1. (U) Secretary of Energy Spencer Abraham met with Dutch
Economics (also energy and telecommunications) Minister
Laurens Jan Brinkhorst on August 13 in The Hague. In
response to a question from Brinkhorst, the Secretary
described the factors that led to the California
electricity shortages - explaining that there was no link
between lack of supply and deregulation. Brinkhorst was
gratified that the first U.S. bilateral agreement on
installing radiological monitors at a megaport was with
Rotterdam (septel) but suggested that the U.S. may now want
to engage the European Commission on making a broader
agreement with the EU rather than further bilateral
agreements with EU member states. The Secretary and
Minister agreed to explore opportunities for U.S.-Dutch
collaborative research on carbon-emission reducing
technologies. The Secretary expressed the U.S.'s deep
concern over Iran's nuclear program. The Minister urged
that the U.S. ensure a "level playing field" for energy
companies in Iraq - specifically for Royal Dutch/Shell.
The Secretary expressed interest in participating in the
May 2004 International Energy Forum, which will be hosted
by the Netherlands. End summary.

Energy Deregulation


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2. (U) Minister Brinkhorst told the Secretary that
California is always raised in Europe as the example of why
energy deregulation is a bad idea. He supports deregulation
himself and asked what happened in California. The
Secretary explained that California's electricity

SIPDIS
shortfalls resulted from a series of factors unrelated to
deregulation: inadequate transmission lines from north to
south California, below average precipitation in the US
northwest, political factors which obstructed construction
of new power plants, a prohibiton on long-term power
purchases, and a half-way deregulation whichfreed wholesale
prices while maintaining caps on retail prices. He said
that not only Europeans, but other U.S. states have
examined the California example. He recommended that the
Minister look at much more successful examples of
electricity deregulation, in Pennsylvania and Texas, for
example. Amb. Sobel offered to provide information on
Pennsylvania to Minister Brinkhorst.



3. (U) Brinkhorst said that the Secretary's description of
strong local autonomy in the energy sector in the U.S. also
applies to Europe. Not only the EU member states, but
regions within the member states prefer to run their own
"energy fiefdoms," making a cohesive European electricity
strategy very difficult.

Radiological Monitors at Rotterdam


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4. (U) Minister Brinkhorst lauded the U.S.-Netherlands
bilateral agreement (which the Secretary signed during his
trip to the Netherlands, septel) to install radiological
monitors at Rotterdam, but wondered whether it wouldn't be
better to negotiate further agreements with the European
Commission. He suggested that, as the trailblazer, the
Dutch government might be able to help facilitate talks
with the Commission - particularly with Commissioner De
Palacio. The Secretary noted his many meetings with EU
Commissioner. De Palacio. He and the Ambassador replied
that the U.S. is open to speaking with anyone and every one
if the effect would be to speed implementation of
radiological monitoring.



5. (U) Comment: Laurens Jan Brinkhorst worked for a long
time in the European Commission, finishing his career there
as Director-General in the Environmental Directorate. He
is more predisposed towards deferring to the Commission
than other Dutch Ministers. End Comment

Research Collaboration


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6. (U) Brinkhorst said, that as someone who worked
directly on the Kyoto negotiations, he regretted the
failure of the U.S. to sign the agreement, but added that
"that is water under the bridge." He said the point now is
to discuss mutual efforts to reduce carbon emissions. The
Secretary described U.S. policy in detail, and pointed out

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the ambitious Bush Administration program to reduce carbon
intensity and eventually to reduce emissions



7. (U) When the Secretary described the importance of
advanced technologies in reducing carbon emissions, the
Minister said that the Dutch government completely agrees.
Even while reducing government spending in almost all
areas, the research and development budget for energy
technologies will be increased. He suggested that should
the Secretary be able to come to the Netherlands for the
May 2004 International Energy Forum, they spend time
further discussing energy research. The Secretary and
Minister agreed to have Department and Ministry officials
talk in the meantime about possible collaboration.

Other topics


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8. (U) The Secretary told the Minister that he could not
let the meeting end without highlighting deep concern over
issues regarding Iran, in particular Iran's nuclear
program. The Minister took note and said, for his part, he
similarly needed to raise Dutch government interest in
urging the U.S. to ensure a "level playing field" for
energy company operations in Iraq. He noted that Royal
Dutch/Shell "is as much an American as a European company,"
and understands that Shell is interested in applying its
regional expertise in Iraq. The Secretary replied that the
U.S. is committed to letting Iraq make its own decisions
about its resources.



9. (U) In a brief discussion of potential drilling in the
Dutch Waddensee (a major environmental dispute in the
Netherlands), Brinkhorst said that he wants the issue to be
resolved quickly and in favor of beginning horizontal
drilling. The new government's attitude is that the focus
should be on how to maintain the sea bottom level and
mussel fields, not on whether drilling should proceed.

Sobel