Identifier
Created
Classification
Origin
06ATHENS2324
2006-09-05 15:11:00
CONFIDENTIAL
Embassy Athens
Cable title:  

PUTIN AND PURVANOV IN ATHENS: THE LONG ROAD TO

Tags:  ECON ENRG GR 
pdf how-to read a cable
VZCZCXRO1346
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DE RUEHTH #2324/01 2481511
ZNY CCCCC ZZH
O 051511Z SEP 06
FM AMEMBASSY ATHENS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6668
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 4308
RUEHKB/AMEMBASSY BAKU PRIORITY 0087
RUEHMO/AMEMBASSY MOSCOW PRIORITY 0657
RUEHSF/AMEMBASSY SOFIA PRIORITY 1453
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 ATHENS 002324 

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/06/2016
TAGS: ECON ENRG GR
SUBJECT: PUTIN AND PURVANOV IN ATHENS: THE LONG ROAD TO
BURGAS-ALEXANDROUPOLIS

Classified By: AMB Charles P. Ries for Reasons 1.4(b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 ATHENS 002324

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/06/2016
TAGS: ECON ENRG GR
SUBJECT: PUTIN AND PURVANOV IN ATHENS: THE LONG ROAD TO
BURGAS-ALEXANDROUPOLIS

Classified By: AMB Charles P. Ries for Reasons 1.4(b) and (d)


1. (C) Summary. Greek Prime Minister Karamanlis, Russian
President Putin and Bulgarian President Purvanov met in
Athens on September 4, to discuss the three countries'
cooperation on the long-proposed, but not yet realized,
Burgas-Alexandroupolis pipeline (B-A). Despite higher
expectations by some commentators, the talks resulted only in
a reiteration of the three countries' intent to agree on the
implementation of the long-standing project before the end of
the year. Our MFA contact said the meeting had been
productive, but had not resolved some of the major concerns
on B-A, such as the equity structure or
operational/management arrangements. Contrary to our earlier
concerns, there does not appear to have been any Russian
effort to link the B-A project with other energy issues such
as the renewal of the Russian natural gas contract (expiring
in 2016) or the proposed Turkish-Greek-Italian natgas
interconnector. Press speculation surrounding the meeting
was all over the map, but more reputable sources highlighted
US concerns regarding further EU dependence on Russian energy
resources and underlined US Secretary Bodman's meeting later
this month with Foreign Minister Bakoyannis. End Summary.

The Burgas-Alexandroupolis Project
--------------


2. (SBU) The B-A project was originally conceived in 1994 as
a project to relieve tanker traffic through the congested
Bosporus strait. Encountering a variety of problems,
including low market prices for oil and difficulty in finding
financing, the project languished for nearly ten years before
being revived in 2004. In April 2005, Russian, Greek and
Bulgarian leaders signed a political agreement stressing
their commitment to the project. The 285-kilometer
cross-border pipeline is designed to carry Russian oil from
the Bulgarian port of Burgas to the Greek port of
Alexandroupolis in northern Greece. The project has an
estimated investment cost of 750-800 million US dollars with
an annual capacity of 35 million tonnes of oil. Recently,
discussions have stumbled over the division of equity between
the three participants. Since it will almost exclusively

carry Russian oil, the Russians want the vast majority of
equity shares in the pipeline, while the Greeks want to limit
the Russians to 51 percent and to divide the remaining equity
with Bulgaria.

MFA Readout
--------------


3. (C) Our MFA contact, Dimitris Platis of DepFonMin
Stylianides' office, told EconCouns that the visit had gone
fairly well, but had not been very substantive. In contrast
to press speculation that this "summit" would result in a
final agreement green lighting the project, it resulted in
only one important deliverable: the establishment of a
"strong" coordinating body made up of the key ministers in
charge of making B-A happen, which will meet in October to
work out the final details of the interstate agreement on
Burgas-Alexandroupolis. Platis noted this was a significant
advance -- in Greece alone eight different ministries have a
role in B-A, a situation mirrored in the other two partner
states. Platis was optimistic this step paved the way for a
final signing by the three premiers by the end of the year.


4. (C) Platis was also clear on what the leaders did not
achieve: any agreement on equity stakes or
operation/management structure. "Personally I had hoped such
a meeting could have helped iron out these key details."
Platis claimed nonetheless to be convinced Putin had been
right to take these issues off the table at the meeting as
they could have prevented any political agreement from being
reached whatsoever. Indeed, he claimed the leaders had
formally agreed to leave equity/operational issues to the
private companies involved in the pipeline. For Greece, this
includes the firms Hellenic Petroleum, the Copelouzos group
and its joint venture with Gazprom Prometheus Energy, and the
Latsis group.


5. (C) In his readout, Platis maintained that the Russian
Government had been the prime mover behind the three-way
meeting. He said Putin told Karamanlis Russia had completed
a 2500 km pipeline to Asia in the span of eight months, but
that B-A discussions had been going on for 13 years with no
results. "Time is of the essence," Putin had stressed,

ATHENS 00002324 002 OF 002


noting that further delays ran the risk of destroying the
project. Platis theorized Putin was motivated primarily by
the fact B-A promised to save his oil majors significant
money. "Oil firms lost $800 million in the winter of 2004-05
as a result of shipping delays through the Bosporus. The
Russians want to find a way to stop this bleeding."

Surprise: Russians Didn't Demand Concessions on Gas
-------------- --------------


6. (C) Contrary to our earlier concerns, however, Platis
claimed the Russians were open about the fact that B-A was in
the Russian interest, and did not press the Greeks for
concessions in the gas sphere (including the proposed
Turkey-Greece-Italy natgas interconnector that has been the
source of considerable Gazprom and Russian State pressure
over the last six months.) In fact, Platis acknowledged that
it was the Greeks who raised the extension of Greece's
current bilateral gas supply agreement, currently slated to
expire in 2016. Putin's cryptic reaction to the Greek
request on the extension was that Russia "would work on it."
As for rhetoric in the post-"summit" Declaration relating to
closer cooperation on gas issues, Platis said the Russians
had hoped for more but did not push hard for it.

The Private Sector Reaction
--------------


7. (C) Vangelis Chronis, who attended PM Karamanlis'
September 4 dinner for Presidents Putin and Purvanov on
behalf of the Latsis group, told the Ambassador he felt the
"summit" had primarily been for show. Chronis also told us
Putin had originally proposed the meeting be held later in
the fall. It had been advanced to early September at the
Greek request to take place just before PM Karamanlis' annual
speech to the Thessaloniki International Fair. In fact, he
said, FM Bakoyannis was very pleased September 4 with how the
visit had gone and by its likely positive domestic political
impact.

Press Sees a U.S. Conspiracy
--------------


8. (SBU) Press reporting on the meeting was highly
speculative, and in the finest Greek tradition, all over the
map. Several reports underlined purported U.S. concern or
opposition to the pipeline as a threat to the
Baku-Tblisi-Ceyhan pipeline (probably confusing the BTC with
the Turkish led alternate Bosporus bypass pipeline that would
run from Samsun to Ceyhan) and interpreted Secretary of
Energy Bodman's upcoming meeting with Foreign Minister
Bakoyannis as proof of the supposed American opposition to
Russian energy policy and the B-A. More informed sources
suggested that US interest and "pressure exerted behind the
scenes," only magnified the importance of the Russian visit.
At least two major papers reported that "the Americans have
told Athens both in public, when Secretary Rice was in
Athens, but also in private, that under no circumstances do
they want a stronger role for Russia in the European energy
sector."

Comment
--------------


9. (C) This meeting appears to have been less than it at
first appeared. Expectations were higher for a resolution to
the equity/management sharing problems as well as for a
stronger statement from the states involved that the B-A was
open for business (a move designed to get corporate investors
to opt for B-A as THE Bosporus bypass). Nevertheless, the
meeting apparently resulted in a political impetus for
further discussions, and it is possible that a solution is
only a few months away. We expect that the visit will be
used by the GoG in the upcoming Thessaloniki Trade Fair to
demonstrate that the current government can deliver major
international accords without giving away the farm. Post
will be obtaining more read-outs on this meeting. End
comment.
RIES