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Cablegate: Faymann in Moscow: Austria Reaffirms South Stream Interest;

VZCZCXRO7264
PP RUEHIK
DE RUEHVI #1447 3171207
ZNR UUUUU ZZH
P 131207Z NOV 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 3585
INFO RUEHMO/AMEMBASSY MOSCOW PRIORITY 2277
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS VIENNA 001447

SIPDIS, SENSITIVE

E.O. 12958: N/A
TAGS: ENRG EAIR ELTN ECON PREL AU RS
SUBJECT: Faymann In Moscow: Austria Reaffirms South Stream Interest;
Russians Push Hard on Gas Issues

REF: Moscow 02784

Sensitive but Unclassified - Protect accordingly.

1. (U) Austrian Chancellor Werner Faymann discussed energy and
transportation issues with Russian President Medvedev and PM Putin
during a November 10-11 trip to Moscow. According to press reports,
the Medvedev meeting was a brief courtesy visit while the Putin
meeting was a three-hour discussion that the Russian PM later
described as "fact based" and "trustworthy."

SOUTH STREAM
- - - - - - -

2. (SBU) Faymann and Putin confirmed that Austria will become a
partner in the South Stream pipeline project, if the negotiations on
the details are successful. The pipeline (or, more likely, one
branch of the line) would then terminate at the Austrian/OMV gas hub
in Baumgarten. Russia hopes that a final agreement can be concluded
by the end of the year. However, contacts in the Chancellery and
Austrian energy company OMV told us in the lead-up to the visit that
reaching an agreement by the end of 2009 will be difficult, as the
Austrians and Russians are still quite far apart on legal and
technical issues. According to Chancellery contacts, the Russians
have been pushing for months to make a South Stream agreement a
centerpiece of the visit, and Austrian press reports affirm that
Putin personally (accompanied by Gazprom CEO Alexei Miller) pushed
Faymann very hard on South Stream.

3. (U) Faymann told reporters that Austria "will take gas from
wherever it comes, as we need long-term energy security." He noted
that gas consumption is expected to significantly increase in
Austria in the coming years. Faymann reportedly assured Putin that
the planned Nabucco pipeline is not competing with South Stream --
Putin's reply reaction after the meeting was to say publicly that
all pipelines circumventing Ukraine could help to "discipline" that
country. At Putin's request, Austria and Russia are planning to set
up a bilateral energy working group.

RUSSIA-UKRAINE GAS DISPUTE
- - - - - - - - - - - - - -

4. (U) Putin said bluntly after talks with Faymann that if Ukraine
"cannot pay for our gas, we will not deliver it. If Ukraine takes
out our transit gas, we will reduce the amount of supply to Western
Europe." Faymann tried to allay public fears by saying he is
confident in Ukraine's ability to pay its bills and in the EU's
capacity to serve as mediator between Russia and Ukraine.

AVIATION / RAIL
- - - - - - - -

5. On transportation, the leaders discussed air service rights for
Austrian Airlines (AUA) in Russia following its recent takeover by
Lufthansa, where Russia agreed to extend AUA rights through February
` (but rights will then have to be re-negotiated (NOTE: Faymann
tried to convince the Russians that AUA is still an "Austrian
company" under the terms of the bilateral air service agreement,
despite ownership by Lufthansa). Leaders also confirmed plans to
extend a Russian-gauge (which differs from EU standards) rail line
through Slovakia to the Danube, which would facilitate container
shipments from China to central Europe.

COMMENT
- - - -

6. (SBU) Faymann's trip to Moscow was his first major foreign policy
expedition outside the EU, and natural gas was sure to top the
agenda. The GoA has long said it wants to participate in South
Stream (but Nabucco is its "first priority"); until now, the GoA
has taken a "go slow" approach on South Stream, letting sticky
regulatory/tax issues (driven in part by EU regulations) slow the
negotiations. If press reports are accurate about closed-door
meetings, the Russian side was insistent in pushing for Austria to
sign a South Stream agreement this year, or the pipeline could
terminate in Slovenia, not at the Baumgarten hub. END COMMENT.

EACHO

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