READOUTS ON ITALIAN ENERGY TALKS IN MOSCOW AND

C O N F I D E N T I A L SECTION 01 OF 02 ROME 001432 SIPDIS EEB FOR SE GRAY EEB FOR DAS HENGEL EEB FOR AMBASSADOR MANN EUR FOR DAS BRYZA E.O. 12958: DECL: 11/24/2018 TAGS: ECON ENRG PREL SUBJECT: READOUTS ON ITALIAN ENERGY TALKS IN MOSCOW AND IZMIR REF: ROME 1308 ROME 00001432 001.2 OF 002 Classified By: Deputy Chief of Mission Elizabeth Dibble for reasons 1.4 b, d and e ¶1. (C) Summary: PM Berlusconi discussed energy issues with Russian and Turkish leaders during recent bilateral summits in Moscow and Izmir. The Italians signed a nuclear research cooperation agreement with Rosatom; we are told this agreement has little significance. The GOI once again failed to get the Russians to give ENI a written partnership agreement on the South Stream project. At the Izmir summit, Italy urged the Turks to allow Azeri gas to flow West to Italy and Greece in the TGI pipeline project -- the Turks said they needed to make sure that their domestic gas needs are met before considering TGI. End Summary. -------------- -------------- Italo-Russian Nuclear Agreement, Still No ENI-GAZPROM South Stream Deal -------------- -------------- ¶2. (C) Ambassador Mancini, Diplomatic Advisor to Italian Energy Minister Claudio Scajola, gave EconOffs a readout of the energy issues discussed at the recent November 6 Italy-Russia summit in Moscow and the November 12 Italy-Turkey summit at Izmir. While in Moscow, Scajola initialed an agreement with Rosatom's Director Sergey Kirienko, described on the Italian Ministry of Economic Development website as directed towards "collaboration in the realization of third generation nuclear reactors and for the study, planning and development of a fourth generation reactor prototype." Mancini downplayed this, calling it a "minor" agreement aimed at creating an Italian-Russian working group for research collaboration on fourth generation nuclear energy power plants. Mancini did not mentioned the cooperation on third generation nuclear technology (possibly because he does not understand the technological distinctions between third and fourth generation). He emphasized that this agreement (which he said is a one-page document) will not open the door for Russian construction of nuclear power plants in Italy, nor will it pave the way for Italian procurement of Russian-designed plants. (Comment: Mancini's description of the nuclear cooperation agreement as being of little importance tracks with what Scajola's Energy Advisor had told us last October: that it would not be an important agreement. See Ref. End comment) ¶3. (C) According to Mancini, ENI is frustrated due to little progress on the South Stream Black Sea pipeline project. ENI wants a written partnership agreement from Gazprom specifying a contract to build the gas project, and rights to sell South Stream gas in Central and Eastern European markets (see Ref). ENI apparently feels left out because it sees Gazprom working with the companies of the countries in the projected path of South Stream without bringing ENI into these contract negotiations. Scajola once again failed to get ENI the written agreement it wants. -------------- -------------- No Deal Yet With Turkey on TGI Transit: Turkey Will Take Care of Own Gas Needs First -------------- -------------- ¶4. (C) Minister Scajola reportedly pushed the Turks hard on TGI during the November 12th Berlusconi-Erdogan summit, arguing that it is an important EU energy diversification project, that the USG is in favor of it and that the Russians don't object (because it is small, i.e. smaller than Nabucco). Scajola also argued that the project would reduce Italian and Turkish energy dependence on the Russians. Mancini said that the Turks responded by pointing to their growing need for natural gas, and he noted that the Turks "didn't exactly say they wanted to buy all of the Azeri gas" but told the Italians that "after they have taken care of their own needs, they would then look at TGI." Mancini commented that the Turks could use ALL of the Azeri gas for their own domestic needs. Mancini assessed that the Turks were not really negative on TGI, but are "trying to get the ROME 00001432 002.2 OF 002 most that they can" out of the evolving project. In an effort to win the Turks over, Mancini implied that Scajola is playing the EU membership card -- he is asking the Turks to "be a good European partner." Mancini admitted that while the Azeri gas is very important to the Turks, for Italy it is "not pivotal" since it would account for only about 5 percent of Italy's gas needs. He also said that EU Commissioner Piebalgs's continued touting of Nabucco is "irritating to Italy." ¶5. (C) Mancini said the Italians would keep working on the Turks. He said that Berlusconi can be very persuasive, and that the PM had a very good and cordial personal chemistry with Erdogan. He added that Azerbaijan President Aliev will be in Rome on November 26th. Mancini also mentioned a Ministerial in Athens on the 28th as another opportunity to further advance TGI negotiations. In the end, he seemed a bit pessimistic, noting that there are many possibilities for the Azeri gas: 1) the Azeris might not sell it; 2) the Russians could buy all the output; 3) they might sell it all to the Turks; or 4) TGI might get a sufficient quantity to make the project worthwhile. -------------- COMMENT -------------- ¶6. (C) We were pleased to once again hear that the Italo-Russian nuclear agreement doesn't mean much, but Mancini's effort to present it as a strictly fourth generation research collaboration agreement (when it is in fact third and fourth generation) is somewhat worrisome. Given the close relationship between Berlusconi and Putin, all agreements of this kind warrant close monitoring. ¶7. (C) We were also interested to learn of ENI's continued Gazprom/South Stream contract woes. We have often raised the subject with the Italians of politicized Russian business dealings. The South Stream "disappointment" may serve to drive home the point that ENI's eager embrace of Russian energy projects may have limited payback. ¶8. (C) On TGI, in October Scajola's energy advisor told SE Gray that the Turks would not be the problem (see Ref),and implied that the Italians could win their cooperation. It now appears that more work remains to be done in this area. Post will monitor and report on the outcomes of the November 26th Berlusconi-Aliev Rome meeting. End Comment. SPOGLI