AUSTRIAN EMBASSY SASY OMV COMMITTED TO NABUCCO,

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000409

SIPDIS

SIPDIS

DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT
EUR/CARC, SCA (GALLAGHER, SUMAR)
DOE FOR HARBERT, HEGBORG, EKIMOFF
DOC FOR 4231/IEP/EUR/JBROUGHER

E.O. 12958: DECL: 02/04/2018
TAGS: EPET ENRG ECON PREL RS
SUBJECT: AUSTRIAN EMBASSY SASY OMV COMMITTED TO NABUCCO,
RUSSIA A STRATEGIC PARTNER

REF: A. BERLIN 0153

B. 07 VIENNA 2853

Classified By: Econ MC Eric Schultz for Reasons 1.4 (b/d)

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Summary
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1. (C) Austrian Embassy Political-Economic Counselor Reimund
Magis told us February 11th that Austria is committed to the
Nabucco project and to diversification of Europe's gas
sources. That said, Austria viewed Russia as a "strategic
partner" on energy issues and planned to continue to
carefully draw Gazprom and Russia further into mutual
dependence with Europe. End Summary.

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Nabucco and Route Diversification
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2. (C) Magis said Austrian energy company OMV and the
Austrian government are fully committed to the Nabucco
pipeline project. He said the recent inclusion of Germany's
RWE (ref A) opens up additional potential markets for gas
from Nabucco, perhaps extending to northwest Germany. He
claimed Nabucco is further along in planning than South
Stream, and even, to some extent, Nord Stream.


3. (C) According to Magis, diversity of gas sources is not
just a political ideal, but a necessity as Russia alone
cannot supply the growth in European gas demand. Moreover,
gas disputes and threatened disruptions between Russia and
Ukraine have been "too frequent", making diversification of
routes (in addition to sources) important. Energy security,
the potential for accidents in aging systems, European demand
increases, and high prices all put a premium on
diversification.


4. (C) Magis suggested that quiet diplomacy on our part in
favor of diversification would be more helpful than public
advocacy. He added that while the U.S. is largely a market
bystander in the Russia-EU energy relationship, U.S. support
is crucial, especially on difficult issues like Turkish
transit policy and Iraqi gas flows.

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Russian-Austrian Energy Partnership
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5. (C) Magis described Austria's energy (especially gas)
relationship with Russia as "strategic" and "long-standing,"
noting that it dates back over 50 years. Based on mutual
dependency, he predicted it will continue. Austria is at the
"heart" of the routes Gazprom uses to access Europe and "they
need us". He stressed, however, that Austria is "not naive;"
that it wants Gazprom as a partner but will preserve its
independence -- "we think we can handle them." Austria is
being "very careful about what we sell them," but like many
European countries Austria is gauging how best to integrate
Gazprom as the company attempts to secure access to lucrative
downstream markets.


6. (C) Magis observed that the pendulum of opinion in Europe
is swinging away from the "wide open doors" seen under
previous German Chancellor Schroeder to a more cautious
approach in which the Russians are "invited where they are
useful." Meanwhile, Russian rhetoric is beginning to change
from "simple chest-thumping" to "realism" about mutual
dependency.

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Baumgarten Deal
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7. (C) Referring to the Baumgarten deal (ref B),Magis
described it as a gesture of goodwill toward Russia that cost
OMV very little. He said the economic value is minimal to
OMV ($1-2 million per year),and all physical facilities will
remain under Austrian control. Magis said it is another
example of a joint venture where Gazprom has less than a

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controlling stake. In addition, he said the Baumgarten deal
should not threaten Nabucco in any meaningful way, because as
a trading hub through which essentially anyone's gas can
traverse, Gazprom's ability to influence those flows would
likely be marginal at best.
BURNS