ITALIAN RESPONSE TO ENERGY SUPPLY DISRUPTIONS

UNCLAS ROME 003185

SIPDIS


SENSITIVE

E.O. 12958: N/A
TAGS: ECON ENRG EPET PREL IT
SUBJECT: ITALIAN RESPONSE TO ENERGY SUPPLY DISRUPTIONS

REF: STATE 163206

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Introduction and Summary
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1. (SBU) ECMIN and Econoff met September 9 with Director
General for Energy and Mineral Resources, Sergio Garribba, of
the Ministry of Productive Activities (MPA) on Hurricane
Katrina's impact on energy supplies. The discussion centered
on the international response to energy supply disruptions,
and possible lessons learned from the International Energy
Agency (IEA) response. Garriba also spoke about the
difficulty in passing effective energy legislation and
offered his views on the U.S. energy law recently enacted.
End Introduction and Summary.

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International Response to Energy Supply Disruptions
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2. (SBU) ECMIN thanked Garribba for Italy's support of the
IEA energy supply response in the aftermath of Hurricane
Katrina, specifically, the GOI's immediate and strong
endorsement of collective action to make available crude oil
and refined products in response to supply disruptions.

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Preliminary Lessons Learned
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3. (SBU) Garribba said that the Hurricane Katrina supply
disruption was "unprecedented," a "test case," and that there
would be valuable lessons learned as a result. On a
preliminary basis, he thought that the IEA response has been
"overly cautious," but that the greater risk had been not to
act. He also thought that the IEA response system might not
have had the flexibility needed to double or triple the
release of energy reserves over fifteen days following the
hurricane. Garribba recalled that the Gulf War had been the
first large world event affecting the oil market after the
creation of the IEA. At that time, the IEA had taken no
action.


4. (SBU) With respect to Italy's national response to
Katrina, Garribba thought there was room for improvement. He
said that the Italian Council of Ministers' September 9
decision to release oil reserves had been made expeditiously,
but it had taken a week to implement that decision--far too
long, in Garribba's view.


5. (SBU) With respect to other EU member states, Garribba
said that the European Union and the IEA needed to further
harmonize their rules and procedures regarding reserves and
distribution. Many IEA members have little or no reserves to
offer the IEA, and Garribba wondered whether it would be
better for members who do, to offer those reserves
immediately and unilaterally during an emergency.


6. (SBU) ECMIN then asked for Garribba's views on the likely
impact of several weeks of continued disruption in the U.S.
market. Garribba said supply conditions would probably be
difficult with the onset of winter in the northern
hemisphere, and that there would probably be continued
pressure as demand increases. He said that while the IEA
should not talk about prices, overall, it would be best for
the market if prices were kept low.


7. (SBU) In this context, Garribba thought that the IEA
should extend its market intervention for at least an
additional thirty days, if not longer.

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Recent U.S. and Italian Energy Legislation
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8. (SBU) Regarding the U.S. energy bill passed in August,
Garribba widened his comments to include other countries'
experiences with trying to enact comprehensive energy reform
legislation. He said that it was very difficult to pass
good, coherent legislation on energy because of the
inevitable pressure for a plethora of amendments responding
to constituent and lobby interests. Germany, for example,
had experienced enormous difficulties, and the just-passed
Italian energy bill had over seven hundred amendments. This

process in a parliamentary democracy usually leads to so many
conflicting interests that in the end there is no clear
policy direction, in Garribba's view. He said that he was not
satisfied with the Italian energy reform law, and that,
overall, the U.S. Congress had done a better job at producing
coherent legislation than had the Italian parliament. Given
this dynamic, Garribba stated that in the future he would
press for changes to Italy's energy framework through
executive decrees, rather than parliamentary legislation.

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Comment
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9. (SBU) Garriba is a knowledgeable interlocutor whose views
on how the IEA should respond to Katrina-related events in
world markets are broadly supportive of U.S. policy. We
believe we can continue to count on him as a helpful voice if
further IEA actions are required in the weeks and months
ahead. End comment.

SPOGLI


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2005ROME03185 - Classification: UNCLASSIFIED