ENERGY SECURITY: FRANCE WANTS EU ENGAGEMENT WITH CASPIAN

UNCLAS SECTION 01 OF 02 PARIS 001138

SENSITIVE
SIPDIS

STATE FOR EEB; EUR/WE; SCA

E.O. 12958: N/A
TAGS: ENRG ZK PREL FR
SUBJECT: ENERGY SECURITY: FRANCE WANTS EU ENGAGEMENT WITH CASPIAN
COUNTRIES, DIALOGUE WITH RUSSIA


1. (SBU) Summary: Ambassador Steven Mann, Coordinator for Central
Asian Energy Issues met May 29 with GOF officials, who outlined
French plans to promote energy security during its upcoming
presidency of the EU Council. Specific ideas included greater
political engagement with Caspian countries, a potentially difficult
dialogue with Russia on energy interdependence, and encouragement of
regional cooperation both in the Caspian and Black Sea regions.


2. (SBU) Ambassador Mann met with David Molho, Technical Advisor to
the Prime Minister for Energy, Industrial Policy and Nuclear Safety;
and in a separate meeting with MFA officials over lunch, with
Christian Masset, A/S equivalent for Economic and Financial Affairs;
Isabelle Dumont, Technical Advisor to the Foreign Minister for
Russian and Central Asian Issues; Jean Lamy, Director of the Office
of Energy and Transportation; and Christophe Sammartano, Desk
Officer for Energy.

3. (SBU) Mohlo described reaction to the report former International
Energy Agency (IAE) head Claude Mandil recently submitted to the
Prime Minister on energy security, which he characterized as
generally positive, and which he said France thought could be the
basis for the EU's strategic review of energy security due in
October. He admitted that some recommendations, such as suspending
the Commission's proposed restrictions on foreign investment in
network infrastructure, were probably too controversial for
adoption. France hoped to raise the profile of energy security in
EU deliberations, encourage the EU to speak with one voice, and
increase dialogue with both consumer and producer countries. Molho
mentioned Finance Minister Christine Lagarde's proposal that morning
to put oil prices on the agenda for the upcoming G8 in Japan as an
example.
Note: The Mandil report is available at:
(http://www.premierministre.gouv.fr/IMG/pdf/8 -04-
21_Mandil_Rapport_au_Premier_ministre_final.p df)

4. (SBU) Masset outlined France's "ambitious" plans for its EU
presidency, noting that energy security would be one of its
priorities. There would be a Ministerial level meeting in September
with Central Asian countries, followed by an October EU "Baku
process" meeting (either in Baku or Kiev) and an EU summit with
Russia in Nice. France was also thinking about a broader conference
on energy security that would include non-EU members in December.
During its presidency France hoped to promote both EU internal
market reforms and increased political engagement with Caspian
producers. Companies were looking for this kind of political cover
before investing in the Caspian, he said. France also hoped to
increase dialogue and move towards an "adult" relation of
interdependence with Russia, which Lamy said should involve more
detailed discussion of supply, demand, and needed investment.
Masset said that France was realistic about the difficulties
building such relationship on energy with Russia would entail.

5. (SBU) Ambassador Mann noted that the focus needed to be on
developing upstream supplies alongside supporting needed pipeline
projects, including the "most desirable" Nabucco pipeline. Caspian
countries such as Turkmenistan needed to be encouraged to develop
market oriented policies, and Azerbaijan needed to be convinced that
it should invest now in developing its gas fields for the future.
EU plans to strengthen the portfolios of Special Representative for
Central Asia Pierre Morel and Nabucco coordinator Jozias van Aartsen
were excellent ideas, but ultimately, until private sector companies
were convinced projects made commercial sense, political support
alone would be insufficient. Masset noted that there was growing
interest from Caspian countries in linkages with Iran. Mann replied
that Iran's potential as a supplier was exaggerated. Aside from
sanctions issues, it had large internal needs, limited capacity to
transport natural gas, and insufficient investment in the energy
sector.

6. (SBU) Russia too needed to be encouraged to definitively abandon
the "old way" of thinking about former Republics as dependencies,
Mann said. Gazprom was addicted to cheap central Asian gas, and
this promoted underdevelopment of Russia's energy resources and
environmentally destructive practices such as flaring. Masset and
Lamy offered broad support for this view, but noted the considerable
influence Russia wielded with energy companies due to their
investments in the country and the size of its reserves.
High-profile support for controversial projects like the
TransCaspian might not be the most productive way to engage Russia.
Masset and Lamy thought a triangular dialogue between the EU,
Russia, and Caspian producers, based on the G8 St. Petersburg
principles adopted under the Russian presidency was the most likely
way to achieve a constructive outcome.

7. (SBU) On the utility of greater regional cooperation, Ambassador

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Mann strongly suggested that it needed to have a concrete basis,
such as development of oil transport links between Kazakhstan and
Azerbaijan, or improving cooperation on energy development between
Turkmenistan and Azerbaijan. Jean Lamy suggested Black Sea
cooperation might provide a third avenue, and could help deal with
the crucial issue of Turkish transit. He noted that differences of
approach between Romania (in favor) and Bulgaria (opposed) might
make EU implementation of this difficult. Alternatives bypassing
Turkey such as LNG transport to Ukraine, or a third pipeline
project, did not appear economically viable to the GOF. France
hoped instead to use the Energy Community of South East Europe (in
which Turkey had observer status) to reinforce the EU rules allowing
third party access regardless of infrastructure ownership. They
hoped to persuade Turkey to adopt these rules as well.

8. (SBU) This cable was cleared by Ambassador Mann.

Stapleton