GREECE IN GAZPROM'S SIGHTS; READOUTS ON GREECE'S

C O N F I D E N T I A L SECTION 01 OF 03 ATHENS 000546 SIPDIS SIPDIS E.O. 12958: DECL: 02/24/2016 TAGS: ENRG ECON GR GAZPROM SUBJECT: GREECE IN GAZPROM'S SIGHTS; READOUTS ON GREECE'S ROLE IN WESTERN EUROPEAN ENERGY SECURITY REF: A. 2005 ATHENS 3264 ¶B. AHTENS 231 ¶C. ATHENS 342 ¶D. ATHENS 393 Classified By: AMB Charles P. Ries, for reasons 1.4 (b) and (d) ¶1. (C) Summary: On February 23rd, Ambassador met with Deputy Foreign Minister Stylianides to discuss the recent visit to Greece by Gazprom Chairman Alexei Miller. A clearly worried Stylianides described the visit as part of a full-court press by Gazprom to sign Greece to a long-term contract for natural gas that would effectively fill the Turkey/Greece/Italy gas Interconnector with Russian gas. Additional conversations with British colleagues, the Chairman of the Greek natural gas concern DEPA, and others have revealed deep divides in Greece on whether the Russian offer is one that Greece cannot refuse or whether Greece has a viable opportunity to diversify their natural gas sourcing, both for domestic consumption, as well as for transit through to Italy. Stylianides asked Ambassador for USG assistance in sorting out the facts of the Russian offer, as well as understanding the natural gas situation in Azerbaijan. Embassy recommends that early visits to Greece by intel community briefing team and a senior USG energy policy official would help the GoG act in a way that enhances overall European energy security. End Summary. DepForMin on Gazprom and Energy -------------- ¶2. (C) On February 23rd, Ambassador met with Greek Deputy Foreign Minister Stylianides to get a read-out on the recent visit to Greece of Gazprom Chairman Alexei Miller. Stylianides initiated the request for the meeting, saying he was anxious to brief the Ambassador on key energy developments as they affect Greece. He stressed that Greece is "now in the process of making decisions that will affect Greece's long-term energy independence and security." ¶3. (C) Stylianides said Miller was pushing Greece hard to remain primarily a Gazprom client.Musing on the strategic implications of the Russian offer, Stylianides indicated his concern about what would happen after Gazprom,s proposed contracts with Greece ran out in 2016: "if they stop supplying, we're in trouble." According to Stylianides, Miller told the Greeks "Gazprom controls the whole system of energy. Gazprom has already bought all Azeri gas for the next 25 years." Furthermore, Russia was in a position, Miller claimed, to pressure the Azeris on price. Stylianides chef de cabinet Platis chimed in that he understood that Russia had an agreement with the Azeris to purchase Azeri gas at low prices. ¶4. (C) As for Europe, Stylianides said Miller told him that "Russia is ready to give energy to Europe for the long term. We are already in a position to deliver 150 bcm now and, with upgrades, up to 300 bcm annually." Stylianides characterized Miller,s overall message to the Greek Government as "either you play with us or you don't play at all." This was reinforced in Stylianides' mind by his feeling that the Russians are trying to become the "monopolist of monopolies," getting into a controlling role for all varieties of energy supplies: "They're trying to control nuclear power as well to have absolute control over European gas energy." He claimed Russia was also "in North Africa," and said he would be investigating this further during his upcoming March 13-14 trip to Libya. The Situation in Turkey and in Italy -------------- ¶5. (C) According to Stylianides, Miller indicated that Gazprom was looking into connecting BlueStream I and II with Turkey. It would be from this source that Gazprom would provide gas not only to Southeastern Europe, but also Southwestern Europe through Greece. Gazprom was also sending gas through its North Sea pipeline, leading Stylianides to hypothesize that Gazprom was "trying to bypass the Ukraine." He said he did not know if there had been discussions between Russia and Turkey on these issues, but knew that the Russians and the Italians had spoken. ¶6. (C) Ambassador noted that while Italy was obtaining Gazprom gas through Russia and Ukraine, it was also purchasing LNG from Algeria, and furthermore, was looking at expanding its LNG terminal capacity. Although domestic opinion was against building new LNG terminals in Italy proper, we had heard Albania and Italy were considering a proposal from an investment group involving Qatar LNG and an LNG receiving station built on the coast of Albania, near Fier, with an underwater pipeline to Italy. Ambassador noted that these discussions are serious, with the lead investor being a Swiss electricity utility. The Turks also were expanding their supply options: the country had signed a contract with Egypt to supply gas through Syria. This helps Turkish independence. ¶7. (C) More broadly, Ambassador acknowledged that Gazprom's apparent strategy was to monopolize the European market and close out the competition. That would not be in either Greece's or Europe's interest. Ambassador stressed it would be a bad idea to commit Greek or Turkish capacity to Russian gas, but that the USG message is not anti-Russian, merely pro-free-market: diversified supply allowed the market to work. Ambassador also noted that if Greece had an Azeri gas source, it would have much more leverage vis--vis Gazprom, from which Greece currently derives as much as 80 percent of its domestically consumed natural gas. ¶8. (C) The Ambassador refuted Alexei Miller's claim that all Azeri gas was controlled by Russia. Ambassador recalled the Azeris have contracted with BOTAS for the supply of gas with the rights of resale to countries to Turkey's west. Ambassador also noted that there was a lot of Turkmen gas, but so far the only route out was through the Gazprom network, making it less than optimally Russian independent. Ambassador noted that Azeri resistance to a TransCaspian Pipeline might finally be weakening in acknowledgment of their own importance as providing a non-Russian pipeline to the West. DEPA in Baku -------------- ¶9. (C) Regarding Greek/Azeri efforts to sign a sourcing contract for gas, Stylianides said DEPA,s (Greece's major natural gas company) Vice President and General Director were going to Baku this week at the Azeris' invitation. The Azeris had also invited the Italians, the Bulgarians and others for discussions. Stylianides thought this was a positive development, although he reserved judgment until he had had a chance to be debriefed by the DEPA team. (Note: Embassy was also informed of the DEPA meetings in Baku directly by DEPA, and have been promised a debrief next week. End Note.) He also said the Azeris were interested in "selling rights to the Turks and were asking how much Greece could take." The British are Coming... -------------- ¶10. (C) On February 23 and 24 econoffs held meetings with their counterparts from the British Embassy, at the request of the British, to discuss the Greek energy situation, and the regional implications of the Miller visit. British Charge Ian Whitting explained that his mission was in the process of alerting London to the full implications of the Gazprom efforts in Athens, and the follow-on consequences for Western European energy security. According to Whitting, the Greek MFA had contacted them immediately after the Miller visit to provide a debrief and request information as to the veracity of Miller's claims vis-a-vis Russian control of Azeri gas. In particular, Whitting was asking that London pressure BP to provide hard data on the status of the Shah Deniz fields in order to confirm or refute Miller's claims. Moisis Sends Mixed Messages -------------- ¶11. (C) Whitting also shared a variety of information regarding his meetings with various energy figures, GoG officials, and industry executives. Of particular note, he observed that currently in Greece, only the Greek MFA had any inkling of the energy security consequences of the Gazprom visit, and that in his opinion the Minister of Development Sioufas was a "old-fashioned Greek politician" limited in vision to the domestic implications of any policy decision. He also provided a read-out of his Ambassador's recent meeting with DEPA Chairman Moisis, in which Moisis expressed concern that much of DEPA's leadership -- excluding himself -- was fully in favor of Russian gas because of Greek-Azeri political differences stemming from Greek reluctance to condemn Armenia on Nagorno-Karabakh and an Azeri direct flight from Baku to Northern Cyprus last year. ¶12. (C) Interestingly, Senior Commercial Officer met for lunch with Moisis on February 23rd. During that meeting Moisis spun a more complicated, and yet thoroughly Greek, story about Gazprom efforts to control natural gas in Greece. In this story, Minister Sioufas is too overworked to focus on energy issues, and has ceded most decisions in this area to his SecGen Stefanou. Stefanou, according to Moisis, has Parliamentary aspirations which keep him in close contact with Greek businessman Copolouzos (the CEO of Prometheus gas, a competitor to DEPA in northern Greece),who is closely linked to Gazprom. In this way, says Moisis, Gazprom is influencing senior Greek officials and driving GoG policy inexorably into the hands of the Russians. (Note: Moisis has indicated in a conversation with Ambassador that he is close to resigning his position in DEPA after losing out in an internal power struggle with the new Managing Director of Gazprom. He is now painting himself as the loser in a grander struggle for the East-West alignment of Greek energy policy, with the pro-Russian forces in DEPA now ascendant. End note.) Comment -------------- ¶13. (C) Although the current level of Greek gas interconnectivity with Western Europe is limited, it is clear that the Russians view it, or its potential, as a threat to their dominance on energy supplies flowing West. Gazprom's all-out assault on the GoG to lock it into long-term contracts with Russia, as well as Miller's disparagement of Azerbaijan's ability to provide gas, have the Greeks worried. Additionally, GoG officials in the Ministry of Development may not currently have the vision necessary to understand the geo-political implications of the game Greece finds itself in. In short, their view may be, "better a bird in the hand than two in the bush." Not known generally for its long-view strategic thinking, the GoG could quite conceivably succumb to the Russian offer simply because of its immediacy, missing the long-term implications both for itself and energy diversification to Western Europe. It is clear that our British colleagues share this same unfortunate assessment of the situation. ¶14. (C) In addition, Miller also linked Greek interest in seeing the Burgas-Alexandropoulos (B-A) pipeline completed to their willingness to sign a deal with Gazprom on the TGI interconnector. According to the Brits, Miller told Molyviatis that Gazprom had purchased Sibneft, the majority equity holder in the proposed Russian, Bulgarian, Greek B-A project, and therefore was in a position to favorably promote the B-A against other proposed Bosphorus bypass pipelines (presumably the Turkish Samsun-Ceyhan proposal) through favorable financing arrangements. ¶15. (C) Post believes that we have a critical opening to positively influence GoG policy on energy security by providing timely and detailed information regarding Caspian energy, Azerbaijan/SOCAR capabilities, and a broader picture on the regional energy (and energy security) situation. To take advantage of this opportunity, however, Post requests that Washington make available a subject-matter expert/analyst on Caspian energy to brief the GoG as soon as possible. Post further requests that Washington provide a senior energy policy maker to accompany, or follow-on to, the analyst, to provide the necessary counterweight to the Russian blitz. Miller's visit to Greece was followed by the Russian Foreign Minister Lavrov, and included an offer of further contact with Moscow; we must project the same (or greater) level of interest in seeing the GoG follow an energy-diversified path in order to be successful. End Comment. Ries