Identifier
Created
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Origin
08BRUSSELS1862
2008-12-10 14:02:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
USEU Brussels
Cable title:  

BARROSO LETTER TO POTUS ON ENERGY SECURITY

Tags:  ECON EPET EUN 
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UNCLAS SECTION 01 OF 02 BRUSSELS 001862 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EPET EUN
SUBJECT: BARROSO LETTER TO POTUS ON ENERGY SECURITY

UNCLAS SECTION 01 OF 02 BRUSSELS 001862

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EPET EUN
SUBJECT: BARROSO LETTER TO POTUS ON ENERGY SECURITY


1. (SBU) EU Commission Officials provided USEU with a copy a
letter dated November 27, 2008 from EU Commission President
Jose Manual Barroso's to POTUS in response to the POTUS
letter to President Barroso on Energy Security. Text Follows:

Begin Text.
--------------

Dear Mr. President,

Thank You for your letter of 17th October 2008 concerning the
issue of the security of energy supplies and the importance
of actively promoting the Southern Corridor to facilitate the
transit of Caspian gas to Europe.

I agree with you that the Southern Gas Corridor linking the
European Union to the Caspian Sea and the Middle East is a
strategic priority, of course, not only for us but also for
producer states which themselves need to diversify in order
to get the benefits of real pricing mechanisms and spread
their risks.

In our Central Asia Strategy, we have clearly underlined the
importance of Central Asian energy sources and the necessity
to develop the Southern Corridor. This has been confirmed by
the European Commission as recently as 13 November in its
Second Strategic Energy Review. As highlighted at the recent
European Council, the Commission will be organizing, under
the upcoming Czech Presidency, a high level political event
in the spring of 2009 with the Caspian Sea countries and the
transit countries, to which Azerbaijan, in particular will be
invited.

You may rest assured that we share your view of the
importance of increasing political engagement with
Azerbaijan. Building on existing bilateral energy
cooperation, we are also currently examining, in the
framework of our new Eastern Partnership initiative, what can
additionally be offered to Azerbaijan and the other countries
of our Eastern Neighborhood, including Armenia, Belarus,
Georgia, Moldova and Ukraine, with a view to enhancing the
security of energy supplies and transit routes.

To have a viable Southern Corridor, we need in the first
place a clear, transparent and cost-based transmission regime
along the length of the corridor and we need to take
seriously the supply concerns of the transited countries,
including Turkey and Georgia.

The Commissioner for Energy, Mr. Andris Piebalgs, recently
visited Turkey and Azerbaijan. He met the respective
Presidents Gul and Aliyev, and Prime Minister Erdogan. From
these discussions, it is clear that the transit regime

currently offered by Turkey is not acceptable to Azerbaijan
and thus, cannot serve as a basis to connect the Caspian Sea
states to the EU. Moreover, this transit regime does not
appear to be compatible with the system within the EU, which
Turkey intends to adopt.

The gas transit system should not be at odds with the EU
Internal Market rules. We will, with Turkey, try to resolve
outstanding issues of gas transit in the immediate future,
including of course Turkey,s concerns on energy security
which we feel will be best dealt with by other means.

We will also need larger volumes of gas for the Southern
Route. Realistically, we have only Turkmenistan as near-term
new supplier. To get over the Caspian Sea, we have proposed
in our recent Strategic Energy Review a concerted private
sector-led initiative (the Caspian Development Corporation)
that will combine political, legal and commercial resources
to make the link across the Caspian Sea. Both Turkey and
Azerbaijan are very interested in this idea. The feasibility
study for this project is to be spearheaded by the World
Bank, together with the European Investment Bank and European
Commission.

Europe will continue to source substantial and indeed
increasing quantities of its oil, gas and uranium supplies
from Russia. Hence cooperation on energy with Russia remains
essential. We are clearly in a situation of
"inter-dependence" with Russia that, if prudently managed
through a transparent regime of rules, can provide the basis
for a more diverse and mutually beneficial economic
relationship between us. Rules in the field of energy are as
important to Russia as they are to us; only with transparent,

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applied rules will both sides be able to invest.

The European Union,s internal energy market is a rules based
system, with fully regulated natural monopoly elements.
Regulatory and competition law will be applied when there is
a case to answer. Countries that wish to join the European
Union must appreciate that fact, as must our most important
suppliers. We have enforced competition rules against
supplier companies when there has been a breach and we will
continue to do so.

To conclude, I think that we can now achieve the right
conditions for the Southern Corridor. Gas will get to Turkey
but a considerable quantity must transfer through Turkey to
the EU. This should engender new gas field developments that
will be sufficient for current and future needs. The
Southern Corridor, and its members, will increase in
political importance. It is that prize that Turkey must
focus on.

I am grateful for your interest in this important topic. We
look forward to continuing our constructive dialogue and
cooperation with the United States on energy issues.

Yours sincerely,

Jose Manual BARROSO

End Text.
--------------


2. (SBU) Comment. Barroso's remarks on EU-Russia
"inter-dependence" echo the oft repeated Commission line,
that Russia needs the EU more than the EU needs Russia.
Reading between the lines on Barroso's comments on using EU
competition policy in the Energy field, what he does not say
is that the EU is unwilling to aggressively pursue Gazprom on
the basis of its market dominance and anti-competitive
behavior. Barroso's remarks about the "transit regime
currently offered by Turkey" refers to the 15 percent
lift-off model agreed to by the Turkey-Greece-Italy
Interconnector (TGI) pipeline partners. Commission officials
have told us they view this agreement as problematic and not
in agreement with EU rules which Turkey will have to comply
with if it wants to join the Energy Community or eventually
seek EU membership. End Comment.

MURRAY
.