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

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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

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(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