FRANCE ON POSSIBLE RUSSIA - UKRAINE GAS SUPPLY DISRUPTIONS

C O N F I D E N T I A L PARIS 002341 SIPDIS E.O. 12958: DECL: 12/30/2018 TAGS: ENRG EPET ECON PREL UP EU FR SUBJECT: FRANCE ON POSSIBLE RUSSIA - UKRAINE GAS SUPPLY DISRUPTIONS REF: STATE 134475 Classified by Econ Counselor Stuart Dwyer for reasons 1.4 (b) and (d). ¶1. (SBU) Econ Counselor raised reftel points on the Russia/Ukraine gas dispute with MFA Acting Director for Economic and Financial Affairs Philippe Meunier on 12/30. Meunier said guidance issued by the MFA on 12/22 remained extant: France had been in touch with other EU member states as well as the future Czech presidency on the issue; both Russia and Ukraine had indicated their commercial dispute would not/not have an impact on Russian gas supplies transiting Ukraine to the EU; France called on Russia and Ukraine to respect international commitments as supplier and transit countries. ¶2. (C) In the short-term the current situation was less worrisome for EU member states than had been the January 2006 supply disruptions, Meunier thought. Stocks are more abundant and the economic downturn had resulted in slack demand. Moreover, France was "taking at face value" assurances from Russia and Ukraine that supplies to the EU would not be interrupted by the current dispute. Communication with Russia had been reasonably strong, including via the EU/Russia early-warning mechanism for oil and gas supply shocks that had been established in 2007. A January 9 meeting between Russia and the Commission would provide further opportunity for discussion. The Russian approach to energy issues -- including as relates to Ukraine -- had been more "economic and technical," less political, since the Georgia crisis, Meunier thought. During the October Paris meeting of the EU - Russia Permanent Partnership Council on Energy the GOR had even suggested Ukraine be brought into the early-warning mechanism. ¶3. (C) France shared U.S. views on long-term underlying challenges, Meunier said. Russia-Ukraine contracting arrangements were "incomprehensible." The GOF hoped Ukraine's desire to accede to the Energy Community Treaty, and the commitments to energy sector reform it entailed, would help encourage necessary changes in the sector. Meunier was receptive to the call for strong U.S./EU cooperation on energy in Ukraine (though non-committal on a formal trilateral energy dialogue). While the current gas dispute was important, the broader range of issues addressed in Ukraine's current IMF program was the key to stabilization, he suggested, and warranted the international community's continued close attention. PEKALA