A/S WAYNE DISCUSSES ENERGY SECURITY COOPERATION

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 002663 SIPDIS SIPDIS STATE FOR EUR/WE, EUR/ERA, AND EB/ESC USDOC FOR 4212/MAC/EUR/OEURA DOE FOR ROBERT PRICE PI-32 E.O. 12958: DECL: 04/21/2026 TAGS: ENRG EIND EINV PREL PGOV FR EU SUBJECT: A/S WAYNE DISCUSSES ENERGY SECURITY COOPERATION WITH FRENCH OFFICIALS REF: A. PARIS 1666 ¶B. PARIS 762 Classified By: Econ Counselor Kenneth Merten for reasons 1.4 (b) and (d ). ¶1. (SBU) Summary: EB Assistant Secretary E. Anthony Wayne met with GOF energy policy officials to discuss potential areas for bilateral and transatlantic cooperation to improve energy security. GOF officials emphasized the need to maintain pressure on Russia to open its oil and gas markets and, in particular, to accept the transit protocol of the Energy Charter Treaty. They also saw great potential for collaboration on outreach to other countries, such as Ukraine, to help them reduce energy consumption by improving efficiency, as well as outreach to producer countries to encourage them to use part of their windfall profits to help developing countries cope with rising oil and gas prices. End Summary. ¶2. (U) On April 20, EB A/S Wayne met with GOF Industry Ministry Director for Energy and Mineral Resources, Sophie Galey-Leruste, and Head of Oil and Gas Supply, Fabrice Noilhan. Embassy Econ Counselor and Energy Officer accompanied. A/S Wayne began by stressing that he hoped to see the USG and the EU increase coordination and collaboration on energy security issues, to which Galey-Leruste responded enthusiastically, saying the GOF is very open to such cooperation given the critical importance of energy security. Russia -------------- ¶3. (SBU) When A/S Wayne referred specifically to the need to maintain pressure on Russia to improve its investment climate in the energy sector, Galey-Leruste said that it was particularly important for Russia to accept the transit protocol of the Energy Charter Treaty. Recalling her March meeting with EB Energy Office Director Steve Gallogly (ref A),she reiterated that the Russia-Ukraine gas crisis woke up many in Europe (e.g. Italy) to the reality of their dependence on Russian energy. Relative to others in Europe, France has more diversified gas suppliers (e.g. Algeria) and lower overall reliance on imported natural gas (over 75% of French electricity comes from nuclear power),but is nonetheless very concerned about Russian dominance in European gas markets. IEF --- ¶4. (SBU) Galey-Leruste said she has been quite busy preparing for French participation in the upcoming International Energy Forum (IEF) in Doha, where Industry Minister Francois Loos will head the French delegation. She viewed the IEF as a very useful forum for dialogue between consumer and producer countries, where we should encourage producers to increase supply by opening more to foreign investment (and the advanced exploration/production technologies they bring). She noted that the shrinking margin between supply and demand is a critical problem, since it has dramatically increased the volatility of oil and gas prices with price spikes following any disruption. Ukraine -------------- ¶5. (SBU) Galey-Leruste said France supports a greater role for the EU in energy, particularly with respect to coordinating dialogue with and policies toward countries outside of the EU. A/S Wayne replied that this is one of three areas where we hope to expand U.S.-EU energy security collaboration: (1) third country engagement, (2) alternative fuels, and (3) energy efficiency. When A/S Wayne suggested that we might work together to help Ukraine improve its energy efficiency, Galey-Leruste added that there were several other (former Soviet) countries in which we could have a significant impact. In fact, she said that helping countries improve their energy efficiency is a theme the GOF has developed extensively for consideration at the G8. Nuclear -------------- ¶6. (SBU) Galey-Leruste also noted that dramatic increases in oil and gas prices were leading many countries to reconsider PARIS 00002663 002 OF 003 nuclear power. In the UK, Galey-Leruste thought that PM Blair was already convinced of the merits of nuclear power, but "needed to prepare public opinion." Galey-Leruste also thought Chancellor Merkel favored nuclear power, but the political situation in Germany is more complicated, because of anti-nuclear sentiment in the Green Party and other major parties. Nevertheless, many Germans realized the limitations of renewable energy after storms in northern Germany forced wind farms to shut down and blackouts ensued. The Italians are also taking a fresh look at nuclear power, she reported. The GOF has proposed legislation, which was recently approved by the National Assembly and will soon be considered by the Senate, to address nuclear waste management. Once this issue is resolved, Galey-Leruste thought the French public (already pro-nuclear relative to other Europeans) will be more rec eptive to GOF nuclear power initiatives beyond the new reactor that will be built in Normandy. Diversify Supply -------------- ¶7. (U) When A/S Wayne asked Galey-Leruste which energy issues were the most important to address in the coming months, she highlighted the security of energy supplies. Europe hopes to diversify suppliers and expand research into technologies to increase energy mix options and thereby maximize supply security. Galey-Leruste noted that President Chirac and PM de Villepin often mention energy in their public speeches, emphasizing the need to reduce energy consumption by improving energy efficiency and conservation. These efforts are beginning to bear fruit. According to Galey-Leruste, French consumption of gasoline and diesel declined slightly in 2005 for the first time in many years. Although France is expanding its use of biofuels, 95% of transportation fuel is still petroleum-based. She said that fuel for transportation is a key problem that must be addressed. Developing Countries -------------- ¶8. (SBU) Lastly, Galey-Leruste pointed out that while developed countries are struggling to deal with rising oil and gas prices, they have been catastrophic for developing countries. A/S Wayne agreed that sadly the increase in fuel prices has in many cases neutralized or surpassed the increase in development assistance receipts in many poor countries. Galey-Leruste suggested that we work together to encourage producer countries to do more to help developing countries cope. US-EU -------------- ¶9. (SBU) A/S Wayne also raised the need for overall energy security cooperation in his earlier meeting with MFA Strategic Affairs Director (A/S-equivalent) Philippe Carre, Deputy Director for Economic and Financial Affairs Jacques Maillard, and others. He said he hoped the U.S. and the EU could move forward with a more in-depth dialogue on energy security. He added that progress with the EU meant that the U.S. also needed to be engaged with key member states. Maillard assured A/S Wayne that "key member states like France" were deeply involved in trying to come up with a common EU position on energy security issues. He welcomed working with the U.S. in this area. ¶10. (C) Maillard asked how the U.S. viewed progress on energy in the G8 summit preparation process and Russia's attitude. A/S Wayne said work was progressing on energy security. He added that the U.S. remained concerned about the apparent Russian willingness to use energy as a political tool in relations with its smaller neighbors. A/S Wayne reminded Maillard that Russia's neighbors, EU states, and the USG all had a common interest in seeing a broader diversity of supply and energy mix. Maillard said the French shared the USG evaluation and opined that the G8 energy security paper still needed to be improved as a matter of credibility for the G8 as a whole. ¶11. (SBU) Comment: Clearly, there are several areas where the French are eager to work with us to improve energy security, particularly to promote nuclear power, where they are industry leaders and could reap significant rewards from a renewal of nuclear power. They also favor enhanced cooperation on outreach to other countries, particularly to encourage the Russians to improve their investment climate and to help others improve energy efficiency. Embassy PARIS 00002663 003 OF 003 believes there may be scope to work together with the French to encourage key producer countries to use part of their windfall profits to help developing countries offset the effects of significant price increases over the past year. France's interest in Africa and many of the poorest countries there may make the GOF particularly interested in a coordinated approach to producer countries. End comment. ¶12. (U) A/S Wayne cleared this message. Please visit Paris' Classified Website at: http://www.state.sgov.gov/p/eur/paris/index.c fm Stapleton