ENERGY SECURITY WEIGHING HEAVIER IN AUSTRIA

UNCLAS SECTION 01 OF 02 VIENNA 001819 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ENRG EPET ECON PGOV SENV AU IR SUBJECT: ENERGY SECURITY WEIGHING HEAVIER IN AUSTRIA REF: (A) VIENNA 1733; (B) VIENNA 1710; (C) VIENNA 1351 Sensitive but Unclassified - not for Internet distribution. ¶1. (SBU) SUMMARY: Energy security has arrived on the agenda of Austrian policymakers. Whereas energy policy was heretofore dominated by issues like renewables/biofuels, climate change, and a vociferous anti-nuclear stance, now diversifying and securing energy supply take equal priority (even as public perceptions are slow to catch up). Recent signs of the new agenda include elements of the new Austrian governmentQs platform, ministerial appointments, the high-profile Turkmen visit to Vienna (ref B),and AustriaQs hosting of a high-profile conference November 23- ¶24. Unchanged is the commitment to stable energy ties with Russia (ref A): the GoA has now officially endorsed the South Stream pipeline project alongside Nabucco. END SUMMARY. NEW GOA PLATFORM EMBRACES BOTH NABUCCO AND SOUTH STREAM -------------- -------------- ¶2. (U) The coalition platform for the new Austrian government (which took office in early December) devotes eight pages to energy issues: it defines security, efficiency, and renewables as the central principles of domestic energy policy and the Nabucco Gas Pipeline as the Qtop priorityQ for energy diplomacy. At the same time, it characterizes South Stream as a Quseful additionQ to Nabucco and says the GOA will introduce an enabling act for participation in South Stream. The program also endorses the construction of LNG terminals (NOTE: this probably refers to OMVQs planned LNG terminal in Krk/Croatia, but might refer indirectly to future OMV gas projects in Iran - END NOTE). The country intends to position itself as an Qinternational energy hubQ -- a clear reference to OMVQs gas compressor/distribution station in Baumgarten and the OMV-Gazprom Central European Gas Hub (CEGH) software-based trading platform in Vienna. ¶3. (SBU) The new coalitionQs platform codifies the rise of energy security on the GOA agenda. In 2007, the Economics Ministry created a department for QInternational Energy RelationsQ and anointed its head, Dr. Maria Reich-Rohrwig, to be QSpecial Envoy for Pipeline ProjectsQ. A seasoned WTO negotiator, Reich-Rohrwig was slated to sign an MOU in September on AustriaQs participation at South Stream, but the meeting (in Moscow) was cancelled at the last minute due to the Georgian conflict. In October, she negotiated with Turkmen President Gurbanguly Berdymukhamedov on connecting the future trans-Caspian gas pipeline to Nabucco. Berdymukhamedov paid a high-profile visit to Vienna in November (ref A),but negotiations are apparently still pending. GOA WATERS DOWN RENEWABLES AND ETS GOALS; NO DEMANDS ON CARBON LEAKAGE -------------- ¶4. (U) In the new GoA program, Austria commits itself to meeting the EU 20-20-20 goals on climate change by developing a Qmaster plan on energy efficiencyQ -- mainly in the building and household sectors. On renewable energies, the GoA commits to biofuels production and to the EU Action Plan (which foresees an increase of renewables in the energy mix from 23% to 34%),but drops its previous goal of 45% renewables by 2020. On a Kyoto follow-on, the program says it is Qdecisive to bring the U.S., China and India on boardQ but is vague on the Qcarbon leakageQ issue (no demands for barriers to market access by non- participating countries). NOTE: Austrian industry is a vocal proponent of carbon leakage arrangements -- but focuses on free emissions allocations rather than border tax adjustments. END NOTE. ¶5. (U) In his first statement on energy issues, new Economy/Energy Minister Reinhold Mitterlehner applauded the EU CommissionQs updated Strategic Energy Review and its focus on energy security, accelerating infrastructure projects (especially Nabucco),and energy efficiency. On GHG emissions, Mitterlehner remains very critical of the updated Emissions Trading Scheme (ETS): the Commission should not QpunishQ highly efficient energy intensive industries by QexilingQ them from Europe. The GoA program advocates continuing free CO2 permits after 2013 for steel and related industries. AUSTRIA WILL REMAIN A THORN ON NUCLEAR ENERGY -------------- ¶6. (U) On nuclear energy, Austria will continue to lobby VIENNA 00001819 002 OF 002 against nuclear energy in all international fora, according to an early interview with new ForMin Michael Spindelegger. Austria maintains that nuclear energy is Qnot sustainable and does not increase energy securityQ and supports the creation of a nuclear-free zone in Central Europe. Austria promotes abandoning nuclear power stations that cannot be QmodernizedQ (Kosloduy, Bohunice, Ignalina) and favors creating Qhigh, common EU safety standards on nuclear energyQ. Within the EU, the Austrians have always tried to minimize financial support for building or modernizing nuclear energy plants. HOW WILL THE ENERGY SECURITY AFFECT THE IRAN OUTLOOK? -------------- -------------- ¶7. (U) In late November, the GOA and non-profit European Forum Alpbach (a much smaller, German-language counterpart to the Davos forum) co-hosted a conference on QEurope Q a Global Player in Energy?Q High-ranking participants from the EU Commission (including Commissioner Piebalgs),the GoA, and the private sector examined energy security and the EUQs and AustriaQs role in the future. Piebalgs lobbied for EU Member State adoption of the CommissionQs Third Energy/Climate Package, which empowers the EU to act and pave the way for innovation and investments in renewables, energy efficiency, and more security. MinEcon section head Alfred Maier (Reich-RohrwigQs boss) agreed with the EUQs goals of but expressed skepticism that Member States will cede full power, since the landscape is diverse -- particularly with regard to the national energy mix (an important point for Austria which will remain Qnuclear power freeQ in any case). ¶8. (SBU) Ambivalent on Iran -- QWe need to tap Iranian energy sources as soon as possible because the Russian pipelines are hard to fill, and Central Asian promises are vague.Q This argument, by prominent Austrian political scientist/Russia expert Gerhard Mangott, apparently fell on fertile ground at the conference. Mangott cited Russian energy ministry sources for his claim that Russia will have to throttle gas exports to the EU given RussiaQs soaring domestic consumption. RussiaQs plans for energy efficiency and diversifying its domestic energy mix (more nuclear) will fail, Mangott argued, due to the upcoming recession, and new gas fields on the Yamal peninsula and Barent Sea will be slow to materialize. In addition, China is promising a $20 billion loan to Gazprom and Rosneft, if they sell significant amounts of gas to China. Shakier still are empty promises to Europe by the four Central Asian countries, Mangott claimed: proven gas reserves there are 7.6 tcm, while Iran sits on 27.8 tcm. Turkmenistan might produce only 7 bcm gas per year, but has already concluded a contract with Russia over future delivery of 80 bcm according to Mangott. Mangott downplayed the Iran nuclear issue and argued for moving more quickly to conclude gas supply contracts with Iran as QindispensableQ for EuropeQs energy security. In the following Q/A session, private-sector Austrian energy stakeholders appeared to share his view that Europe must move -- sooner or later -- to develop Iranian gas resources. GIRARD-DICARLO