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Cablegate: Eu Energy Security Strategy Seminar

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DE RUEHFR #2248/01 3461322
ZNR UUUUU ZZH
R 111322Z DEC 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 5034
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 PARIS 002248

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET ECON SENV EUN
SUBJECT: EU ENERGY SECURITY STRATEGY SEMINAR

REF: BRUSSELS 01761

1. (SBU) Summary. Participants in a December 1 EU Presidency
seminar in Paris on energy security concluded that EU goals on
energy security, energy efficiency, and the fight against climate
change are mutually reinforcing. The financial crisis and economic
downturn has boosted EU solidarity and justifies a greater EU
leadership role in coordinating investment and infrastructure
improvements. Achieving energy security requires big money,
political sensitivity, and dialogue to create a stable legal
framework that minimizes risks of supply and demand shocks. All
agreed the EU should speak with one voice in relations with non-EU
suppliers and transit countries, though how to get there was
unclear. End summary.

2. (SBU) Economic, development, and industry ministers from France,
Italy, Lithuania, Sweden, Poland, Greece, and the Czech Republic
discussed strategy options for a common EU energy security policy at
the December 1 French EU Presidency seminar. Key speakers included
Malcom Wicks, U.K. Prime Minister's Special Representative on
International Energy Issues; Nobuo Tanaka, Executive Director,
International Energy Agency; Plutarchos Sakellaris, Vice-President,
European Investment Bank; Andris Piebalgs, European Commissioner for
Energy; Anne Laperrouze, European Parliament Member and Reporter of
the Second Strategic Energy Review. Industry majors (Total, RTE,
E.ON Rhurgas, Dow, Dalkia/Veolia) participated. Three round-table
discussions focused on the EU's long-term security of supply, energy
crisis prevention and management, and member states' contribution to
European energy security.

EU VISION OF ENERGY SECURITY

3. (SBU) Participants agreed that policies for energy security,
energy efficiency, and the fight against global warming are mutually
reinforcing. France's Grenelle measures on environmental
protection, the EU Strategic Energy Review, the Energy-Climate
Package, and the ultimate goal of a single, integrated European
energy market comprise a coherent policy foundation with concrete
targets. The vision should not be shaken by the financial crisis or
recession. Instead, there is an opportunity to integrate structural
policies such as energy security initiatives into stimulus packages
and EU macro-economic policies. French State Minister for
Sustainable Development Borloo heralded the "energy transition" of
the twenty-first century that will bring far reaching long-term
changes in production and consumption modes.

INVESTMENT

4. (SBU) In the short term, the financial crisis and economic
recession will impact energy investment. Low oil prices mean
inadequate rates of return for new projects. The real issue is
medium term investment as "the era of cheap oil is over." If
investors take on significant renewable energy (RE) or nuclear
projects, they need EU-wide regulatory predictability and
transparency, IEA DG Tanaka concluded.

INFRASTRUCTURE PRIORITIES

5. (SBU) General consensus emerged on infrastructure priorities
taken from the EU Energy Security and Solidarity Action Plan of the
Second Strategic Energy Review. Key areas are: electrical
interconnections and new supply corridors, external energy
relations, oil and gas stocks and crisis response solidarity
mechanisms, energy efficiency, and the best use of EU's indigenous
energy resources. Participants also supported the Commission's
infrastructure aims (reftel), notably the need to build up links
with the Baltic countries. The Deputy Minister of Economics for
Lithuania stressed that "energy transition" means reconstruction of
its internal electricity grid and network strengthening, at a
projected cost of 1.7 billion euros. Other urgent priorities
include an EU LNG action plan and addressing the rising demand for
diesel fuel that is straining European refining capacity.

6. (SBU) Total, Dow, and Polish and French transmission system
operators argued that EU project development should consider
relative costs, flexible contracts, and exploiting sources where
they make sense. Notable problem areas relate to the establishment
of sufficient gas volume and transit conditions for the southern
corridor, social acceptability for high voltage lines, windmills,
and nuclear strategies in Northern Europe.

ENERGY EFFICIENCY

7. (SBU) Discussion on efficiency focused on energy conservation
measures, buildings, energy labeling, and cogeneration. The EIB
Vice-President said equity would generally be available in Europe
for the energy sector. In 2009-2020, the EIB's energy budget would
remain at its current 6 billion euros p.a., with 20 percent
earmarked for RE projects. (Note: We assume in real terms. End
note.) Several financial organizations and the EIB are proposing a
new financing initiative for ECOFIN consideration that would help

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mobilize large-scale capital markets funding for projects promoting
energy efficiency, the clean use of fossil fuels, combined heat and
power, and renewables. Attendees stressed that regulatory measures
aimed at energy efficiency must not translate into higher prices for
consumers. Energy must be efficient and affordable.

ROLE OF EU

8. (SBU) Former IEA Director Claude Mandil noted that member state
concerns over foreign ownership and energy dependence were not
raised during the seminar. EU leadership in energy security is
needed to promote coherence among rules, procedures, safety, and
security regulations, including the nuclear sector. Tanaka spoke of
a "Green New Deal." (Comment: On the margins, Tanaka told us the
U.S. needed to convince China that the new green economic
development model was commercially viable. If demand of emerging
economies shifts to RE and clean technologies, industry and
investment will follow. Setting a carbon price would incite
investment in carbon capture and storage technologies. End comment.)
Participants agreed the EU should map out infrastructure projects
in RE production to ensure indigenous energy sources are maximized,
and a fair balance among long-term interests is achieved. There is
nothing wrong with imports or interdependence, it's a question of
minimizing risk, Mandil concluded. (Comment: In an embassy
follow-up meeting with Mandil on December 10, he expressed
deep-seated doubts about solidarity mechanisms, citing the Germans
and the Czechs who see some member states as energy freeriders who
fail to take adequate budget measures to build up their energy
sectors. End comment.)

EU EXTERNAL RELATIONS

9. (SBU) On Russia, an expert from the EU-Russia Center said too
much political pressure is counterproductive. Russia feels
threatened by EU efforts to diversify its clients. Export
conditions dictate that Russian gas must be sold on the European
market. By 2012 Russia will face reduced export capacity owing to
rising domestic and emerging economy demand, maturing old fields,
and delays in the Shtokman gas project. Total CEO De Margerie
clarified that Russia is both a large consumer and exporter.
Helping the Russians become energy efficient and encouraging
investment in the EU are good moves. De Margerie believes it is
vital the EU go beyond import-export contracts, to pursue exchanges
in research and development with Russia. The EU needs to speak with
one voice when dealing with third-party countries such as Russia.

POLITICAL CHALLENGES

10. (SBU) De Margerie urged prudence in public statements on oil
market issues, saying EU leaders make matters worse by "unjustified
declarations" regarding terrorist threats and "crisis" that only
fuels market anxiety. He reminded participants there have been very
few supply interruptions in Europe in the previous decades. He is
more worried about maintaining current oil production capacity,
which is near its maximum level because access is increasingly
difficult and costly. EU Leaders should promote a technical
dialogue with consumers, producers, and international oil companies.
Minister Borloo said the EU must articulate its EU energy security
strategy. Public action is critical to promote social acceptability
but also since the energy market "will not regulate itself".

EU CZECH PRESIDENCY

11. (SBU) In 2009, the EU Czech Presidency intends to include
infrastructure improvements, energy security, and solidarity
mechanisms in conventional energy sources among its priorities.
Flexibility is key in the event of supply disruptions, the Czech
Deputy Minister for Industry and Commerce said. Part of the
solution is in fostering arrangements with the Caspian countries and
key transit countries (Ukraine and Belarus), as well as continued
dialogue with the Russians.

12. (SBU) Comment: The one-day seminar was largely a brainstorming
session on how to get Europe's energy house in order, with lots of
talk about the need for a medium and long term investment and
regulatory framework that will facilitate "energy transition."
Although solidarity and interdependence were the bywords, the
Lithuanian Deputy Minister's focus on the cost of network upgrades
needed to achieve his vision of "solidarity" was a reminder that
speaking in one voice will remain a challenge.

PEKALA

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