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Cablegate: Iea/China: Das Hengel Discusses Iea, Bilateral

VZCZCXRO0243
PP RUEHAST RUEHCN RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
RUEHVC
DE RUEHBJ #4603/01 3540302
ZNR UUUUU ZZH
P 190302Z DEC 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1481
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 4693
RUEHKO/AMEMBASSY TOKYO PRIORITY 2332
RHEHNSC/NSC WASHDC PRIORITY
RUEAEPA/HQ EPA WASHDC PRIORITY
RUEHOS/USMISSION OECD PARIS FR PRIORITY

UNCLAS SECTION 01 OF 03 BEIJING 004603

STATE FOR EEB/ESC/HENGEL, EEB/ESC/PSECOR/JKOPP, OES,
OES/EGC, OES/ENV, EAP/CM/HABJAN/FLATT,
TREASURY FOR OASIA/ISA/DOHNER/HOLMER/WRIGHT

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET ECON EMIN SENV CH
SUBJECT: IEA/CHINA: DAS HENGEL DISCUSSES IEA, BILATERAL
ENERGY COOPERATION WITH CHINESE OFFICIALS

1. (SBU) Summary: Chinese energy experts and government
officials explained their views on bilateral energy
cooperation and China?s engagement with the International
Energy Agency (IEA) with EEB DAS Douglas Hengel December
3-5. On bilateral energy cooperation, National Energy
Administration International Cooperation Director General
Wu Guihui praised the accomplishments of the Strategic
Economic Dialogue (SED) and other fora, but noted that
several bilateral energy cooperation mechanisms have
overlapping responsibilities, but are led by different
ministries, leading to institutional obstacles in some
cases. Energy Research Institute (ERI) Director General
Dr. Han Wenke suggested that the U.S. and China establish
a policy coordination mechanism, which could improve
market stability. On IEA cooperation, all interlocutors
agreed that China should continue to strengthen its
cooperation with the IEA, but several noted concerns
about the possibility of China joining the IEA. DG Wu
stated that it is ?premature? for China to pursue IEA
membership, as the IEA would need to revise its criteria
for membership if China were to join. ERI DG Han noted
that the Chinese government is currently studying how it
can best work with the IEA. On membership, he said that
if the IEA were to issue a formal invitation for China to
join, China would be obligated to respond. Development
Research Council (DRC) DG Dr. Feng Fei said he also
supports closer cooperation with the IEA, but pointed out
that China would struggle to meet the IEA?s membership
criteria at this time. End Summary.

2. (SBU) In conjunction with participation in the
Strategic Economic Dialogue in Beijing December 3-5, EEB
DAS Douglas Hengel discussed bilateral energy cooperation
and China?s engagement with the International Energy
Agency (IEA) with National Energy Administration (NEA)
International Cooperation Director General Wu Guihui,
Energy Research Institute (ERI) Director General Dr. Han
Wenke, Director for the Center of China Studies at
Tsinghua University Dr. Hu Angang, and Development
Research Center (DRC)of the State Council Department of
Industrial and Economic Research Director General Dr.
Feng Fei. DAS Hengel solicited Chinese views on how to
improve bilateral energy cooperation mechanisms and how
best to pursue China?s coordination with the IEA, noting
that the U.S. has been a strong advocate for Chinese
participation in IEA activities and that the U.S. would
support Chinese efforts to become an IEA member. Such
efforts would be assisted by an expression of interest by
China in joining the IEA, he explained.

U.S.-China energy relationship ?at a crossroads?
--------------------------------------------- --

3. (SBU) NEA DG Wu Gui Hui, DRC DG Dr. Feng Fei, and
NDRC-affiliated Energy Research Institute (ERI) DG Dr.
Han Wenke praised bilateral efforts to strengthen energy
cooperation through the Energy Policy Dialogue, the SED,
the Ten Year Framework, and exchanges between U.S. and
Chinese research institutions. Wu said the bilateral
energy relationship now ?stands at a crossroads.? He
pointed out that existing cooperation mechanisms reflect
the needs of both countries at the time they were created.
Some of these mechanisms now overlap with one another,
but are led bydifferent ministries, resulting in
institutional obstacles in some cases. DRC DG Feng noted
that while bilateral energy cooperation remains a top
priority for the Chinese government, it is easiest for
China to contribute to efforts at the regional level.

4. (SBU) DG Han suggested that the U.S. and China
establish a policy coordination mechanism. For example,
the U.S. could inform China if it planned to increase its
strategic petroleum reserves or China could inform the
U.S. in advance of changes to domestic fuel prices. Such
a mechanism would contribute to international market
stability, he explained.


BEIJING 00004603 002 OF 003


U.S. should be flexible on technology transfer
--------------------------------------------- ---

5. (SBU) NEA DG Wu recommended that the U.S. and China
focus on substantial cooperation on environmental
protection, climate change, and renewable energy.
Opining that U.S. IPR concerns hinder the transfer of
clean energy technology to China and other developing
countries, Wu stated that the U.S. should promote a ?more
flexible environment? for technology transfer. Wu said
China welcomes U.S. enterprises and institutions that
want to invest in new energy research and development in
China. This could also benefit U.S. companies weathering
the economic crisis in the United States, he argued. DRC
DG Feng also suggested that the United States should
offer greater support for the transfer of clean energy
technology to China. Feng acknowledged U.S. IPR concerns,
but argued that China relies heavily on coal-fired power
generation and the transfer of clean coal technology
would be in the interest of both countries.

6. (SBU) ERI DG Han also noted that the U.S. and Chinese
governments should make efforts to improve enterprise-
level cooperation on clean energy and energy efficiency.
He noted that many U.S. clean energy firms already
operate in China and more would like to do so. China, on
the other hand, has many clean energy companies that have
not yet entered the U.S. market. By encouraging clean
energy enterprises to enter one another?s markets, the
U.S. and China could speed up technology transfer and
stimulate more investment in clean energy technology, he
stated.

Chinese NOCs? overseas activities benefit us all
--------------------------------------------- ---

7. (SBU) DRC DG Feng noted said he is concerned that the
U.S. misunderstands Chinese national oil companies? (NOCs)
overseas exploration and production objectives. In
Feng?s view, the U.S. and China must work to establish
?common trust? regarding Chinese NOCs overseas activities.
The U.S. should not assume that Chinese NOCs intend to
control overseas resources. Rather, Chinese NOCs?
overseas activities contribute to increased production
and greater market stability. He pointed out that
African oil, for example, is expensive to transport back
to China and a portion of Chinese NOCs? production in
Africa is sold on the international market. This
benefits all oil importing countries including the U.S.,
he argued.

U.S., China need to lead on climate change
------------------------------------------

8. (SBU) Director for the Center of China Studies at
Tsinghua University Dr. Hu Angang asserted that China
should play a more active role in international energy
cooperation, including through the IEA and other
organizations. The U.S. and China should also assume
more responsibility and leadership in international
discussions on climate change, he suggested. On this
issue, Hu opined that Chinese leaders remain reluctant to
commit to specific emissions reductions targets. In Hu?s
view, this is because central government authorities
worry that if they make a commitment, local government
leaders will be unable to follow through effectively.

Supportive of IEA cooperation, but cautious on membership
--------------------------------------------- ----------

9. (SBU) NEA DG Wu welcomed the IEA?s cooperation with
China and acknowledged U.S. support for Chinese
membership in the IEA. He argued, however, that it is
still premature for China to seek membership, as China
does not belong to the OECD and does not meet the IEA?s
membership requirements. Wu noted that the IEA would
have to revise its membership criteria if China were to

BEIJING 00004603 003 OF 003


join. Wu explained that China will continue its
cooperation with the IEA and said that NEA
Administrator/NDRC Vice Minister Zhang Guobao would
consider participation in next October?s IEA ministerial.

10. (SBU) ERI DG Han, echoed Wu?s views on IEA membership,
noting that China would have to overcome several legal
obstacles -- in particular OECD membership -- in order to
join the IEA. Han explained that Chinese government
agencies are now in the process of studying how China
could best work with the IEA. As part of this process,
China is reviewing the obligations that IEA membership
would entail. It will be another 3-5 years before China
reaches a decision on whether to pursue IEA membership,
he stated. Han explained that earlier this year, he had
told IEA President Tanaka that IEA member countries
should first reach internal consensus on whether to
invite China to join. If the IEA were to issue a formal
invitation for China to seek membership, China would be
obligated to respond, he clarified. Hengel responded
that the U.S. supports changing the OECD membership
requirement, which would be easier to do if China
expressed an interest in joining.

11. (SBU) DRC DG Feng also welcomed closer cooperation
between China and the IEA and agreed that Chinese
participation in IEA activities enhances global energy
security. On membership, however, Feng emphasized that
China must carefully review the costs and benefits of
joining the IEA. He also pointed out that China is far
from meeting the IEA?s membership requirements.
Insufficient collection of energy data, for example,
would make it difficult for China to meet the IEA?s rules
on transparency. ?The government itself does not know
the true cost of energy,? he explained. OECD membership
and 90-day petroleum reserves requirements would also be
challenges for China. Feng noted that IEA voting weights
would need to change if China joined, which may be
problematic for some European members.

Comment
-------

12. (SBU) Comment: Chinese officials expressed a strong
interest in further cooperation with the IEA, but
remained cautious about pursuing membership. They noted
that China will not qualify for IEA membership in the
near future, pointing out that China will not become an
OECD member any time soon, 90 days of petroleum reserves
remains a long-term goal, and IEA voting weights would
need to be changed to reflect China?s large and growing
oil imports. One official expressed concern that Chinese
membership in the IEA would result in obligations to
reduce greenhouse gas emissions. Hengel explained that
this was not the case. End Comment.

13. (U) DAS Hengel has cleared this cable.

RANDT

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