GOI NON-PAPER SETS GOAL OF ENERGY

C O N F I D E N T I A L SECTION 01 OF 02 ROME 000150

SIPDIS

SIPDIS

DEPARTMENT OF ENERGY FOR TYLER TILLER

E.O. 12958: DECL: 02/01/2023
TAGS: ENRG EPET PREL RU AJ IT
SUBJECT: GOI NON-PAPER SETS GOAL OF ENERGY
"INTERDEPENDENCE" WITH RUSSIA

REF: MOSCOW 222

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Classified By: ECMINCOUNS THOMAS DELARE BY REASON
OF 1.4(B) AND (D).


1. (C) Summary. In late December, the GOI provided the
Embassy and Department a non-paper on Italian energy/energy
security policy in response to questions raised during the
December 11, 2007, meeting between President Bush and Italian
President Napolitano. The full text is included below. The
non-paper is an excellent summary of GOI policy on energy and
energy security issues. It makes clear that from Rome's
point of view, the energy relationship between Italy and
Russia works and sets out energy interdependence as a fact
and goal of GOI policy. This position is diametrically
opposed to the goals of USG policy, which seeks to encourage
Italy and other EU states to diversify their energy sources,
lessening their dependence on Russian oil and natural gas.


2. (SBU) Begin Non-paper.

Italy has only limited energy resources, hence it has to
import more than 90 percent of its energy needs. This is why
Italy has a strategy to diversify energy sources (from Oil to
Gas) and suppliers (from North Africa and Middle East to the
rest of the world where Oil and Gas are available). By region
Italy imports: about 26 percent from North Africa (Libya,
Algeria, Egypt, Tunisia),25 percent from Middle East (Saudi
Arabia, Iran, Iraq and other Gulf States),22 percent from
Russia, 10 percent from Europe (Norway, Holland and Germany),
7 percent from former USSR Countries (Kazakhstan, Azerbaijan,
and Turkmenistan).

As for Russia, Italy is Moscow's main energy partner together
with Germany, with gas imports of over 30 billion cubic
meters and a growing partnership in the overall energy field.
This partnership includes: the Gas UPSTREAM sector (ENI and
ENEL recently took part in the acquisition of ex Yukos gas
assets),investments in the electricity sector in Russia
started by ENEL and, reciprocally, GAZPROM access to gas
distribution in the Italian market. This energy partnership
is now extending to other "strategic" sectors, such as
banking with Italian Banks Unicredit and Intesa opening
branches in Russia.

As far as new infrastructure projects are concerned, last
July the Italian Government and the Russian Government signed
an agreement for the implementation of a feasibility study by
ENI and GAZPROM towards the realization of a new gas pipeline
that would transport around 30 billion cubic meters of gas
from Russia to Europe. After crossing the Black Sea, this
gas pipeline would follow two different routes starting from
Bulgaria: a northbound route would reach Austria, while the
other route would reach Italy, probably through Greece.

Italy aims at a partnership that is based on economic
interdependence: energy supplies, in exchange for technology
and know how. Investments must follow reciprocity principle
on both ends of the system: Italian investments in the
upstream sector as a condition to opening direct distribution
by Russian companies in Italy. Every step is considered
using a cautious and realistic approach.

Italy would like this partnership model -- which is also
broadly pursued by Germany -- to be a guideline for relations
between European Union and Russia. We consider that we
should improve the existing degree of dialogue between Europe
and Russia. We support relaunching a "European" approach
aiming at defining mutual regulations and guarantees for
energy supplies, investments and assets.

The relationship between Europe and Russia in this sector
should not prevent a European diversification of supply
strategy on the example of what Italy carried out in the last
few years. In particular Europe should be able to develop
her own strategy in the Caspian region. This strategy would
not necessarily be conflicting with the Russian presence in
the region.


3. (C) Comment. Throughout much of the post-WWII period,
Italy sought to establish itself as a middle power between
Europe, the Soviet Union, and (after the end of the Cold War)
Russia. This intent is not unique to the Italian left -- one

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of Russian President Putin's most ardent suitors was Silvio
Berlusconi, who headed Italy's 2001-2006 center-right
goverment. Many of the center-left's political leaders had a
youthful enthusiasm for the Soviet Union and its goals; a
substantial portion retains a nostalgic and positive regard
for Russia. Simply put, many saw little threat from the
Soviet Union in its heyday; they see even less from Russia --
even in light of its recent behavior. A December 2007 survey
conducted for the Bureau of Public Diplomacy and Public
Affairs' Office of Research revealed that 47 percent of
Italians somewhat approve of the GOI's handling of relations
with Russia. An additional seven percent "strongly approve."
The same survey showed that 25 percent of Italians believe
that Russia's control of gas supplies to Italy benefits their
country.


4. (C) Comment continued. We will continue to engage the
GOI on the issue of energy security and diversification of
energy supplies. However, given the divergence in how we and
the GOI perceive Russia and our policies on this issue, we
need to be realistic about our ability to encourage greater
energy independence in Italy. Moreover, if we wish to reduce
Russia's role as an energy supplier, we will need to be able
to answer questions about the cost of alternative sources of
energy (both in terms of other sources of natural gas and the
replacement of natural gas energy with other, possibly
"green," sources of energy). Our interlocutors can also be
expected to ask how Italy can reduce Russian inputs without
simultaneously increasing supplies from problematic Middle
Eastern sources (Iran),raising the cost to the consumer (an
apt political question) or increasing carbon emissions). We
need to be able to provide the GOI with comprehensive answers
to these questions in order to make a credible case for a
fundamental change in Italian energy policy.
BORG