DEVELOPMENT MINISTER FULLY SUPPORTIVE OF U.S.

C O N F I D E N T I A L SECTION 01 OF 02 ATHENS 001913

SIPDIS

SIPDIS
NOFORN

DEPARTMENT ALSO FOR EUR BRYZA AND EB GARVERICK

E.O. 12958: DECL: 07/16/2016
TAGS: ENRG GR
SUBJECT: DEVELOPMENT MINISTER FULLY SUPPORTIVE OF U.S.
SOUTHERN CORRIDOR STRATEGY

ATHENS 00001913 001.2 OF 002


Classified By: AMBASSADOR CHARLES RIES FOR REASONS 1.4 (B,D)


1. (C) Summary. The Greek Government is committed to
enhancing European energy security through promoting the
Turkey-Greece-Italy natural gas interconnector as a conduit
for Caspian gas. This was the message conveyed July 14 to
EUR DAS Bryza by Minister of Development Sioufas, who said he
wanted to move forward immediately on the necessary supply
agreement with the Azerbaijani government. Flies in the
ointment? Sioufas mentioned Turkey's wish to become an
energy reseller (as opposed to energy transit country),and
ongoing pressure from Gazprom. Sioufas was optimistic both
obstacles could be overcome, and Bryza pledged U.S. support.
Participation:

U.S.
EUR DAS Bryza
Ambassador Ries
Ambassador to Azerbaijan Derse
Economic Counselor Price (Notetaker)

Greece
Minister of Development Sioufas
Director General Stefanou
Diplomatic Advisor Therese Angelatou
Translator

End Summary.


2. (C) Sioufas told Bryza he was optimistic about the course
of energy relations with the Azerbaijanis, and noted he had
said so publicly. He had conducted an intense 1.5 hour
discussion with the Azeri Minister of Finance, Sharifov, whom
he called "impressive and well-informed." He had also met
with the Azeri Minister of Foreign Affairs and Minister of
Energy on the margins of the Baku-Tbilisi-Ceyhan pipeline
first oil ceremony in Turkey July 13. As a result of these
meetings, and a previous meeting with his Italian
counterpart, Passani, Sioufas said he wanted to explore the
possibility of a four-way agreement with Italy, Turkey, and
Azerbaijan, on the provision of Caspian natgas through TGI to
Italy. "We are ready to take Azeri gas tomorrow morning"
Sioufas told Bryza a number of times.


3. (C) Sioufas was confident that the TGI infrastructure was
coming along on schedule. The Turkey-Greece link would be
completed by February 2007; P.M. Erdogan and FM Guler had
reconfirmed their commitment to this timeline during
discussions on the margin of the BTC ceremony. As for the
Greece leg, Sioufas said Greece was now completing the study
of the link from Thessaloniki to Despotia, and was working
with Italian Edison on the underwater link from Despotia to
Italy. Sioufas felt that the Italian political energy
minister was following the positive line of his predecessor.
EU concerns about TGI -- primarily related to whether it
would go through Albania -- had been assuaged, Sioufas
maintained. Although the pipeline would go through Greece,
plans were well-developed to send a spur to Albania.

--------------
Greek Concerns: Russia and Now Turkey
--------------


4. (C) Sioufas said Russia continued to press Greece to make
unacceptable concessions on energy. "Over the past year, our
Russian interlocutors have changed. They used to talk; now
they are arrogant and try to dictate." During negotiations
on the extension of the current bilateral natural gas
agreement scheduled to lapse in 2016, the Russian had
demanded a stake in TGI. Sioufas said he had told them: "We
can talk about the provision of Russian gas to Greece's
domestic market, but TGI is not an issue for Greece alone,
but also for Turkey Italy and the EU." He continued to
remind the Russians that the intergovernmental Greece-Italy
agreement on TGI, which had been ratified by the Greek
parliament in early July (and was thus now Greek law),
referred specifically to TGI's role in the provision of
Caspian, mid-Eastern, and other Asian gas to Europe. It did
not/not mention Russian gas.

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5. (C) Nonetheless, as much as Greece insisted on its
position, the Russians maintained and even expanded their own
demands, and on other fronts as well. They had once again
raised the ante on the Russian equity stake in the
Burgas-Alexandroupoli pipeline, asking for 95% instead of the
previously-agreed 51%. Sioufas said he had stood firm on all
issues. He had flatly refused to give the Russians a stake
in TGI, and he had simultaneously assured Greek firms full
minority rights as well as operations management control in
B-A. In the end, Russia needed B-A more than Greece. At
this point, Sioufas became angry and said "although I'm at
risk -- the Russians are asking what we're doing down here --
I refuse to allow Greece to be at their feet."

--------------
Other Sources of Gas
--------------


6. (C) Sioufas said he is looking for other sources for
non-Gazprom gas. He recently signed an agreement with the
Egyptian Minister of Energy that aimed to deepen bilateral
energy cooperation. Options included getting hydrocarbons
from the Egypt-Turkey pipeline, obtaining LNG, and perhaps
even developing an Egypt-Greece gas pipeline that would run
through Crete. The main problem with the latter "dream" was
that some of the deepest, and least stable, parts of the
Mediterranean sea floor were between Crete and the Greek
mainland. Sioufas was also investigating gas from Libya,
although these discussions had not proceeded too far.

--------------
Bryza Responds and Outlines Next Step
--------------


7. (C) DAS Bryza thanked Sioufas for Greece's support of
European energy security. He noted that bringing Caspian gas
to Europe required the coordination of many moving parts in
Turkey, Italy, Greece, Azerbaijan and elsewhere. He had
personally lobbied Azerbaijani President Aliyev on the
importance of this goal and explained the long-term threat to
Azerbaijan represented by Gazprom's aim of filling TGI with
its own gas, thereby locking-out Caspian resources. These
entreaties, which supported approaches by President Bush, had
convinced Aliyev to reach out to Greece both publicly and
privately. Greece's reaction to Russian pressure was exactly
right. On Turkey, Bryza noted he had spoken with a number of
officials including FM Gul, Energy Minister Guler, and the
Acting Managing Director of BOTAS. Bryza had also stressed
the importance of Turkey entering the South Eastern European
Energy Charter (SEEC),but said that Guler had claimed the
time was not right. The Ambassador noted that Canada had
tried the reselling approach in the 1980s and had quickly
learned that this was risky. Now Canada and the U.S. are
truly partners in energy, an approach that has benefited both.


8. (C) Bryza listed the next steps as he saw them. First,
Greece and Italy should negotiate a gas sales agreement with
Azerbaijan. Simultaneously, efforts needed to be made to
craft a transit agreement between Azerbaijan and Turkey.
Sioufas agreed with the importance of Turkey and Azerbaijan
ironing out transit issues. He played with a number of
permutations on the gas sales agreement, first indicating
interest in the four-way agreement, then settling on Greece
inviting Azerbaijan to send another mission to Athens to
hammer out a bilateral agreement. Ambassador Derse said she
would help convey the Greek invitation, but counseled that
Azerbaijani officials had indicated to her that they felt a
transit agreement with Turkey must precede any other
negotiations. All agreed that the more the parties worked
together truly as partners, the less leverage Gazprom would
have to pick them off one by one. Bryza ended by once again
promising U.S. support for Greece generally, and for Sioufas'
effort to reach a supply agreement with Azerbaijan.


9. (U) DAS Bryza did not have an opportunity to clear this
cable.
OLESEN