EU STANCE ON NABUCCO WORRIES ITGI

UNCLAS USEU BRUSSELS 001421

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG IT ZJ RU EU
SUBJECT: EU STANCE ON NABUCCO WORRIES ITGI

REF: ROME 1110

This cable is sensitive but unclassified. Please protect
accordingly.



1. (SBU) Summary: A representative of the Italy-Turkey-Greece
Interconnector (ITGI) pipeline project believes the
Commission,s public bias towards Nabucco is prejudicing
ITGI,s ability to secure a gas deal. Commission officials
told him that their support for Nabucco is driven by USG
pressure. In a separate conversation, a Nabucco
representative said Russia may be steering Azerbaijan towards
ITGI in order to thwart Nabucco. End summary.


2. (SBU) An employee of Edison SpA, the Italian partner in
ITGI, expressed concern to econoff about EU partiality
towards Nabucco. He claimed that during the BTC pipeline
10th anniversary celebrations in Baku last month,
Commissioner Piebalgs declared that &,Nabucco is close to
my heart.,8 He said the appointment of former Piebalgs
staffer Roland Kobia as the next Commission ambassador to
Baku reaffirms the Commission,s commitment to Nabucco. He
cited the European Parliament,s (EP) September 17 resolution
on energy security, which specifically references Nabucco as
an &EU priority,8 as another example. Finally, he said
Commission officials claimed that they are under pressure
from the USG to support Nabucco. (Note: The EP,s energy
security resolution stresses &the importance of a general
regime to govern the development of the (Southern)
(C)orridor, with a view to linking the EU to new sources of
gas from the Middle East and the Caspian region independently
of any one company or pipeline.8 End note.)


3. (SBU) He asked what Edison could do to promote ITGI as a
European project. He said ITGI, which only needs an 800km
interconnector between Greece and Italy, is poised to deliver
Azeri gas to Europe, much quicker than Nabucco. The ITGI
consortium is prepared to build an interconnector to
Bulgaria, which is totally dependant on Russian shipments via
Ukraine. Edison could also ship excess gas to the Baumgarten
gas hub in Austria for sale in other European markets.


4. (SBU) He said Edison seriously contemplated an offer to
join the Nabucco consortium, but declined for two reasons.
First, it did not want to alienate Greece. The GoI told
Edison that abandonment of the ITGI project would affect
official relations, and further, Edison does not want to
jeopardize its commercial ties with Greece. Second, he said
ITGI would deliver up to 6 bcm to Italy, whereas Nabucco
would only afford Edison the right to bid on up to 2.5 bcm.
He also acknowledged that if it joined the Nabucco
consortium, Edison would have to import gas from Baumgarten
through pipelines operated by Italian competitor Eni.


5. (SBU) Edison considers U.S. support crucial to securing a
gas deal with Azerbaijan. Edison CEO Umberto Quadrino plans
to visit Washington on November 9 to press its case. (Note:
No mention was made of Edison,s Dayyer exploration contract
in Iran per reftel. End note.)


6. (SBU) In a separate conversation, a representative of RWE,
a partner in the Nabucco consortium, raised his concern that
Azeri President Aliyev is under pressure from Russia to reach
a deal with ITGI for Shah Deniz II gas. He said Russia seeks
to deny Nabucco its primary source for phase I, which would
effectively kill Nabucco. Russia may be willing to forego
the Azeri gas and accept 6 bcm to Italy in order to prevent
31 bcm from flowing to central and eastern Europe. This
would also eliminate western competition in Turkmenistan.


7. (SBU) Comment: Edison continues to tout ITGI is as the
most commercially viable and expeditious project to import
Azeri gas via the Southern Corridor ) from its perspective a
clear advantage for Europe. It is trying to expand its
support base, but it may not fully appreciate that it is
viewed outside of Italy as an Italian project in contrast to
Nabucco, which is considered a political priority by the
Commission, the EP and several member states.

Murray
.