SCENESETTER FOR DOE DEPUTY ASSISTANT SECRETARY FOR

C O N F I D E N T I A L SECTION 01 OF 03 ROME 001184 SIPDIS EEB FOR SPECIAL ENVOY GRAY EEB FOR DAS HENGEL EEB FOR DAS BRYZA STATE PASS TO DOE DAS DENNIS MIOTLA E.O. 12958: DECL: 09/22/2018 TAGS: ENIV ENRG ETRD ETTC KNNP SUBJECT: SCENESETTER FOR DOE DEPUTY ASSISTANT SECRETARY FOR NUCLEAR POWER DEPLOYMENT DENNIS MIOTLA TRAVEL TO ROME, ITALY, SEPTEMBER 24 - 26, 2008 REF: A. 07 ROME 2438 B. ROME 451 Classified By: ECMIN THOMAS DELARE FOR REASONS 1.4(b) and (d) Political Backdrop -------------- ¶1. (C/NF) The new Berlusconi government took office after winning a snap election in April 2008. Although it has a strong electoral mandate, the government needs to take decisive steps to revitalize the economy and reduce budget deficits. Over his first hundred days in office, Berlusconi delivered concrete results on election promises. His coalition's solid majorities in both chambers of parliament allowed the swift adoption of wide-ranging laws on domestic security and the budget. Berlusconi intends to pass significant judicial reforms and devolve more fiscal powers to the regions between now and the end of the year. Politicians of all stripes agree that deep institutional reform is essential. But initial hopes of cross-aisle cooperation have faded, as the weakened opposition has signaled its intent to protest budget cuts and changes to the dysfunctional and deeply politicized judicial system. Italian Nuclear Energy Power Background -------------- ¶2. (SBU) Your visit to Rome to speak at the Italian Chamber of Deputies Seminar on security standards for nuclear energy comes at an opportune time as the Berlusconi government continues to inform us and the public that it intends to revive the Italian nuclear energy sector. Minister for Economic Development Claudio Scajola announced on May 22, 2008 that the GOI would develop a plan with the objective of beginning construction of new generation nuclear power plants by the end of the current legislature (2013). The high cost of fossil fuels and a desire for greater energy security appear to be the motives behind this return to nuclear power. Solid majorities in both chambers of parliament should facilitate the passage of the required legislation to address the issues of nuclear waste and construction sites, but these are likely to remain thorny problems for the GOI. ¶3. (U) Twenty years ago Italy had a nuclear power sector with four functioning nuclear power plants and a reprocessing plant. It was the world's fourth largest consumer of nuclear-produced electricity. After the Chernobyl accident, however, a series of three referenda in 1987 had the practical effect of banning nuclear power generation in Italy. A subsequent 1988 national energy plan called for the closing of existing nuclear plants and no building of new ones. The nuclear power plants were thus decommissioned. Today Italy imports around 15 percent of its electricity needs, mostly from France, at an estimated cost of about 90 billion dollars per year. ¶4. (U) Italy has, nevertheless, maintained some nuclear power capabilities. Parastatal electricity company ENEL operates a nuclear power plant in Slovenia, and in 2007 ENEL reached an agreement with Electricite de France for investment in up to six new nuclear reactors in France. Italian firm Ansaldo Nucleare has also retained nuclear power plant design, analysis and research capabilities. It is building an nuclear power plant in Romania, and cooperates on research with U.S.-based Westinghouse on the IRIS system. Ansaldo Nucleare also participates in research through EURATOM on generation IV system lead-cooled fast reactors. Italy is also covered by Section 123 Agreement as a member of the European Union, and it joined GNEP in 2007 (ref A). Italian Energy and Energy Security Policy -------------- ¶5. (U) Since 2005, the GOI has sought to increase the use of natural gas to meet Italy's winter heating needs. This ROME 00001184 002 OF 003 policy was driven by the desire to minimize exposure to high oil prices and to lower Italian carbon dioxide emissions in order to comply with Italy's Kyoto Protocol obligations. According to Eni, the Italian oil and gas parastatal 30% owned by the Italian government, Italy was the world's seventh-largest consumer of natural gas in 2005. In 2005, Italy consumed 84.27 bcm of natural gas. Of this, 23.33 bcm (27%) came from Russia. The use of natural gas for power generation has also increased. In 2005, of 303,699 GWh of electricity generated by Italian power plants, 149,262 GWh (49%) was generated using natural gas. Italy's remaining electricity was generated using coal (49,419 GWh, 16% of total),oil (47,124 GWh, 16%),and hydro (42,927 GWh, 14%), with the remaining 5% coming from waste, biomass, geothermal, wind, and other sources. ¶6. (U) Italian energy security policy has been focused on increasing Italian access to existing natural gas sources by constructing new natural gas pipelines. The GOI is developing a new national energy plan (expected in the Spring 2009) which will likely include the return to nuclear energy power as an additional goal. ¶7. (C) After natural gas shortages in January 2006, caused by Gazprom's decision to cut off gas exports via pipelines transiting Ukraine, the GOI has supported construction of pipelines linking Italy to natural gas fields in Russia, Algeria, and the Caspian Basin. Ministry of Foreign Affairs officials have said the GOI will support "any project that will bring natural gas to Italy." Most recently, GOI efforts helped ensure EU approval of the Turkey-Greece-Italy (TGI) pipeline, which will connect Italian gas consumers to natural gas fields in Azerbaijan. The GOI also supports the South Stream pipeline, proposed by Gazprom and Eni, which will connect Russia directly to Bulgaria and European markets via a pipeline running under the Black Sea. Eni's close cooperation with Russia's Gasprom is controversial; many believe that Eni is helping Russia strengthen its stranglehold on EU energy supplies. Ref B reports on the Eni-Gazprom relationship and its implications for Italian energy security. While the GOI has offered rhetorical support for the construction of LNG re-gasification facilities, it has not intervened forcefully to help gas companies, including ExxonMobil and British Gas, overcome opposition at the regional and city/town levels. After many years and delays, a new LNG re-gasification plant by ExxonMobil and Edison is scheduled to start operations in early 2009. Background on Meetings -------------- ¶8. (SBU) Your meeting at the Ministry of Economic Development will present an excellent opportunity to inquire about the GOI's plans for a return to nuclear energy. This Ministry has the energy portfolio and will play a leading role in Italy's nuclear energy future. You are scheduled to meet with Ambassador Mancini and Professor Sergio Garribba. Mancini is a senior Italian diplomat whose role is to advise Minister Scajola on policy matters. Garribba is one of Italy's foremost experts on energy and also serves as an advisor to the Minister on the technical side of energy matters. He previously held the post of Commissioner with the Italian Energy Authority and prior as Director General for the Ministry's Energy Directorate. Garribba has significant international experience, having worked at various international bodies and was a candidate in the 1990s to chair the IEA (Note: the U.S. did not support Garribba's candidacy; while he has continued to be a close Embassy contact, we think he may still resent our decision not to support him for the IEA chair. End note). ¶9. (SBU) Your meeting with ENEL should serve to understand better what role that company will play in Italy's plans for nuclear energy. As Italy's electricity parastatal ROME 00001184 003 OF 003 (approximately 30 percent GOI owned),ENEL is Italy's largest electricity company with approximately 50 percent of the domestic market. It is conceivable that the GOI may give ENEL a significant operational role (prime contractor) in a future nuclear energy sector. As previously noted, ENEL has already invested in nuclear energy generation abroad, particularly in France, and has acquired Russian nuclear technology through the purchase of a power plant in Slovakia. ¶10. (U) A courtesy call to the Honorable Andrea Gibelli, has also been scheduled. Gibelli is the Chairman of the Chamber of Deputies for the Productive Activities Committed, and the host of the VAST Seminar in which you will speak. Gibelli's Committee will play a key role in the passing of the energy related legislature needed for the return to nuclear energy power. ¶11. (C) You should also be aware that Ambassador Spogli has made energy security one of the top priorities of this Embassy. We are working now to intensify our dialogue with the Italian government on a broad range of energy issues, including energy diversification, EU market reform, and increased use of renewable energy sources. It would be very helpful to us if you could focus your public comments to the press on the urgent need for Italy and the EU to diversify their energy supply and take other steps to enhance their energy security, noting that a return to nuclear power could be one element of such an effort. SPOGLI