KOSOVO ENERGY: PLANNING FOR A POTENTIAL BELGRADE

C O N F I D E N T I A L SECTION 01 OF 03 PRISTINA 000786 SIPDIS SIPDIS DEPT FOR EUR, EUR/SCE, DRL, INL, AND S/WCI, NSC FOR BRAUN, USUN FOR DREW SCHUFLETOWSKI, USOSCE FOR STEVE STEGER, OPDAT FOR ACKER E.O. 12958: DECL: 11/14/2017 TAGS: PGOV KJUS KCRM EAID KDEM UNMIK YI SUBJECT: KOSOVO ENERGY: PLANNING FOR A POTENTIAL BELGRADE SHUT-OFF AND RELATED ISSUES REF: PRISTINA 677 Classified By: COM TINA KAIDANOW FOR REASONS 1.4 (B) AND (D) ¶1. (C) SUMMARY: Planning for the potential of Belgrade disconnecting Kosovo from its energy grid, Kosovo energy transmission experts have begun quiet talks with their Macedonian, Albanian and Greek counterparts to coordinate action to preserve the stability of the regional energy system. In other contingency moves, the Kosovo Energy Corporation (KEK) intends to build a bypass, which our USAID energy experts tell us can be completed in as little as five weeks, that would insulate a vulnerable part of western Kosovo from a Serbian shut-off. At a November 19 meeting, PDSRSG Steve Schook told COM that UNMIK had approved this proposal and construction is going ahead. Schook also noted that he would work with KFOR to help ensure the security of the cooling water, located in the Serb-majority north, for Pristina's two large lignite-burning power plants (Kosovo A and B). ¶2. (C) SUMMARY (CONT'D): Despite this threat of a cutoff, Serbia's government continues to say it wants to provide an electricity donation this winter to all Kosovo Serb areas north and south of the Ibar river. UNMIK/KEK recently sent a contract to the Serbian Ministery of Energy and Mining for this purpose and is awaiting a response. Given Kosovo's generally parlous energy situation, we have urged UNMIK to follow through on the offer as expeditiously as possible. In the best of circumstances, KEK will continue to struggle with its two aging and unreliable power plants and, for that reason, has sought emergency procurement authority from UNMIK during the cold weather months of November 1-April 1. We strongly support all of these contingency measures as a means to deal more effectively with a potential Serbian shut-off, and will continue to closely monitor the situation. END SUMMARY. Contingency planning with Macedonia, Greece and Albania ¶3. (C) As discussed reftel, should Serbia decide to shut down the electricity grid into Kosovo, Kosovo would likely be able to muddle through, though with some attendant disruptions and extra costs -- potentially significant costs, ;if the need for energy imports rises as a result of infrastructure breakdowns. Additionally, the sheer act of the shutdown could provoke a temporary blackout in Kosovo, given the stresses placed on the system with regard to load and frequency control. Thus, regional cooperation and coordination will be important to lessen the immediate effect of any regional system instability caused by Serbian action. ¶4. (C) With the last point in mind, officials from the the Transmission System and Market Operator of Kosovo (KOSTT) recently traveled to Skopje and had very positive talks with their counterparts. Since Kosovo is a transit point for energy flowing from and through Serbia mainly to Macedonia (and to a lesser extent, to Albania),the talks centered around how to coordinate actions so that the regional energy system could remain stable. The Macedonians were concerned about a potential Serbian shut-off and indicated the need for detailed planning. They also said Greek energy officials need to be involved and had expressed concerns as well. As a result, KOSTT officials will travel to Greece in the near future to discuss coordination. (Note: Apparently, Greek energy officials are worried about not being able to keep the regional system stable unless there is at least 300 MW of reserve in the system. Neither Kosovo, Albania, nor Macedonia have such a reserve, although KEK will plan to carry 180 MW of reserve on its own generators as a contingency.) Kosovo and Macedonian officials will meet again the first week of December to prepare a detailed plan of action. Discussion with Albania is ongoing as well, with the next meeting planned for the end of November. Montenegro? PRISTINA 00000786 002 OF 003 ¶5. (C) The picture is less clear with Montenegro. To date, there has not been any discussion with the country's energy officials. Our sources tell us there is worry among KOSTT officials and others that Montenegro may be subject to pressure from Belgrade not to cooperate in allowing transmission capacity for delivery of energy to Kosovo. (Comment: Our USAID energy experts say it is unlikely that Montenegro would physically cut its transmission line to Kosovo. In the unlikely event that Serbia and Montenegro both disconnected their lines to Kosovo simultaneously -- i.e., within about three hours of each other -- the region as a whole would suffer a blackout. If it were done beyond the three-hour window, Kosovo, coordinating closely with Macedonia and Albania, would likely be able to adjust. End Note.) Other plans: circuit bypass/security for cooling water ¶6. (C) Due to the architecture of the transmission line with Serbia, a part of western Kosovo, particularly the area around the town of Peja/Pec, would be vulnerable to a Serbian shut-off. In response, KEK intends to build a bypass that would link this area to the rest of the Kosovo circuit, but in so doing, would have the ability to de-link the Serb-majority area of northern Mitrovica from this circuit as a contingency measure in two cases: in the case of a Serbian disconnection, and for the purposes of applying the same load-shedding program to the north as is applied to the rest of Kosovo. According to KEK officials, this bypass could be completed by late December. In a November 19 conversation with COM, PDSRSG Steve Schook said that UNMIK had approved this proposal, clearing the way for construction to go ahead despite the political sensitivities involved (i.e. the potential perception by some Albanians that bypassing the Serb north in this way could be the first step towards partition). We agree that this step is prudent and should be undertaken without delay. ¶7. (C) Schook also said he was working with KFOR to examine the security aspects of ensuring the continued flow of cooling water for Kosovo A and B power plants, which is channeled from its source in the northern Serb-majority municipality of Zubin Potok to the plants' location just outside of Pristina. KFOR Chief of Staff BG Wolf (U.S.) also affirmed that KFOR would look closely at this potential problem. Belgrade energy donation ¶8. (C) Separately, and despite the threat of a Serbian cutoff, discussions are fairly well advanced between UNMIK/KEK and the Serbian Ministry of Mining and Energy (MME) regarding a Belgrade donation of 50,000 MW hours/month of electricity until April 30, 2008 to Kosovo Serb areas both north and south of the Ibar river. This offer represents the third year such an arrangement has been discussed (previously unsuccessfully) between UNMIK and Belgrade, but both the technical possibilities and political will on UNMIK's part appear to be in greater supply this winter. (UNMIK has in the past viewed such a targeted donation as problematic, fearing that Kosovo Albanians will reject it as discriminatory.) As a consequence, UNMIK/KEK recently sent a contract specifying the terms of the donation to the MME and is currently awaiting a response. We have expressed our strong support for the proposal, given Kosovo's energy needs and the potential for this deal to free up scarce energy resources for use elsewhere in Kosovo. Emergency Procurement Authority ¶10. (C) In other contingency planning, KEK has also asked UNMIK for emergency procurement authority from November 1-April 1 to purchase pumps, rotors and other spare parts for its problematic Kosovo B plant during the cold weather months. Without this authority, which would allow rapid PRISTINA 00000786 003 OF 003 sole-source procurement, KEK would have to go through a cumbersome process that could result in delays in completing emergency, unplanned equipment repairs, especially if one of the plants fails and Belgrade has disconnected Kosovo from its grid. UNMIK has promised to expedite the request, but we will follow through to press for timely action. 1l. (C) COMMENT: The good news is that Kosovo, with help from our USAID energy experts, is doing some serious planning in response to the threat of a disconnection from Serbia's energy grid. The potential for problems is still strong, but the worst and most immediate physical dislocations can likely be prevented by coordinated action with Kosovo's key neighbors and some quick infrastructure adjustments. KAIDANOW