greater access to North African natural gas fields; along
with Caspian gas, these fields are among the only other major
alternative sources of natural gas for Europe.

-- You should understand that on two of our most important
Eurasian security issues, we see your company as taking very
short-sighted commercial decisions. We find it particularly
disturbing that these positions are being taken by a company
that is 1/3 owned by the Italian government.

-- We strongly urge Eni to re-consider its participation in
the South Stream project, and, in a broader sense, we urge
Eni to align its policy's and programs with EU efforts to
diversify sources of energy supply. We also strongly
recommend that you end your collaboration with the Iranian
regime.

-- You should not interpret our concerns as being
anti-Russian. However, we think Europe should diversify its
sources of energy, and we are concerned that in its
partnership with Gazprom (a firm that often seems to be an
arm of government action) your company is not working in
support of this objective.

-- You should know that we have similar concerns about other
powerful market actors that, like Gazprom, do not have
transparent decision processes.


-------
COMMENT
-------

13. (C) The current South Stream vs. Nabucco situation is
eerily reminiscent of a similar struggle during the 1990s:
In an effort to delay or prevent the construction of a
trans-Caspian pipeline that could have helped bring Caspian
gas to Europe, the Russians pushed forward their Blue Stream
project (under the Black Sea). The Russians built Blue Stream
not for commercial reasons (it always seemed like a money
loser) but for strategic reasons (to stop the trans-Caspian
pipeline). The Russians succeeded: Eni built Blue Stream, and
the Trans-Caspian pipeline has never been built. Eni is now
preparing to play a very similar role in another Russian
strategic pipeline project, this time as an equity partner
with Gazprom in the South Stream effort aimed at stopping
Nabucco.


14. (C) Ambassador Spogli has made energy security one of
Embassy Rome's top priorities. The election of the new
Italian government, along with Eni's parastatal status,
presents us with an opportunity to address what is clearly
the most important Italian piece of the European energy
security puzzle: Eni's role as facilitator for Gazprom's
efforts to gain a semi-monopolistic and politically
influential position in the European energy market. We would
like to try to use our influence with the GOI (and with Eni)
to change that, and to induce Eni to cooperate (not
counteract) EU energy security efforts.


15. (C) We are still between governments in Italy, and many
decision makers are not yet in place, Nevertheless, we have
some reasons to think we might have some success in pushing a
cautionary approach on Eni and Gazprom when we engage with
the new Berlusconi team. Berlusconi is close to Putin, and
that may be a problem, However, Berlusconi's people have been
talking quite a bit about energy security, and this may
provide an opening. Tremonti seems especially seized with
this issue, and (as noted) has expressed unhappiness with
Scaroni's approach to Gazprom. We were surprised to find Eni
itself so uncertain about whether South Stream would actually
be built. They seem to be ""on the fence"" regarding this
project -- perhaps we can make them even more uncertain about
it, and about the wisdom of their alliance with Gazprom. Eni
also seems deeply concerned about the consequences of
angering us -- the company has significant investments in the
United States. It would be very helpful if Scaroni hears of
our deep dissatisfaction (as outlined above).


16. (U) We understand Scaroni has a confirmed appointment
with U/S Jeffery and U/S Levy, and tentative appointments
with Acting U/S Fried and Deputy NSA Jeffrey. Post strongly
recommends that these appointments be confirmed.


SPOGLI
"

© Scoop Media

 
 
 
 
 
World Headlines

 

Werewolf: Gordon Campbell On North Korea, Neo-Nazism, And Milo

With a bit of luck the planet won’t be devastated by nuclear war in the next few days. US President Donald Trump will have begun to fixate on some other way to gratify his self-esteem – maybe by invading Venezuela or starting a war with Iran. More>>

Victory Declared: New Stabilisation Funding From NZ As Mosul Is Retaken

New Zealand has congratulated the Iraqi government on the successful liberation of Mosul from ISIS after a long and hard-fought campaign. More>>

Gordon Campbell: On The Current US Moves Against North Korea

If Martians visited early last week, they’d probably be scratching their heads as to why North Korea was being treated as a potential trigger for global conflict... More>>

ALSO:

Gordon Campbell: On The Lessons From Corbyn’s Campaign

Leaving partisan politics aside – and ignoring Jeremy Corbyn’s sensational election campaign for a moment – it has to be said that Britain is now really up shit creek... More>>

ALSO:

Another US Court: Fourth Circuit Rules Muslim Ban Discriminatory

ACLU: Step by step, point by point, the court laid out what has been clear from the start: The president promised to ban Muslims from the United States, and his executive orders are an attempt to do just that. More>>

ALSO:

 
 
 
 
 
 
  • Pacific.Scoop
  • Cafe Pacific
  • PMC