Identifier
Created
Classification
Origin
08MILAN69
2008-04-18 11:10:00
CONFIDENTIAL
Consulate Milan
Cable title:  

ITALY'S EDISON: IRANIAN GAS NOW, NUCLEAR POWER

Tags:  ENRG ECON EPET IT IR 
pdf how-to read a cable
VZCZCXRO1436
PP RUEHAG RUEHROV
DE RUEHMIL #0069/01 1091110
ZNY CCCCC ZZH
P 181110Z APR 08
FM AMCONSUL MILAN
TO RUEHC/SECSTATE WASHDC PRIORITY 1461
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHTH/AMEMBASSY ATHENS 0181
RUEHRO/AMEMBASSY ROME 8383
RUEHTI/AMEMBASSY TIRANA 0129
RUEHFL/AMCONSUL FLORENCE 0162
RUEHNP/AMCONSUL NAPLES 0159
RHEHNSC/NSC WASHDC
RUEHBS/USEU BRUSSELS
C O N F I D E N T I A L SECTION 01 OF 02 MILAN 000069 

SIPDIS

SIPDIS

STATE FOR EUR/WE, EUR/PPD

E.O. 12958: DECL: 04/17/2018
TAGS: ENRG ECON EPET IT IR
SUBJECT: ITALY'S EDISON: IRANIAN GAS NOW, NUCLEAR POWER
LATER

Classified By: CG Daniel Weygandt. Reasons 1.4 (b) and (d).

-------
Summary
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C O N F I D E N T I A L SECTION 01 OF 02 MILAN 000069

SIPDIS

SIPDIS

STATE FOR EUR/WE, EUR/PPD

E.O. 12958: DECL: 04/17/2018
TAGS: ENRG ECON EPET IT IR
SUBJECT: ITALY'S EDISON: IRANIAN GAS NOW, NUCLEAR POWER
LATER

Classified By: CG Daniel Weygandt. Reasons 1.4 (b) and (d).

--------------
Summary
--------------


1. (C) Edison CEO Quadrino told the Consul General that
Europe will need to increase natural gas imports dramatically
to meet increased demand and counter predicted supply
shortages through 2020. New nuclear energy production is the
long-term answer, but cannot realistically be brought online
soon enough to improve the situation through 2020. Russia,
Algeria, Qatar and Azerbaijan will be Edison's primary
sources, but Quadrino is actively seeking deals with Iran
with the GOI's knowledge and consent. Italian energy
companies, like Edison, will continue to do business with
Iran absent GOI objections. End summary.

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European Energy Needs Through 2020
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2. (SBU) The Consul General recently met Umberto Quadrino,
CEO of Edison at Edison's headquarters in Milan. Quadrino
described the EU energy scenario in general for the next 12
years. The EU will face a shortage of natural gas due to the
North Sea wells' eventual exhaustion. In the meantime,
demand for natural gas will go up by 150 billion cubic meters
and supply will drop by 100 billion (creating an overall
shortage of 250 billion cubic meters). In addition, several
coal and nuclear power stations in Europe will close. The
only two new nuclear reactors under construction in Europe
(France and Finland) will take approximately ten years to be
completed. Consequently, meeting European electricity demand
through 2020, according to Quadrino, can only be based on a
large scale increase in the use of natural gas products. The
EU countries will need to double their natural gas imports;
however, high costs and the time for building the related
infrastructure must be taken into account.

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Sources of Natural Gas
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3. (SBU) Edison will import natural gas from Russia (both
South Stream and Nord Stream projects),Algeria, Qatar, and
Azerbaijan. ENI and other major energy companies have

monopolies on Libyan and Saudi Arabia production that would
be hard for Edison to break. China is particularly
aggressive in Africa, recently opening a $50 billion line of
credit towards Nigeria, making it hard for Edison to make
inroads. Edison is also the Italian investor in the TGI
pipeline to bring Caspian gas to the Western European market.

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Iran is Edison's Preferred Source
--------------


4. (C) Quadrino declared that Europe must look to Iran, Iraq
and the Persian Gulf to increase its natural gas imports. He
further cautioned that if European countries do not buy
natural gas from Iran, then Russia, China and India will.
Quadrino sees Iran as not only the most promising source of
natural gas but as the essential source for the future of
European energy companies. Though he recognizes the
political sensitivities to doing business with Iran, he sees
no point in putting Iranian gas aside when other buyers are
ready to take their place.


5. (C) Quadrino was upfront about Edison's intent to invest
USD 5-6 billion in the Iranian fields. Quadrino is well
aware of the potential risk of the investment and knows that
he will be accountable to shareholders in case of losses, but
still he is ready to take the risk. He noted that he has
been and will continue to be completely transparent regarding
Edison's dealings with Iran. Quadrino has been in constant
talks with the MFA at high levels and with Enrico Letta,
Secretary General of Premier Romano Prodi's Office during

SIPDIS
negotiations with Iran. He said he will continue to engage
the newly elected government in the same manner. Edison
expects to finalize its agreement with the Iranian Government
by the end of July 2008, and expects the project will be

MILAN 00000069 002 OF 002


completed by 2010.

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Nuclear is the Long-Term Solution
--------------


6. (C) Quadrino was clear that nuclear energy represents the
only promising and concrete solution to Italy's long-term
energy problems. The EU resolved to reduce greenhouse gas
emissions by 20 percent, reduce energy consumption by 20
percent, and obtain 20 percent of their energy from renewable
energy sources by 2020. The binding targets vary from member
state to member state to meet the overall EU goal. The
target for renewable energy sources for Italy is 17 percent.
Quadrino noted that Environment Minister Alfonso Pecoraro
Scanio's energy plan (presented in 2007) is extremely costly
and insufficient to solve future energy needs because it is
largely based on expensive incentives to solar energy
production and renewable sources that, even when fully
exploited, are inadequate to meet Italy's future demand.
According to Quadrino, to meet 900 KWH of electricity demand
using photovoltaic panels, Italy would need 41 million square
meters of solar panels (in all of Europe at the end of 2006,
the total number of existing solar panels was 19 million
square meters).


7. (C) Similarly, Quadrino was skeptical on Giulio
Tremonti's (rumored to be Berlusconi's choice for Minister of
Economy) recent proposal to building a nuclear reactor at
Durazzo, Albania. He worries that local environmental
opposition could derail the project (the Greek government has
already protested) and notes that transporting electricity
over long distances is still not efficient or cost effective.
He believes nuclear reactors need to be built where the
energy is needed. He would welcome and USG efforts to
encourage Italy to use nuclear power.

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Comment
--------------


8. (C) Quadrino is an open and engaging interlocutor who
makes a forceful business case for energy deals with Iran
while acknowledging the political sensitivities. Further, he
seems to be in lock-step with Italian government officials on
his investments in Iran. His comments underscore the need
for USG officials to engage the Italian government directly
on reducing Italian business with Iran. End comment.
WEYGANDT