DAS HENGEL TALKS ENERGY SECURITY WITH THE EU

UNCLAS SECTION 01 OF 02 BRUSSELS 000245

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EPET EUN
SUBJECT: DAS HENGEL TALKS ENERGY SECURITY WITH THE EU

REF: BRUSSELS 186

Sensitive but Unclassified - not for Internet distribution.


1. (SBU) Summary. On February 5 DAS Doug Hengel gave a well
received presentation on "Oil and Gas Pipelines: the US
Perspective" to a conference on "Investing in Europe's Energy
Future" organized by the French Institute of International
Relations (Ifri) in Brussels. Following the conference on
February 6 Hengel met with EU officials to exchange views on
opportunities to enhance European energy security. A
recurring theme in these meetings was the importance of
building interconnections between member states and reforming
the internal market. EU officials also stressed the
importance of opening the Southern Corridor as a way to
diversify Europe's energy supplies. End Summary.


2. (SBU) On February 5, DAS Doug Hengel gave a presentation
on "Oil and Gas Pipelines: the US Perspective" to a
conference on "Investing in Europe's Energy Future" organized
by the French Institute of International Relations (Ifri) in
Brussels. DAS Hengel's remarks were well received by the
participants who included representatives from the EU, Member
States, NGOs, and press. DAS Hengel outlined how the U.S.
views European energy security and stressed the commonality
of U.S. and EU desires to address EU energy security
challenges, notably the need to build a common,
interconnected, competitive internal market for natural gas
and electricity and the need to look to diversify Europe's
sources for natural gas by moving forward on the Southern
Corridor as well as opportunities for LNG and the potential
for developing non-conventional gas deposits in Europe. DAS
Hengel also stressed that Iran must remain off-the-table as a
source of gas for the Southern Corridor.


3. Following the conference, DAS Hengel met on February 6
with EU Commission and Council officials to discuss energy
security. In a meeting with Jean-Arnold Vinois, Head of Unit
for Energy Policy & Security of Supply at DG-TREN, Vinois
said that the principal energy security challenge the EU
faces is integrating eastern Europe into the internal market.
Gazprom wants to maintain the monopoly position it enjoys in
many eastern States so the EU needs to find the right
incentives to build new infrastructure to interconnect the
currently isolated national markets. Following the
Ukraine/Russia gas crisis the Commission is re-examining the
2004 Security of Gas Supply directive with an eye to how it
can be strengthened. The Commissions goal is to have a new
proposal before the Summer recess. Energy Minister's was
scheduled to discuss their ideas on the gas directive on
February 19, the Council's Gas Coordination Group will
discuss the topic in more detail on February 23. The topic
could then be raised at the Spring Council on March 19 as
part of their response to the Commission's Second Strategic
Energy Review.


4. (SBU) Dr. Klaus Gretschmann, the EU Council's
Director-General for the Internal Market, Customs Union,
Industrial Policy, Telecommunications, Information Society,
Research, Energy, and Transport, discussed some of the
options he sees for the EU in terms of diversity of supply.
In Gretschmann's opinion establishing an interconnected
single European market for natural gas and electricity is the
key for achieving energy security. Gretschmann opined that
the EU would stick to its Nabucco strategy, but may seek to
enlarge the role of LNG. Gretschmann said that the
Russia/Ukraine crisis had shown that the consumer could be
blackmailed by transit countries just as easily as by
producer countries. Gretschmann stressed that the EU learned
a lot about how the gas system works and doesn't work during
the crisis. He see's a need for the EU to tackle the problem
of building interconnection. Gretschmann also said he
believes the EU may look at a public/private model for
funding the Nabucco pipeline project. He said that getting
gas from Turkmenistan will be important, but the EU needs to
solve the transit problem first. And for transit, the big
question remains in Turkey. On the question of the money for
infrastructure projects included in the European Recovery
Project, Gretschmann saw this as a very political issue and
said "All Hell broke loose" over which country and which
project will get what.


5. DAS Hengel met with Faouzi Bensarsa, DG-RELEX Energy
Counselor for an exchange focused on U.S.-EU cooperation on
Ukraine's energy infrastructure (see reftel). Bensarsa also

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discussed his outlook for the Southern Corridor. He said the
EU is fully committed to establishing a trans-Caspian
corridor for gas. There are not technical obstacles, but the
issues of Caspian delimitation, political agreements, and
security will have to be addressed to make trans-Caspian gas
flow a reality. Bensarsa opined that ultimately the public
sector would have to provide risk coverage for any new
Caspian projects. In his mind, no private company would be
able to take the risks by itself in the post Russia/Georgia
conflict environment.


6. Steven Everts, Advisor to EU High Representative Javier
Solana, told DAS Hengel that he expected the March Council to
take real decisions on energy security and expected that they
could wrap up the Third Energy Package. He said that over
the last two years the EU has built a consensus on what
energy policy should be and the debate has been accelerated
by the Russia/Ukraine gas crisis. Everts expects the debate
going forward will focus on the internal market, gas stocks,
and building interconnections. On the Southern Corridor,
Everts acknowledged the importance of Turkmenistan as a
potential gas supplier, but said a lot hinges on the reaching
an agreement for gas transit between Azerbaijan and Turkey.
DAS Hengel urged that senior level EU officials visit
Turkmenistan to press for private sector companies to be
allowed to develop Turkmen energy resources; otherwise these
resources will not be available for export. Everts was not
optimistic about the possibility of the EU opening the Energy
Chapter with Turkey. Everts said that for Solana, energy is
only part of a larger relationship with Turkey. Solana views
energy as part of a broader context and considers it to
require a long term process of building relationships,
especially with Azerbaijan.


7. (SBU) Comment. Like the meetings DAS Bryza had with EU
officials the prior week, DAS Hengel's discussions revealed a
clear focus on the need to accelerate actions to enhance EU
energy security in light of the Russia/Ukraine dispute. The
Russia/Ukraine "wake up call," however, does not seem to
translate into a willingness to engage in a more robust
manner with Turkey to push forward the transit agreement
necessary to make the Southern Corridor a reality. In their
meetings with Hengel EU officials underlined the difficulties
in opening the Energy Chapter with Turkey and seemed to be
looking for the US to deliver an Azeri-Turkey deal." End
Comment.

Murray
.