Identifier
Created
Classification
Origin
09TIRANA16
2009-01-12 11:55:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tirana
Cable title:  

ALBANIA: CHALLENGES AND OPPORTUNITIES FROM THE RUSSIAN GAS

Tags:  EPET ENRG ECON PGOV AL 
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DE RUEHTI #0016 0121155
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O 121155Z JAN 09
FM AMEMBASSY TIRANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7749
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEHVEN/USMISSION USOSCE PRIORITY 2432
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0781
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
UNCLAS TIRANA 000016 

SIPDIS
SENSITIVE

DEPT FOR EUR/SCE JISMAIL

E.O. 12958:N/A
TAGS: EPET ENRG ECON PGOV AL
SUBJECT: ALBANIA: CHALLENGES AND OPPORTUNITIES FROM THE RUSSIAN GAS
CUTOFF

Ref: 08 TIRANA 811

UNCLAS TIRANA 000016

SIPDIS
SENSITIVE

DEPT FOR EUR/SCE JISMAIL

E.O. 12958:N/A
TAGS: EPET ENRG ECON PGOV AL
SUBJECT: ALBANIA: CHALLENGES AND OPPORTUNITIES FROM THE RUSSIAN GAS
CUTOFF

Ref: 08 TIRANA 811


1. (SBU) SUMMARY: Albania is somewhat insulated from the immediate
effects of the Russian-Ukrainian gas spat since Albania imports no
natural gas. However, rising fuel and energy costs in the region,
primarily for electricity, could create problems for an economy
largely untouched by the global financial crisis, but partially
dependent upon imported electricity. A possible benefit for Albania
of the gas crisis could come from a determination by EU countries,
primarily Italy, that LNG (liquefied natural gas) terminals in
Albania could provide a buffer from future gas crises. END
SUMMARY.


2. (SBU) Albania imports no natural gas, so the energy crisis
befalling many European and Balkan countries will not produce
additional Albanian energy shortages. However, Albania's chronic
electricity problems could be exacerbated since the cost of imported
electricity will probably increase due to additional demand on the
grid as well as reduction of supply if gas-fired thermal power
plants have to be taken off line. Since the GOA is unlikely to
increase electricity prices to consumers before the summer 2009
elections, it will have to 1) release more water from its reservoirs
to offset higher import prices; 2) allow the budget deficit to
increase due to higher costs of imported electricity; or 3) increase
electricity blackouts. Although Albanians are to a certain extent
used to blackouts, the GOA will probably do everything in its power
to keep them at a minimum, since blackouts are a constant and
painful reminder of the GOA's inability to deal with a long-term
problem. If the GOA uses more of its stored hydro power to offset
higher import costs, it is gambling that the reservoirs will not run
dry by this summer. The budget deficit seems to be the most
vulnerable target, but an increase in the deficit could have the
most serious consequences due to the global financial crisis
(reftel).


3. (U) The gas crisis, though, could have two possible long-term
benefits for Albania. Prior to 1990, Albania produced a moderate
amount of natural gas from over 250 wells in fields in the south of
the country. A network of 500 km of gas pipelines was built to
connect the wells to primarily industrial consumers. However, as
some of the wells became depleted, output dropped radically, and the
GOA decided to abandon the wells and pipelines instead of investing
the capital necessary to make the gas fields productive. Recently,
a Western investor presented an unsolicited proposal to the GOA for
building a gas-fired thermal power plant (TPP) using locally
produced gas.


4. (U) Secondly, Italy is facing a growing energy crisis in part due
to the resistance of green opposition groups to the construction of
TPPs, nuclear power plants and LNG (liquefied natural gas)
terminals. The GOA has received a number of proposals to build LNG
terminals in Albania, use some of the gas to power a TPP and pipe
the rest of it to Italy in an underwater pipeline. Some of the
electricity generated would also be sent to Italy via underwater
cables. In addition, some companies have proposed extending various
planned gas pipelines from Greece through Albania with Italy as the
final destination.


5. (U) COMMENT: These Albanian gas projects, as well as much larger
projects liee the NABUCCO pipeline, have languished due to lack of
financing and political will to get them done. Perhaps the current
gas crisis will provide incentive to EU governments, particularly
Italy, to kick-start some of these projects, benefiting both
countries. Investment in infrastructure projects like these would
also help bring these countries out of their economic doldrums while
ensuring future energy supplies. Unfortunately, history has shown
that when the crisis is over, governments tend to go back to their
old ways as if the crisis never happened.