SCENESETTER FOR ACTING DEPUTY SECRETARY OF ENERGY

C O N F I D E N T I A L ROME 000461

SIPDIS

NOFORN
SIPDIS

DEPARTMENT FOR EEB DAS HENGEL
DEPARTMENT PASS TO DEPARTMENT OF ENERGY
DEPARTMENT OF ENERGY FOR P/I JAMES HART

E.O. 12958: DECL: 04/14/2023
TAGS: ECON ENRG EPRT IT
SUBJECT: SCENESETTER FOR ACTING DEPUTY SECRETARY OF ENERGY
KUPFER'S TRAVEL TO ROME, ITALY, APRIL 21-23, 2008

REF: A. ROME 451

B. 07 ROME 2438

Classified By: EcMin Thomas Delare for reasons 1.4 (b) and (d)

Political Backdrop
--------------


1. (C/NF) Your trip to Rome for the International Energy
Forum (IEF) will occur immediately after Italy's April 13-14
parliamentary elections. While you are here, Italian
parliamentarians will be in the beginning of the government
formation process. Romano Prodi's center-left coalition
government collapsed in January after two years of unstable
government. Prodi will remain caretaker Prime Minister until
mid-May when a new government can be sworn in. As caretaker
PM, Prodi and his ministers (including Economic Development
Minister Bersani, responsible for energy issues) can continue
to carry out day-to-day business but cannot change government
policy. Polls indicate that conservative former PM Silvio
Berlusconi's People of Liberty coalition (PdL) leads Walter
Veltroni's Democratic Party (PD) by an average of five to
eight percentage points. Though Berlusconi's lead may have
narrowed in recent weeks, virtually all pollsters and
political analysts predict Berlusconi will win the national
electoral vote. However, complicated rules for distributing
Senate seats mean the outcome in the Senate is uncertain. In
the event that the two parties split the parliaments, a
"unity" government or other options are possible. An
emerging foreign policy consensus and a future government
without the far left mean any of the likely electoral
outcomes should bring improved U.S. foreign policy
cooperation with Italy and an improved tone in our bilateral
relationship.

Italian Energy and Energy Security Policy
--------------


2. (U) Since 2005, the GOI has sought to increase the use of
natural gas to meet Italy's winter heating needs. This
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.


3. (U) Italian energy security policy has two goals: (i)
increasing Italian access to existing natural gas sources by
constructing new natural gas pipelines, and (ii) encouraging
the formation of a common EU energy policy.


4. (U) 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. Similarly, the GOI 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. Ref A 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.


5. (U) The GOI supports formulation of an EU energy policy
as a means to encourage energy diversification and improve
the competitiveness of the EU's internal energy market.
Italy sees a unified EU position on energy as a balance to
the "negotiating weight" of Gazprom and other energy
suppliers. Gazprom supplies more than a quarter of the EU's

natural gas supplies. Discussions of an EU energy policy
have begun in Brussels, but have not made much progress.
Among the issues that the incoming Italian government will
have to grapple with is the role of nuclear power. A 1988
referendum had the practical effect of banning nuclear power
generation in Italy. Opponents of nuclear energy argue that
the question of nuclear waste disposal must be addressed
before nuclear energy production in Italy resumes.

Possible Meeting With Economic Development Minister Bersani
-------------- --------------


6. (U) Minister of Economic Development Bersani is the GOI
minister responsible for energy issues. Because Bersani is
the IEF host and a G8 Energy Minister, you may meet with him
on the margins of the IEF. If a meeting takes place, bear in
mind that because Bersani came into office under the Prodi
government, he may be a caretaker minister at the time of the
IEF.


7. (U) Energy Secretary Bodman met with Bersani during
Bodman's November 2007 trip to Rome for the World Energy
Congress (WEC). During their meeting, Bersani signed the
Global Nuclear Energy Partnership (GNEP) Statement of
Principles. Bersani and Bodman also signed an agreement on
bilateral cooperation in energy research and development.
(Ref B) If you have a bilateral meeting with Bersani, you
should ask what he thinks the energy priorities of the
incoming government will be. Bersani may also have some
interesting thoughts on the likelihood of the return of
nuclear power generation to Italy and on what Italy and the
EU can do to improve the energy security of Eastern European
EU member states.


8. (U) 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.
SPOGLI