REGIONAL APPROACH TO ENERGY COOPERATION IN NORTHEAST ASIA

UNCLAS SECTION 01 OF 03 SEOUL 000009 SIPDIS STATE FOR EEB/ESC/IEC/ENR, INR AND EAP/K STATE ALSO FOR IO/EDA - DE OTALVARO NSC FOR TONG DOE FOR INTERNATIONAL AND FE USDOC FOR 4440/MAC/EAP/OPB/ITA/TA COMM CENTER PLEASE PASS SCJS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ENRG PREL ESCAP ZO RS MG JA KN KS SUBJECT: REGIONAL APPROACH TO ENERGY COOPERATION IN NORTHEAST ASIA ADVANCES SLOWLY REF: SEOUL 3610 ¶1. (U) SENSITIVE BUT UNCLASSIFIED. SUMMARY -------------- ¶2. (SBU) Korea hosted a meeting of the Senior Officials Committee on Energy Cooperation in North-East Asia (SOC) on Jeju Island, December 13-14. The group approved efforts spearheaded by South Korea to produce a set of energy outlook reports for countries in the region, and endorsed a modest proposal to identify potential regional energy projects. Despite South Korean, and to a lesser extent, Russian, enthusiasm for this multilateral forum, the regional approach to energy cooperation is making only very slow progress, and currently amounts to little more than a venue for Korean-Russian dialogue. Coincidentally, the SOC followed close on the heels of a bilateral Korean-Russian consultation on energy held in Moscow (reftel). End summary. A REGIONAL APPROACH TO ENERGY COOPERATION -------------- ¶3. (U) The Senior Officials Committee on Energy Cooperation in North-East Asia (SOC) is the progenitor of, and steering committee for, the Intergovernmental Collaborative Mechanism on Energy Cooperation in North-East Asia (the Mechanism),which falls under the aegis of the UN Economic and Social Commission for Asia and the Pacific (UNESCAP). The first SOC established the Mechanism at its November, 2005 meeting in Ulaanbaatar, aiming "to facilitate energy cooperation and trade to enhance energy security in North-East Asia." A Working Group on Energy Planning and Cooperation (WG-EPP) carries out the mandates of the SOC and has met four times since May, 2006. The Jeju meeting was the third SOC, following the Ulaanbaatar meeting and one in Khabarovsk in December 2006. The next SOC will be held in November, 2008 (see para. 13 below). GOVERNMENT-BUSINESS DIALOGUE GETS UNDER WAY -------------- ¶4. (U) Immediately prior to the SOC, representatives of the participating governments held the first in a series of planned dialogues with energy companies and sectoral experts. The December 11-12 "Government-Business Dialogue on Energy Cooperation in North-East Asia" (GBD) recommended a joint government-business study group to identify and assess the economic feasibility of energy cooperation projects. Proposed joint studies included potential projects in the coal sector; the possible export of electricity from Russia to China, North Korea, and South Korea, as well as from Mongolia to China; and exploration of oil and gas fields in Mongolia. SENIOR OFFICIALS: WHO CAME, WHO DIDN'T, AND WHY -------------- -- ¶5. (U) The Jeju SOC meeting was attended by senior government officials from Mongolia, Russia and Korea. Mongolia sent a 3-person delegation led by Tserenpurev Tudev, State Secretary at the Ministry of Fuel and Energy. The 5-person Russian delegation was led by Vladimir Saenko, Deputy Director of the Department for State Energy Policy at the Ministry of Industry and Energy, and included a Foreign Ministry representative. Korea's official delegation was huge. ¶6. (U) In contrast, China and Japan were represented only by experts (or "resource persons") rather than officials: Gao Shixian, Director of the Center for Energy Economics and Development Strategy at China's Energy Research Institute; Zhou Shuhui, a researcher at SEOUL 00000009 002 OF 003 the PetroChina Planning and Engineering Institute; and Hiroyuki Ishida, Senior Economist at the Institute of Energy Economics, Japan. Though North Korea had participated in several earlier meetings of the Mechanism, it was not represented in Jeju. ESTH Chief attended to represent the United States, which was invited as an observer. UNESCAP staff served as the secretariat. ¶7. (SBU) One participant stated privately that Japan's absence at the official level reflected a policy decision to avoid groups that have North Korea as a member. He added that China's absence appeared to indicate a lack of conviction that a multilateral approach would be more fruitful than a bilateral Sino-Russian dialogue. (Comments by both Russian and Chinese participants underscored that price is a major sticking point in Sino-Russian energy talks.) North Korea's absence from a meeting hosted in South Korea could be expected, but it had also stayed away, without explanation, from the September 2007 meeting of the WG-EPP held in Irkutsk. ¶8. (SBU) Another participant pointed out that Japan's interest in regional energy integration involving large-scale infrastructure projects, such as a pipeline connecting Sakhalin to Hokkaido, had waned in light of Russia's demonstrated willingness (e.g. in relations with Ukraine and Belarus) to turn off the tap to gain leverage. Adding to Japan's lack of enthusiasm, he said, is the forecast of diminishing energy demand growth due to Japan's declining population, and the lack of a nation-wide grid for a pipeline to feed into. ¶9. (SBU) Comment: Given these regional dynamics, and notwithstanding Mongolia's high-level involvement, to a large extent the meeting devolved into a Korean-Russian conversation about regional energy policy. (Coincidentally, Russia and Korea had held bilateral talks on energy cooperation in Moscow on December 11-12, reported reftel.) End comment. MODEST ACCOMPLISHMENTS, MODEST SHORT-TERM GOALS -------------- -- ¶10. (U) Over the two days of the meeting, the Senior Officials and "resource persons" made presentations on their national energy situations and policies. They also endorsed the preliminary results of the Energy Outlook, focused on China, Mongolia, South Korea, and Russia, prepared by the Korea Energy Economics Institute (KEEI) in cooperation with research institutions in the three other countries. (Though North Korea did not participate in the preparation of the Outlook, KEEI presented its own assessment of North Korea's current energy balance and its long-term needs.) The final version of the Outlook is expected to be completed in the spring of 2008. In the reference case, it predicts that total primary energy demand in Northeast Asia will grow from 2.8 billion tons of oil equivalent (TOE) in 2004 to 4.7 billion TOE in 2020. The study assesses that increased regional cooperation could result in increased efficiency (e.g. through shorter transmission lines),resulting in a 3.7 percent savings in total energy consumed by 2020. ¶11. (U) The SOC adopted a Work Plan for 2008 to guide the activities of the WG-EPP. The main short-term goal is the preparation of a report examining the region's energy production potential and a development plan. It also endorsed the recommendation of the GBD to develop a joint government-business mechanism to assess the economic feasibility of energy cooperation projects, and directed the WG-EPP to prepare an implementation plan that avoids duplication of work done by other institutions. The WG-EPP will meet in late April, 2008, in Chiang Mai, Thailand, with another meeting planned for the second half of 2008. ¶12. (U) The SOC also reviewed KEEI's proposed "5-year strategy for SEOUL 00000009 003 OF 003 energy cooperation in North-East Asia," but decided that further consultations within member states were needed. ¶13. (U) The next meeting of the SOC, and the second GBD, are planned for late November 2008. A venue was not announced. ¶14. (U) Copies of the documents of the Third SOC are being pouched to IO/EDA, EEB/ESC, EAP/K, Beijing, Ulaanbaatar, Moscow, Tokyo and Bangkok. The assessment of North Korea's energy outlook has been forwarded to EAP/K electronically. COMMENT -------------- ¶15. (SBU) South Korea is clearly the driving force behind the UNESCAP energy cooperation initiative. (Korea was reelected to chair the WG-EPP; KEEI was reelected the "nodal institution" doing most of the intellectual work while providing financial and technical assistance to research institutions in other member states if needed for joint studies.) At the same time, Russia's enthusiasm for the group (if not for actual commitments) was evident. Two participants separately asked ESTH Chief for an analysis of why Russia was so gung-ho in this regional forum. (One possible explanation is an effort to counter the negative impressions of Russia's reliability as a business partner created by its widely-reported disputes with trading and investment partners in the energy sector.) Nevertheless, in the absence of clearer indications from Russia about what it is willing to supply, and in the absence of greater engagement from China, the regional approach to energy cooperation appears unlikely to make much of an impact in the near-term. End comment. VERSHBOW