EEB A A/S NELSON DISCUSSES BIOFUELS AND ENERGY

C O N F I D E N T I A L SECTION 01 OF 03 STATE 037293

SIPDIS

E.O. 12958: DECL: 04/15/2019
TAGS: PREL SENV SG SN ENGR DR ES GB GM GT HO
IR, JA
SUBJECT: EEB A A/S NELSON DISCUSSES BIOFUELS AND ENERGY
ISSUES WITH BRAZILIAN U/S FOR ENERGY

REF: STATE 18324

Classified By: EEB A A/S DAVID NELSON FOR REASONS 1.4(b)
& (d)


1. (C) Summary: Brazilian U/S for Energy Andre Amado
met with EEB A A/S David Nelson on March 4 to discuss
ongoing cooperation on biofuels and cooperation on
energy more broadly. Brazil and the U.S. remain
enthusiastic about our cooperation on biofuels,
particularly in assisting developing countries. Work
under the MOU is continuing to move forward, in both
first-tranche and second-tranche countries. Brazil is
proposing additional work in Africa, as Amado did in a
March 3 meeting with U/S Burns (reftel),in cooperation
with the EU. Brazil also urged that the steering
committee reconvene as soon as possible, while
acknowledging the constraints imposed by the transition
of administrations in the U.S. Finally, the Brazilians
raised concerns about the implications of EPA's Notice
of Proposed Rule Making for international trade in
biofuels and for US-Brazil biofuels cooperation because
Brazilian ethanol likely would not qualify as an
advanced biofuel under EISA given EPA's methodology. On
the U.S. side, EEB Energy DAS Douglas Hengel raised
concerns about reports that Petrobras was considering an
agreement with Iran; the Brazilians acknowledged these
concerns but failed to provide strong reassurance. A
variety of other energy issues were discussed, including
Brazil's views on the International Renewable Energy
Agency (IRENA),the future of nuclear power in Brazil,
and the potential for U.S. companies to participate in
development of Brazil's newly-discovered offshore oil
reserves. End Summary.

Ongoing U.S.-Brazil Biofuels Cooperation in Developing
Countries
-------------- --------------
--


2. (C) Brazil has ongoing cooperation with the U.S. to
advance biofuels in developing countries, under a
Memorandum of Understanding signed March 2007. Amado
was positive about the future of biofuels and expressed
particular enthusiasm for the agronomy feasibility
studies underway. He asserted that we need concrete
results from the first tranche of countries receiving
assistance under the MOU and need to start as soon as
possible with studies for the five second-tranche
countries. Amado also proposed a third tranche of
countries, in Africa, noting that Brazil means business
and wants to be really involved in working with
developing countries.


3. (C) EEB A A/S Nelson said the U.S. places great
value on this partnership with Brazil, including our
work with developing countries in Central America, the
Caribbean, and Africa which are unlikely to have the
necessary resources themselves. Regarding the MOU and
bilateral relations, Nelson urged focusing on the first
and second tranche countries and making the developments
there concrete. He noted the substantial financial
contributions from the U.S. and Brazil to these
countries, as well as the promising work between our
respective national labs on research and development.


4. (C) The Brazilians noted the recent events in
Guinea-Bissau, which is a tranche-two country, and its
difficult situation. But they noted that it, and second
tranche country Senegal, have tremendous biofuels
potential and need. Amado noted Brazil was waiting on
its development bank to finalize funding for these two
countries, where Brazil has the lead.


5. (C) Amado advocated reactivating the U.S. Brazil
Steering Committee on Biofuels Cooperation as soon as
possible and that we work on dates, while also saying he
understood State is waiting for some confirmations. The
U/S of Economic, Energy, and Agricultural Affairs
represents the U.S. to the steering committee, which
oversees work carried out under the MOU. [Note: The
subject of reactivating the steering committee also came
up in a previous meeting on this trip.] Nelson agreed

STATE 00037293 002 OF 003

SUBJECT: EEB A A/S NELSON DISCUSSES BIOFUELS AND ENERGY
ISSUES WITH BRAZILIAN U/S FOR ENER
with the need to reconvene the steering committee,
describing it as a good way to institutionalize our
efforts, but indicated we need to wait for the
nomination and confirmation process to conclude.


6. (C) A A/S Nelson suggested that we would like to see
more countries use biofuels sustainably and responsibly.
The U.S. side discussed areas for making progress in
countries where the U.S. and Brazil are currently
engaged: Honduras would very much appreciate Brazilian
technology for a small distillery to showcase that
technology. Guatemala needs a law, and Brazil has
experience passing biofuels laws. Once El Salvador has
had its elections and has a new administration, the U.S.
and Brazil need to return to San Salvador together to
work with the new government. The Dominican Republic
also will need a diplomatic push by the U.S. and Brazil
to continue implementing the biofuels rules they enacted
during the term of our partnership. Jamaica's program
to mix Ethanol at 10 percent levels already is seen as a
good example of how to move quickly on biofuels. There
was agreement that St. Kitts and Nevis can be
"graduated" from the partnership as the partnership
helped them decide on geothermal as the next step in
their renewable energy development.

Brazil's Cooperation on Biofuels with the EU
-------------- --------------


7. (C) Amado indicated that the EU has initiated a new
partnership with Brazil to advance biofuels in Africa.
The plan is to talk with African countries and to work
on two fronts, with the U.S. and EU, and to develop a
list of countries with whom we would eventually work.
Their initial list includes Ethiopia, Kenya, Benin,
Angola, Mozambique, and with particular respect to the
U.S., Liberia and Mali. They are waiting to hear from
the EU but think they will likely be interested in
Angola and Mozambique. The Brazilians would have wished
for technical sharing from others in the past and are
committed to sharing technologies with developing
countries now and in the future. They are very
enthusiastic about ethanol.

EPA's Notice of Proposed Rule Making (NPRM)
-------------- --------------
--


8. (C) Amado said he was concerned about obstacles in
the environmental arena that could prohibit cooperation.
He particularly noted EPA's Notice of Proposed Rule
Making under EISA 2007, which estimates the greenhouse
gas emissions of different biofuels categories,
including Brazilian ethanol. Brazil, Amado noted, could
eventually comply with all the regulations but that many
Central American, Caribbean, and African nations likely
could not. The implication, he asserted, would be an
inability to create an international biofuels trade
because there would not be enough producers and
consumers.


9. (C) Further underscoring Brazil's concern with the
NPRM, Amado noted the significant consequences that
would have ensued if the EU sustainability directive,
approved in December, had been as restrictive as
discussed. Brazil does not see food security as a
problem at this point and views the dialogue about
biofuels, food security, and sustainability as one to
which additional problems are continually added, making
it impossible ever to provide a satisfactory plan. The
current item on the list is indirect land use.

Renewable Energy Technologies and IRENA
-------------- --------------
-


10. (C) ESC DAS Hengel inquired about Brazil's attitude
towards the International Renewable Energy Agency
(IRENA). Amado characterized it as a German idea that
is good for Germany. In the case of wind, $90 million
will yield only 50 megawatts. He was skeptical that
IRENA's focus on wind and solar energy is useful in
Brazil which has abundant hydropower. He said IRENA
could have been interesting if it had a broader focus.
Amado views solar and wind as very expensive
technologies that can only be mastered by developed
countries.

Oil, Petrobras and Iran

STATE 00037293 003 OF 003



11. (C) ESC DAS Hengel inquired about a press release
indicating that Petrobras was signing a deal with Iran
and discussed the implications of the Iran Sanctions Act
on any such deal. Amado indicated that U/S Burns had
raised the same concern, that President Lula is very
aware of this, and that the government is attentive to
the decisions of the Security Council. He turned to his
aide on the topic, who indicated that the GOB is aware
of Petrobras' implicit exposure to U.S. law through
holdings in the U.S., and so for this reason, does not
believe there is reason to worry.


12. (C) DAS Hengel also raised questions about offshore
oil in the Santos Basin and possible new rules, noting
that U.S. oil companies are very interested in how they
can continue to use their deepwater technologies to help
Brazil develop its growing oil reserves. Amado
responded that the offshore oil discoveries have
happened very fast and that they need to determine the
scope of the finds. Whatever happens after the
discovery, he assured us there will be room for foreign
entities, and those concessions now being developed with
foreign partners will be respected. Amado said that
Brazil does not yet know what type of tax regime will be
put in place for the new fields, noting that now that
the reserves have been discovered, there is less risk
(and, he implied, therefore, less reward in the tax
structure). He assured that these reserves, which are
7,000 meters below the ocean surface, will be developed,
but that a new framework is needed before drilling can
begin." The Brazilians estimate it will cost more than
$600 billion to exploit the resource.

Nuclear Power
--------------


13. (U) Brazil is also interested in exploring what
they can do with nuclear energy and has a regular
meeting about this with all relevant agencies. In the
past, Brazil has had good cooperation with Westinghouse,
though the constitution prohibits private participation
in certain parts of the nuclear industry. They have now
made the decision to have a third plant and the new
budget conceives of four more in the future, either with
Westinghouse or with Areva, neither of which is U.S.-
owned.

Broader Cooperation on Energy
--------------


14. (C) Hengel expressed the U.S. desire to work with
Brazil beyond biofuels, on all energy issues, and his
understanding that the U.S. Department of Energy (DOE)
has discussed this previously. Amado noted that the
2003 MOU with DOE needs to be updated and they were
working with the new Administration at DOE to recharge
it.


15. (C) Comment: The tone of the meeting was friendly.
Both Brazil and the U.S. are eager to continue joint
work on biofuels assistance to developing countries.
The Brazilians showed an interest in expanding to
Africa. Although the Brazilians acknowledged the press
reports about a deal between Petrobras and Iran, they
failed to provide strong reassurances on that front.


16. (U) For more information, contact Matt McManus at
McManusMT@state.gov; 202-647-3423.
CLINTON