RUSSIA/UKRAINE DISPUTE COULD HELP, COULD HINDER

UNCLAS SECTION 01 OF 02 BRUSSELS 000036 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EPET EUN SUBJECT: RUSSIA/UKRAINE DISPUTE COULD HELP, COULD HINDER NABUCCO REF: BRUSSELS 31 Sensitive but Unclassified - not for Internet distribution. ¶1. (SBU) Summary. The Russia/Ukraine dispute has heightened interest among EU leaders in going forward with the Nabucco project. However, EU Energy Commissioner Andris Piebalgs believes Turkey remains a huge problem for Nabucco and he is concerned that the cut-off of Russian gas to Turkey via Ukraine will make them "mad to get Azeri gas." He is also concerned that Turkey will believe it is in a better negotiating position given the growing European support for Nabucco because of the crisis. According to a DG-TREN contact, President Barosso will be meeting with Turkish Prime Minister Erdogan in Brussels on January 19 and plans to press Erdogan to move forward on negotiations. The Commission will be sponsoring an intergovernmental conference to focus on the Nabucco IGA on January 22-23. In addition, External Relations Commissioner Benita Ferrero-Waldner plans to travel to Turkmenistan on January 22 to push the "Caspian Development Corporation" idea. End Summary. ¶2. (SBU) The current Russia/Ukraine gas dispute has renewed interest among EU Member States in finding alternative gas supplies. The project that usually comes to the forefront in these discussions is Nabucco. During a January 9 discussion on the Russia/Ukraine gas crisis (see reftel) EU Energy Commissioner Andris Piebalgs told Ambassador Silverberg that Turkey remains a huge problem for Nabucco, and he is concerned that the cut-off of Russian gas to Turkey via Ukraine will make them "mad to get Azeri gas." He is also concerned that Turkey will believe it is in a better negotiating position given the growing European support for Nabucco because of the crisis. ¶3. (SBU) On the positive side, Piebalgs is hopeful that progress will be made on the intergovernmental agreement (IGA) for Nabucco by the end of January. When asked about the possibility of Italian energy company Edison joining the Nabucco consortium instead of going ahead with TGI, Piebalgs said this is definitely something he would like to see. ¶4. (SBU) Separately on January 9, a Commission DG-TREN contact told Econ Officer that he is hopeful the current Russia/Ukraine gas dispute will motivate Turkey to push forward on opening up the Southern Corridor. He said that EU President Barosso will be meeting Turkish Prime Minister Erdogan in Brussels on January 19 and plans to press Erdogan to move forward on negotiations. The Commission will be sponsoring an intergovernmental conference to focus on the Nabucco IGA on January 22-23. So far, the only Nabucco country which has not signed up for the conference is Turkey. ¶5. (SBU) External Relations Commissioner Benita Ferrero-Waldner plans to travel to Turkmenistan on January 22 to push the "Caspian Development Corporation" (CDC) idea. As part of the CDC, the Commission wants to sponsor a full audit of Turkmenistan's gas resources. This audit is seen as a necessity for locking in funding for CDC. ¶6. (SBU) On the various Nabucco and Southern Corridor summits planned this year, our contact said that the Commission is backing away from the Hungarian Nabucco Summit and the Commissioner Piebalgs will not be attending. (Note: Piebalgs confirmed this to Ambassador Silverberg. End Note.) They are also advising their other top officials not to attend, because they feel this summit is becoming mired in internal Hungarian politics. The Commission is putting its focus on the Southern Corridor Summit planned by the Czech Presidency, which is now planned for May 7-8 in Prague. ¶7. (SBU) Comment. The Russia/Ukraine gas crisis has significantly raised the profile of the Nabucco project among European leaders, with renewed calls from many for the EU to diversify its sources of gas supply. Ironically, the same crisis could also work against Nabucco by heightening Turkey's concerns over its own gas supply. Strong EU support for Nabucco will mean nothing if Turkey intensifies its efforts to lock up available supplies from Azerbaijan's Shah Deniz II gas project, leaving little, if any, volumes to allow Nabucco to go forward. End Comment. Silverberg BRUSSELS 00000036 002 OF 002 .