P.M. KARAMANLIS TRIP TO RUSSIA: ENERGY

C O N F I D E N T I A L SECTION 01 OF 02 ATHENS 000598 SIPDIS E.O. 12958: DECL: 04/28/2018 TAGS: PREL ENRG EPET GR SUBJECT: P.M. KARAMANLIS TRIP TO RUSSIA: ENERGY Classified By: Ambassador Daniel Speckhard for Reasons 1.4 (b,d) ¶1. (C) According to Raphael Moisis, Chairman of the Greek Energy Council, P.M. Karamanlis and Russian President Putin signed "an important but general" inter-governmental agreement during Karamanlis' April 28-29 visit to Moscow. The IGA, he said, includes provisions that: a. an international holding company (Societe Anonyme) will be established for the portion of South Stream that passes through Greek territory, jointly and equally owned by Gazprom and the Greek Pipeline Transmission Operator (DESFA); b. the holding company will "request" a third-party access exemption from the EU as well as obtain all relevant national permits; c. refer to specific EU energy regulations, while not referring to the EU by name. (Moisis said RUSSIA absolutely refused to refer to the EU in the agreement, but that Greece said it was required as an EU member state to at least include the operative provisions of EU law); d. give Greece the right to an unspecified amount of offtake from the pipeline. (Moisis said the GoG is hoping to have its new marginal domestic supply needs met by TGI and thus did not want to specify an amount of offtake in the South Stream agreement, which could end up leaving Greece with more gas than it needs); e. the amount of gas transiting Greece through South Stream will total approximately 10 bcm; f. specify that South Stream will enter Greece from Bulgaria but do not specify where it will exit (Moisis said there was the possibility that it would flow from Greece through Albania on its way to Italy). ¶2. (C) Moisis said that, as the Greek portion of South Stream would be operated by a private company (the Gazprom/DESFA JV),it would normally be classified as a private and not public pipeline. Under Greek law, however, any pipeline that links up with the Greek public pipeline network (which South Stream will) must be part of the public pipeline network, managed by DESFA. (Note: The on-shore portion of TGI that runs through Greece is, in contrast, a public pipeline to be owned and operated by DESFA.) RUSSIA rejects putting South Stream under DESFA, Moisis said, so this remains a difficult, outstanding issue. - - - - - TGI Is, and Qdad of South Stream -( ¶3. (C) Moisis stre`ek press attention tQclipsed real action on TGQportant to emphasize to t(p on th ;Interconnectorstill in the formative stages, TGI is happening now." He said that, during Minister Folias' March 17 trip to Baku, the Azerbaijanis had expressed their willingness to supply an additional 1 bcm of Shah Deniz I gas once transit issues with Turkey were worked out. During his April 20 - 23 visit to Rome for the International Energy Forum, Folias had met with Turkish Energy Minister Guler. Speaking on behalf of both the Greek National Gas Company (DEPA),and Italian Edison, Folias told Guler it was important for Turkey to resolve the transit dispute with Azerbaijan so that gas supply contracts could be signed. He invited Guler and Italy's then Minister of Energy Bursani to come to Athens for four-way talks on TGI, which Guler quickly accepted, but Bursani could not as a result of the Italian Government's fall. Moisis says Folias remains committed to this meeting taking place. ¶4. (C) Significantly, Folias raised the Azerbaijani offer to Greece of an additional bcm of SD I gas. Guler told Folias that Turkey did not want to get in the way of this development and was willing to waive the 15% netback provision (for this 1 bcm only). Guler, according to Moisis, urged Folias to send a DEPA representative to Ankara immediately to finalize an agreement on the additional 1 bcm. ¶5. (C) In an aside, Moisis said that Guler surprised Folias during their Rome bilat by pulling him aside and asking whether Folias truly believed Azerbaijan had enough gas for TGI. Moisis said this just further sowed doubts in Greek minds about Azerbaijani supplies. Economic Counselor reminded Moisis that he had sent him in late 2007 information that British Petroleum had provided the USG convincing evidence of significant new finds showing Azerbaijani gas could more than fill TGI. ¶6. (C) Moisis ended the meeting by saying he viewed TGI and South Stream as two separate projects, with separate suppliers and separate customers. TGI was ahead. Provided it stayed ahead, South Stream would be unable to derail it. Economic Counselor noted that the USG was intensely engaged on helping resolve the transit dispute between Turkey and Azerbaijan. He urged Moisis, however, to recommend to his counterparts that the GoG greatly increase its public support for TGI so that potential investors and suppliers kept the faith with this important project. - - - - - - - - - - - - - Comment: Where's the EU? - - - - - - - - - - - - - ¶7. (C) This meeting once again raises the question: "Where's the EU?" According to Moisis, ENI and Gazprom representatives have either just met, or were just about to meet, EU Energy Commisioner Piebalgs to probe for the EU's real opinion on South Stream. In our view, it is amazing that there should be any question. Southstream is aimed at the heart of the EU's energy security strategy. It is being implemented through agreements signed by EU member states that (if Moisis is to be believed) wink at EU requirements while not citing the EU by name. It is based on the belief that the EU will grant it TPA exemptions. While we believe that TGI (which we in Athens know pretty well) is far enough along that agreements such as that signed in Moscow cannot derail it (assuming a resolution of the Turkey-Azerbajani transit dispute),we cannot say the same for Nabucco (about which we are admittedly less informed). We believe the USG's new energy envoy, Amb. Gray, is perfectly positioned to raise with his former EU interlocutors such as Piebalgs our hope that EU institutions will rigorously require EU member states to consider and justify how their rhetorical (and sometimes more) support for South Stream meshes with the EU's overarching security need for Nabucco. We also believe that our engagement with the GoG on TGI would be immeasurably enhanced by Piebalgs and other EU officials coming to Athens and making clear and unequivocal statements of support for TGI. SPECKHARD