U.S.-UKRAINE ENERGY SECURITY WORKING GROUP

UNCLAS SECTION 01 OF 02 KYIV 001761

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SUBJECT: U.S.-UKRAINE ENERGY SECURITY WORKING GROUP

REF: STATE 103668

KYIV 00001761 001.2 OF 002


Sensitive but unclassified.


1. (SBU) Summary: Ukraine welcomes the opportunity to
discuss a broad range of energy-related issues with
Ambassador Morningstar and DOE co-hosts at the upcoming
Energy Security Working Group meeting, tentatively scheduled
for October 28. Minister of Foreign Affairs
Ambassador-at-Large for Energy Security, Viacheslav
Kniazhnytskyi, suggested detailed discussions on gas transit
system modernization, nuclear fuel supply and waste,
renewables, energy efficiency, mine safety and methane
capture, which all could be discussed within the framework of
the proposed agenda (reftel). Ukraine would also be prepared
to brief the U.S. delegation on Ukraine's cooperation with
the European Union in the area of energy, including the
recently completed negotiations for Ukraine to join the
European Energy Community. Kniazhnytskyi said that the
Ministry of Fuel and Energy would co-chair the meetings with
the Presidential Secretariat's Representative for
International Energy, Bohdan Sokolovsky. End Summary.

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Energy Security Working Group Meeting
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2. (SBU) Ukraine's new Ministry of Foreign Affairs
Ambassador-at-Large for Energy Security, Viacheslav
Kniazhnytskyi, on October 9 said that the GOU welcomed the
opportunity to deepen cooperation on energy-related matters
with the United States at upcoming Energy Security Working
Group meetings in Washington, D.C. Kniazhnytskyi said he
hoped to be able to confirm shortly that October 28 would be
acceptable for the Ukrainian delegation. He understood our
desire to have an interagency delegation that would be able
to speak with authority on the broadest range of energy
issues. He said that the Ministry of Fuels and Energy was
planning to co-chair the meeting, possibly at the Deputy
Minister level (Deputy Minister Sergiy Pavlusha). Bohdan
Sokolovsky from the Presidential Secretariat would also
co-chair. Kniazhnytskyi mentioned that it would be useful to
have some of the regulators at the table as well.


3. (SBU) Kniazhnytskyi thought that the proposed agenda
(reftel) would be acceptable to the Ukrainian delegation, and
he had a number of suggestions for discussion topics under
the agenda items:

-- Gas Transit System Modernization. He envisioned a
discussion about infrastructure to include the underground
storage of gas. Ukraine wants to emphasize plans for
improved metering and auditing and will discuss general
improvements in the legal and regulatory environment.
Ukraine intends to use its recent agreement to join the
European Energy Community to bring its system up to EU
standards.

-- Nuclear Power Fuel Supply. Kniazhnytskyi said that
diversification of nuclear fuel supply is a very high
priority for Ukraine. He was positive about the prospects
for licensing (done by the Nuclear Regulatory Commission) of
Westinghouse fuel assemblies, including the 42 that are to be
loaded in the third unit of the South Ukraine Nuclear Power
Plant. He was aware of the concern of some regulators in
Ukraine about using both Westinghouse fuel and Russian fuel
in the same reactor, however. He emphasized that there is no
bias against American fuel. Note: See para 4 for additional
information on this issue. End Note.

-- Nuclear Waste. Ukraine is participating with the EU and
the IAEA on a roadmap for nuclear safety and would be willing
to discuss findings of a yet-to-be released Ukraine-EU-IAEA
report on nuclear waste issues.

-- Nuclear Cooperation with the U.S. Ukraine is eager for
additional assistance/cooperation with the U.S., including to
build a fuel fabrication plant in Ukraine. Kniazhnytskyi
asked that we keep in mind that Ukraine wants technology
transfer along with this project.


KYIV 00001761 002.2 OF 002


-- Renewables, Energy Savings, Efficiencies. Kniazhnytskyi
said that Ukraine was working hard to improve energy
efficiency and would be interested in a discussion of energy
efficiency, possibly under the agenda item devoted to U.S.
technical assistance.

-- Mine Safety. Ukraine would welcome further cooperation on
mine safety, in particular methane capture.

-- Tripartite Cooperation. Kniazhnytskyi suggested the ESWG
explore US-Ukraine-EU cooperation in the area of energy and
possible benefits of tripartite cooperation.


4. (SBU) Note/ Additional information on Nuclear Fuel Supply:
Over the last couple of months the State Nuclear Regulatory
Committee of Ukraine (SNRCU),the regulator for nuclear
matters in Ukraine, has been asserting a number of technical
issues must be resolved before SNRCU will license the initial
core load of fuel developed under the Ukraine Nuclear Fuel
Qualification Program (UNFQP). This initial core loading is
scheduled for January ) February of 2010 and would be the
culmination of 10 years and $80 million dollars worth of DOE
assistance to develop an alternative qualified nuclear fuel
for Ukraine,s civilian nuclear power sector. Qualifying
this alternative fuel would remove Russia,s monopoly on
nuclear power plant(NPP) fuel in Ukraine and also make the
Westinghouse technology more attractive with regards to
competing proposals between Westinghouse and Russia regarding
Ukraine,s imminent selection of a technology for a Ukraine
domestic nuclear fuel fabrication facility. The SNRCU is
raising concerns although the Ukraine Center for Nuclear Core
Design from the Kharkiv Institute of Physics and Technology,
which is the designated lead organization in Ukraine for
criticality and safety documentation for this material, has
submitted recommendations that this fuel meets all normally
accepted criteria and should be licensed. Many of the
comments by SNRCU are non-standard, inaccurate and
unsubstantiated. The United States Department of Energy
Attache in Kyiv is concerned that the delay in licensing this
fuel for loading could be related to an attempt by factions
in the GOU to assure Russia remains Ukraine,s only source of
NPP fuel. The delay could also enable Energoatom to opt out
for non-performance of their contract obligations, due to
commence in 2011, to purchase Westinghouse fuel for future
core reloads at South Ukraine NPP. End Note.

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Joining the European Energy Community
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5. (SBU) Kniazhnytskyi said that Ukraine would also be
prepared to brief the U.S. delegation on Ukraine's
cooperation with the European Union in the area of energy,
including Ukraine's commitment to join the European Energy
Community. Ukraine and the EC completed negotiations on
October 7 for Ukraine to join the European Energy Community,
signing a memorandum specifying the terms and conditions,
including a timetable, for implementation of directives that
would bring Ukraine into conformity with Energy Community
obligations. Ukraine gains access to Europe's energy market
by becoming a member of the Community. Although the
memorandum awaits ratification by Ukraine's parliament (the
Rada) as well as the Ministerial Council of the Energy
Community, Ukraine is expected to start work immediately to
be able to meet its targets. The Memorandum regarding
Ukraine's accession to the Energy Community Treaty can be
found at www.energy-community.org/pls/portal /docs/426177.pdf



6. (SBU) Kniazhnytskyi also said that he thought that the
long-awaited new law on issues related to the gas sector
would be finalized and sent to Prime Minister Tymoshenko for
approval the week of October 12. After her approval, it would
be submitted to the Rada. Although this draft law had been
revised many times and had been circulating from the
government to the Rada for over eight years, Kniazhnytskyi
thought the current, improved version had a significant
chance of being brought into law.
PETTIT