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

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DEPT FOR EUR, EUR/SCE, DRL, INL, AND S/WCI, NSC FOR BRAUN,
USUN FOR DREW SCHUFLETOWSKI, USOSCE FOR STEVE STEGER, OPDAT
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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?

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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

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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