AMBASSADOR SILVERBERG'S MEETING WITH EU ENERGY

UNCLAS SECTION 01 OF 02 BRUSSELS 001189

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET SENV
SUBJECT: AMBASSADOR SILVERBERG'S MEETING WITH EU ENERGY
COMMISSIONER PIEBALGS

REF: A. A. BRUSSELS 952

B. B. SOFIA 503


1. (SBU) Summary. In a July 28, 2008 meeting with
Ambassador Silverberg, EU Energy Commissioner Andris Piebalgs
laid out his goals and concerns for the coming months. On
the environment, Piebalgs argued for the need for the US, the
EU, and Japan to adopt a common position going into the
Copenhagen negotiations. He acknowledged that China and
India would have to be part of any agreement, but said he was
not sure exactly what commitments they would be willing to
make. On energy security, Piebalgs lamented that political
problems are preventing a solution to open up the Southern
Corridor for gas transit through Turkey. According to
Piebalgs, Turkey has fallen back on demanding t keep a
lift-off clause as a pre-condition foran agreement, which is
a non-starter for Azerbaijan. Piebalgs thinks there is
currently a power vacuum in Russia and he doesn't understand
current Russian actions on TNK-BP, the oil cutoff to the
Czech Republic, and the lack of Russian interest in pursuing
South Stream, which Piebalgs categorized as dead. Speaking
on energy efficiency, biofuels, and energy research, Piebalgs
emphasized the need for greater cooperation between the U.S.
and the EU. Looking ahead to autumn, Piebalgs indicated he
would be devoting much of his time to the EU's Strategic
Energy Review. The difficult question for him will be what
the EU should announce, especially regarding the balance
between member state competencies and EU competencies. End
Summary.


2. (SBU) In a July 28, 2008 meeting with Ambassador
Silverberg, EU Energy Commissioner Andris Piebalgs laid out
his goals and concerns on a range of subjects including the
environment, energy security, energy efficiency, biofuels,
energy research, and the Commission upcoming Strategic Energy
Review.

Environment
--------------

3. (SBU) Piebalgs began by noting the good cooperation he
has enjoyed in the past with USEU. He said the major issue
coming up for him is the Environment Summit in Copenhagen.
Piebalgs said his dream would be for the U.S., the EU, and
Japan to agree to a common position on climate change, but he
realizes this will be challenging. He emphasized that
industry needs clear signals on climate change policy to make
investment decisions. Asked about including the major
developing nations (especially China and India) in a climate
agreement, Piebalgs said he agreed that China and India must
be part of any agreement, but is less clear what their
commitments under an agreement would be. While they would
need to share the same goals, they might have different
commitments than developed nations. He believes China will
be willing to agree to targets for energy efficiency and
sectoral goals, but he is not sure this will be enough.
Japan has been working to try to involve China and India
through the sectoral approach. At this point, it is not
clear to him what the blueprint for Copenhagen will be. He
does believe, however, the difficulties to overcome are
mainly technical, not political.

Energy Security
--------------

4. (SBU) Piebalgs sees the question of European energy
security becoming more and more political. The biggest
problem affecting the Southern Corridor strategy is the EU's
inability to reach an agreement on transit. Piebalgs
indicated that the EU team, which held discussions in Turkey
on July 24, did not meet with success. Contrary to the
positive outlook for a breakthrough noted Ref. A, Turkey
insists on a lift-off clause as a pre-condition for an
agreement. According to Piebalgs, this is a non-starter for
Azerbaijan who doesn't want to see part of its exports
siphoned off in Turkey at a lower price than it could get by
exporting to Europe. Piebalgs stressed that Turkey could
end up being bypassed and said it was a pity that Turkey
doesn't realize this. Energy Minister Guler, unlike the MFA,
does not seem to understand this risk. Piebalgs noted he is
now waiting on the political developments regarding the AKP
closure case, but whatever the results the EU will continue
working towards a solution with Turkey.


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5. (SBU) Speaking candidly, Piebalgs said he believes the
Russian South Stream project is nearly dead and seems to have
been completely abandoned by the Russians. He indicated he
does not understand why the Russians have stopped pursuing
it. Piebalgs categorized the problems with Nord Stream, on
the other hand, as lying within the EU, not with Russia.
Turning to the recent Russian oil supply problems in the
Czech Republic, Piebalgs said the Russians had sent a letter
to the Czech's proposing that the Czech government start
purchasing Russian oil directly, bypassing the traders.
Piebalgs finds this strange, as he believes the supply
"problems" were politically motivated - traders make money by
shipping oil, not by disrupting supplies. Similarly,
Piebalgs described the TNK-BP situation as ridiculous and
nothing more than an expression of British-Russian security
relations. Piebalgs sees this episode as evidence there is
currently a power vacuum in Russia.

Energy Efficiency, Biofuels, and Energy Research
-------------- ---

6. (SBU) Speaking on energy efficiency, Piebalgs mentioned
the EU initiative for external power supplier (phone
chargers, etc.) performance criteria. He acknowledged that
the U.S. has the lead in this field and that his goal is to
get the EU up to U.S. standards within one year after the
proposal is adopted. In two years, the goal would be to move
beyond the U.S. standard. Part of this proposal would
involve implementing a mandatory Energy Star program, rather
than a voluntary one. Piebalgs emphasized that his
philosophy is that if similar standards are developed in the
U.S. and the EU, they should be compatible and along the
same lines. He pointed to cars as one of those areas where
there is a divergence in standards with the U.S. using miles
per gallon and the EU using grams of CO2 per kilometer. He
pointed to biofuels as an area where both sides of the ocean
are working well together to develop standards. He said that
the EU biofuels program has survived the public outcry phase
and will go forward because biofuels address both climate
change and energy security.


7. (SBU) Piebalgs lamented the fact that the EU and the U.S.
have not had better cooperation in energy research and
development, using the example of an EU Commission proposal
for cooperation on a bio-refinery to which the US, in his
words, did not respond. He also thinks the U.S. and the EU
could do more together on research for second generation
biofuels. Piebalgs believes demonstration projects for
second generation biofuels are needed quickly, but so far
everyone seems to be competing and not cooperating. Lack of
cooperation is not just an EU/U.S. problem, Piebalgs pointed
to Sweden, which has three demonstration projects underway
all of which he believes will fail because they are not
cooperating. He feels the key going forward will be to find
a balance between cooperation and competition.

Strategic Energy Review
--------------

8. (SBU) Looking ahead to autumn, Piebalgs indicated he
would be devoting much of his time to the EU's Strategic
Energy Review. The difficult question for him will be what
the EU should announce, especially regarding the balance
between member state competencies and EU competencies. In
his mind, there is really only one national competence left -
the decision for or against the use of nuclear energy. He
acknowledged, however, that the member states would disagree.
As such, he will be looking for a proposal that goes far
enough to be valuable but doesn't go too far in antagonizing
the member states.


9. (SBU) Comment. The EU's negotiations with Turkey on gas
transit seemed to have taken a turn for the worse with
political issues seemingly outweighing commercial issues.
Piebalgs's comments on South Stream are surprising,
especially in the face of recent press reports citing
ratification of South Stream by Bulgaria's Parliament. (Ref.
B) End Comment.

Silverberg.
.