July 13 Preparatory Meeting for Energy Ministerial

UNCLAS SECTION 01 OF 05 BEIJING 015388

SIPDIS

SIPDIS

SENSITIVE

DEPT FOR EAP/CM AND EB/ESC SIMONS
DOE OIC FOR PUMPHREY, OEA FOR CUTLER

E.O. 12958: N/A
TAGS: ECON ENRG EINV EPET CH JA KS IN
SUBJECT: July 13 Preparatory Meeting for Energy Ministerial
Roundtable



1. (SBU) Summary and Comment: On July 13, China's National
Development and Reform Commission (NDRC) hosted a
successful preparatory meeting to discuss a proposed five
country Energy Ministerial Roundtable in Beijing later this
fall. Reflecting input from the Japanese and Korean
delegations, the Chinese proposed the October 24-27
timeframe as tentative dates for the ministerial, and asked
delegations to provide feedback by the end of July on the
suitability of those dates. Bowing to suggestions from the
U.S. and other delegations, the Chinese also agreed to
broaden the scope of the meeting to include separate
discussions of energy security and strategic oil stocks,
diversification of energy supply and alternative sources,
investment and the energy market, major challenges and
priorities of international cooperation, and energy
conservation and efficiency. Participants also made some
initial progress toward a potential Joint Statement,
shifting the focus from the original Chinese emphasis on
oil markets toward a broader effort to point to areas of
common interest. Demonstrating a flair for multilateral
diplomacy, the Chinese delegation adopted a flexible,
responsive approach to suggestions from the other
delegations, which should bode well for the success of the
eventual meeting. End Summary and Comment.

-- Five Party Energy Preparatory Meeting


2. (U) The Preparatory Meeting for a proposed five country
Energy Ministerial Roundtable was held in Beijing on June
13, 2006. Bringing together representatives from the
United States, China, South Korea, Japan and India, the
Chinese sponsored meeting's purpose was to discuss the
time/venue, agenda, and basic outline of a Joint Statement
to be issued at the proposed Ministerial. The U.S. was
represented by Paul Simons, Deputy Assistant Secretary of
State for Energy and Sanctions, Tom Cutler, Director of
Asia and Europe for the Department of Energy, Embassy DOE
rep, EconMin, and other emboffs.


3. (U) China's delegation consisted of senior NDRC
officials including Vice Chairman Zhang Guobao, Zhao
Xiaoping, Director General for Energy, Ma Xin, NDRC
director General for Foreign Affairs, Xu Yongsheng, Deputy
Director General for Energy, and Li Bin, Deputy Director
General for Foreign Affairs.


4. (U) Prior to the meeting, the U.S. delegation held
preparatory sessions with the delegations of Japan, Korea
and India, and also met with U.S. private sector
representatives for their input. On the margins of the
meeting, the U.S. delegation also met with IEA Deputy
Director General Bill Ramsay, as well as senior officials
from CNOOC, SINOPEC, the CNPC Research Center, and the NDRC
Energy Research Institute.


-- Preparatory Meeting: Chinese Opening Statement


5. (U) NDRC Vice Chairman Zhang Guobao led off with
opening remarks which focused on the value of this grouping
of large consuming countries to speak with one voice on
energy issues. Speaking without notes, Zhang noted that
the solution to this problem needed to take into account
the policies of China and India, which ranked third in
global energy consumption behind the U.S. and Japan and as
"rising economies" were increasingly important players. He
said the solution would need to encompass a mixture of
conservation, domestic supply incentives, as well as
expansion of alternative fuels and renewables, and
acknowledged that with a high energy consumption/GDP ratio,
China had "a lot of work to do". He noted the significance
of the five countries gathered - all were major oil
consumers and importers, and all were located in the Asia
Pacific region. Zhang pressed for an early ministerial,
ideally in late August, and expressed confidence that such
a meeting could help stabilize oil prices by "containing
speculation" which he said some had quantified as

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accounting for $10-15/bbl of the current high oil market
prices. He noted that the meeting had been discussed with
Secretary Bodman in Doha and that Secretaries Rice and

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Deputy Secretary Zoellick had also expressed "interest" in
China's initiative. Energy Director Zhao Xiaoping followed
with remarks which highlighted the important signal such a
meeting could send to the international community and the
fact that Chinese consumption alone could not account for
the current high price levels in international oil markets.

- Preparatory Meeting: Japan, South Korea and
India - Opening Remarks


6. (SBU) Kazuhiko Hombu, Deputy Director General of the
Ministry of Economy, Trade and Industry presented Japan's
opening statements. Welcoming the five party concept, he
said that Japan was "positive" about the idea of bringing
the five countries together. That said, given the
likelihood of Japanese parliamentary elections in September,
he suggested that the proposed ministerial date of late
August was a "little too early" and more time would be
needed to prepare. Hombu said that the Beijing venue was
"OK" but also noted that Japan might field a vice minister
for the meeting. Hombu suggested adding the following
topics to the agenda: impact of oil on the world economy,
transparency and investment in energy markets, improvements
of energy demand structure (conservation, clean coal,
renewables),use of the Asia Pacific Partnership to promote
clean and efficient energy, and cooperation on emergency
response capabilities, including strengthening strategic
stocks of oil, and developing closer relations between
China and India and the IEA. Hombu noted that both the
agenda and the communiquQ would need to be referred to
Tokyo for final approval.


7. (SBU) Seok Cho, the Director-General of Korea's
Ministry of Commerce, Industry and Energy also welcomed the
five party concept and China's preparatory work. He
commented that the proposed date of the meeting was too
early, and noted that specific items with respect to the
agenda and the joint statement would need to be reviewed in
Seoul before final positions could be agreed.


8. (SBU) Prabh Das, Joint Secretary of the Indian Ministry
of Petroleum and Gas, stated that the three key challenges
of sustainable development, access to resources and price
stability all should be addressed through the Ministerial
meeting. The high cost of oil, he said, was being absorbed
by developing countries through huge subsidies that
directed much needed funds away from social and education
sectors. Das echoed the Chinese argument that China and
India were not the principal contributors to current high
oil prices, noting fairly modest Indian oil demand despite
an impressive eight percent GDP growth rate last year. Das
also pointed to pricing problems for oil in the Asian
market which he suggested be addressed in the Ministerial.
Finally, he noted that current high oil prices would spur
more efficiency and conservation.


9. (SBU) Das suggested creating an "Axis of Sustainable
and Affordable Energy". He recommended that the following
areas should be covered in the agenda: structural
shortcomings, sustainable development and access to
hydrocarbon resources, a framework for cooperation among
consumers and producers for security and sustainability of
energy, increased efficiency, conducting joint research,
sharing technology, promoting sustainable growth,
protecting the environment through the use of green fuels
and promoting alternative sources of energy like biofuels.

-- Preparatory Meeting: U.S. Delegation Opening Remarks


10. (SBU) Summing up the discussion, Department of State
Deputy Assistant Secretary (DAS) for Economic Affairs Paul
Simons welcomed the Chinese initiative and noted that it
was consistent with broader U.S. efforts to bring China and
India into a more prominent role in global energy

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discussions. He noted that the five participating
countries were increasingly important players on the global
energy stage, with EIA forecasts suggesting that they would
account for more than half of global oil consumption by the
year 2025.


11. With respect to the agenda, U.S. representatives noted
that it would be important to move beyond a narrow focus on
short term oil markets to a broader approach which
highlighted the commonality of approach of the five
countries. For example, all five participants shared
interests in the development of a global liquified Natural
Gas (LNG) market, accelerated uptake of clean coal
technologies, nuclear energy and energy efficiency. All
five countries needed to focus on the use of alternative
fuels to power their respective transport sectors. The
world's energy future would be determined to a large degree
by how the five participating countries handled those
issues. Rather than seeking to influence oil prices
through a narrowly crafted joint statement, a broader
approach that focused on shared interests in resolving
longer term energy security challenges might be a better
approach. Such a statement could reference the work of
existing institutions and fora, including International
Energy Forum (IEF),International Energy Agency (IEA),APEC,
Asia Pacific Partnership, and others, while not advocating
the creation of any new bureaucracy.


12. With respect to substantive issues, DAS Simons laid
out the four suggestions highlighted in previous U.S.
guidance on the five party ministerial - coordination of
strategic petroleum reserve management; improving data
transparency; cooperation on energy use in the
transportation sector, including biofuels; and a focus on
market principles for energy, possibly tracking the
approach to be followed at the G8 summit.


13. (SBU) With respect to next steps, DAS Simons suggested
creation of an email collective; rather than another face
to face preparatory meeting, he suggested e-mail comments
or conference calls to resolve remaining issues. He echoed
the comments of the Japanese and Korean delegations that
all issues with respect to timing, agenda, and joint
statement would need to be endorsed by capitals prior to
final decisions.

-- Proposed Ministerial Scheduling: Suggested dates of
October 24-27


14. (SBU) Discussion opened on the scheduling of specific
dates for the Ministerial meeting. The Chinese opened with
a proposal for late August; Japan and Korea wanted no
specific dates but wanted the meeting pushed back into
October at the earliest; the U.S. suggested "some time in
the fall". The Chinese insisted on penciling in tentative
dates to be taken back to capitals, with a suggestion of 15
October. The Korean delegate objected to this timeframe,
noting that it conflicted with IEA Governing Board meetings.
The Chinese responded with tentative dates of October 24-27,
and asked delegations to consult in capitals and confirm by
end-July if those dates were suitable.

-- Proposed Ministerial Agenda/Three Days of Meetings, Site
Visits


15. DG Li opened discussion on the agenda, proposing five
topics to discuss: the energy situation, oil pricing, oil
substitution, energy efficiency, and energy conservation.
He proposed that each Minister make a 15-minute keynote
speech on one topic immediately followed by a 15-minute
discussion of the topic. Afterwards, there would be a
press conference and the issuance of a joint statement on
the meetings. The meeting would wrap up in the early
afternoon.


16. Delegates from the other four countries raised a
number of modifications to the proposed schedule; most

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supported the U.S. focus on a broader agenda allowing for
more detailed discussion of key topics.


17. (SBU) After extensive discussion with the participating
delegates, the Chinese delegation produced a considerably
revised second working draft of the agenda, which will be
shown to the Ministers of each country for approval:

Day 1

-- Morning registration

-- Afternoon bilateral meetings (according to each
Minister's individual plans)

-- Evening welcome dinner

Day 2

-- 8:30-9:00 NDRC Chairman Ma Kai meets with Ministers (TBD)

-- 9:00-10:15 15-minute opening Ministerial addresses in
the following order: China, India, Japan, Korea, the U.S.

-- 10:15-10:30 Tea break

-- 10:30-15:30 Structured thematic dialogue led by
Ministers

1- Energy security and strategic oil stocks (U.S.)
2- Diversification of energy supply and alternative sources
(South Korea)
3- Investment and the energy market (Japan)
4- Major challenges and priorities of international
cooperation (India)
5- Energy conservation and efficiency improvement (China)

-- 12:30-13:30 Working lunch

-- 13:30-15:30 Continue thematic dialogue

-- 16:00-16:30 Joint Press Conference

-- 17:00-17:30 State leaders meet with Ministers (TBD)

-- 18:00-20:00 Farewell dinner

Day 3

-- Individual site visits.

-- Proposed Ministerial: Working the Joint Statement Draft


18. (SBU) With respect to the draft Joint Statement issued
by the Chinese, most delegations agreed that it would be
difficult to make progress on such a document until the
agenda was finalized and ministers contributions could be
appropriately incorporated. The Chinese government
distributed an initial draft which focused heavily on the
current oil market situation. Japan argued for a
broadening of the document to reflect a commitment to
market principles; evidence of international cooperation;
and alternative fuels. The U.S. delegation remarked that
in order to be effective, the Joint Statement as well as
the press conference themes would need to demonstrate a
united front of the five countries, and that it would be
particularly important to highlight the shared approaches
adopted by the five countries to our key medium and long
term challenges. The U.S. suggested several edits to the
draft communiquQ which removed some of the heavy focus on
current oil market instability, highlighted the importance
of intensified cooperation on strategic stocks, and
introduced the concept of diversification of fuels in the
transport sector. A revised, bracketed Joint Statement,
which incorporated most of the U.S. Delegation's and other
delegations' suggestions, was provided to the respective
delegations for further review and discussion.

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Comment
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19. (SBU) Chinese officials adopted a highly flexible
approach to this multilateral meeting, taking on board
suggestions from other delegations on the issues of timing,
agenda, and the joint statement, and clearly seeking to use
the proposed ministerial to present a united front on
energy to the broader world stage. This flexible approach
- if sustained -- bodes well for the ultimate success of
the Ministerial gathering. End Comment.


20. (SBU) EB/ESC DAS Simons cleared this report.

RANDT