C O N F I D E N T I A L SECTION 01 OF 04 YEREVAN 000235

SIPDIS

E.O. 12958: DECL: 03/25/2019
TAGS: ECON ENRG ETRD EAID ZS ZJ ZL RU MD UP AM
SUBJECT: BSEC ENERGY MINISTERS SEEK COOPERATION WITH EU,
FIND RUSSIAN RESISTANCE

Classified By: CDA Joseph Pennington. Reasons 1.4 (b/d)

SUMMARY
--------------

1. (C) A meeting of Black Sea Economic Cooperation (BSEC)
organization energy ministers in Yerevan March 20 underscored
the desire for stronger energy cooperation with the EU, but
also showed that Russia remains intent on impeding such an
initiative. In working group meetings Russia successfully
blocked attempts to move toward a more substantive plan of
action. The US, Georgian and Armenian delegations met to
discuss the idea of an Armenia-Georgia Electricity
Interconnection Working Group, which would help move the
Georgia and Armenia power systems to synchronous operation
and help improve regional energy cooperation and security.
Azerbaijan did not participate in the event. End Summary.

BSEC MEETS IN YEREVAN
--------------


2. (C) Energy ministers from the member states of the
Organization of the Black Sea Economic Cooperation (BSEC) met
in Yerevan on March 20. In attendance at the meeting were
delegations from Armenia, Bulgaria, Georgia, Greece, Moldova,
Romania, Russia, Serbia, Turkey, and Ukraine, as well as
observer delegations from the Czech Republic, the United
States, the Energy Charter Secretariat, the Black Sea
Economic Commission, the World Bank and the European
Investment Bank. The purpose of the meeting was to discuss
proposals for a joint BSEC-EU Plan of Action in Energy and to
adopt a Yerevan Declaration on Energy Cooperation.

RUSSIAN OBSTRUCTION
--------------


3. (C) The March 20 meeting of ministers followed two days of
often explosive and contentious meetings of the BSEC Working
Group on Energy. Delegations worked long into the night to
produce a proposal for a joint BSEC-EU Action Plan on Energy
as well as on the text of a Yerevan Declaration on Energy
Cooperation in the BSEC Region. Tensions filled the room as

the Russian delegation fought each statement and quibbled
about the motives of the Europeans and other delegations.
Their lobbying succeeded in producing a watered-down Action
Plan and Declaration that offered little in terms of real
substance or practical solutions.


4. (C) It was clear in the Working Group meetings that most
states wanted to proceed with EU initiatives and to
strengthen the partnership between BSEC and the EU. The
Russians continued to be contentious throughout the meeting,
saying that the Europeans did not want partnership, but
domination; that the Action Plan was not about agreement;
that it was too early to discuss an Action Plan; that the EU
proposals demonstrated their ambitions and were too political
in nature; and that there was too much emphasis on EU
standards. The Russian delegation was even opposed to the
term "Action Plan," favoring a change of the name of the
document to a more muted "Suggestions about an Action Plan."


5. (C) Many of the Russian comments were not accepted by
other participants. The Russian representative complained
that cooperation seemed to be more about following EU
political approaches and standards rather than cooperation of
two organizations. Ultimately the participants agreed with
the Greek proposal for a "Proposal for BSEC-EU Action Plan."
Russia also didn't see the reason for taking stock of ongoing
regional initiatives like the European Neighborhood Policy
(ENP) and the Eastern Partnership (EaP). However, all other
delegations and the EU Ambassador insisted that taking stock
of ongoing initiatives is very useful, especially since many
member countries are parties to these initiatives. The
Armenian delegation was clearly fractured, or at least played
both sides of the fence. The Armenian Chairman of the Working
Group agreed with the points of the EU Ambassador while the
Prime Minister's representative supported the Russian
positions.


6. (C) The Russian objections were ultimately successful, as
the delegations became tied up in trivial changes, and no
real progress was made in terms of practical ways to improve
cooperation among the BSEC member states.

MINISTERS MORE COOPERATIVE
--------------


7. (C) By contrast, the March 20 meeting of energy ministers
was relatively placid, with declarations by individual
ministers clearly indicating support for greater cooperation
and concrete results. The statements of the delegations were
largely similar, supporting the need for more secure energy

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supplies and transit routes; diversification of supplies and
alternative sources; lower prices for consumers; and support
for interconnections in gas and electricity to the European
market, among other themes. Many participants expressed
concerns about the potential impact of the global economic
crisis on attempts to implement international projects.

NATIONAL DECLARATIONS
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8. (C) National declarations revealed country-specific
concerns:

- Bulgaria stressed its interest in close ties with BSEC
nations, stating its solid interest in supporting BSEC. The
Bulgarian representative specifically expressed support for
three Black Sea initiatives: the Nabucco gas pipeline, a LNG
terminal in Bulgaria, and the Russia-Bulgaria SouthStream
trans-Black Sea natural gas pipeline.

- Georgia reiterated its strategic importance as an energy
corridor, both for Caspian hydrocarbons as well as for
regional power transmission. Georgia expressed specific
support for Nabucco, and for developing power
interconnections with Armenia, Turkey and Azerbaijan.

- Greece, an observer, encouraged the BSEC member states to
improve communications in order to develop planning and trade
in energy and other sectors. It stressed that as an EU
member, its role in BSEC was to support other nations'
development in line with EC requirements.

- Moldova supported BSEC as it promotes the greater
transmission linkages the nation is seeking to develop in the
near future. Moldova envisions itself an important link for
transmission of power between Russia, Ukraine and Romania.

- Romania expressed its desire to fulfill EU objectives for
energy system development and international trade, stressing
the importance of compliance with environmental concerns.
Romania also stressed the need for all countries to diversify
supplies and transmission/transit routes for energy security.
To do so, countries need to use the BSEC process to
understand opportunities and develop infrastructure to meet
internal and regional needs. Romania expressed that BSEC
needed to move beyond agreements to develop joint, tangible
undertakings.

- The Russian delegation, led by its ambassador to Armenia,
stressed that it is developing its energy infrastructure in
accordance with the Russian Energy Strategy, which is
compatible with the energy interests of the G8:
Diversification of routes; energy efficiency; market
development; and environment/ecology. Russia is heavily
engaged in the development of transportation infrastructure,
especially in oil and gas, and with the diversification of
supply routes. Referring to recent "problems," Russia
mentioned that it seeks mechanisms for early problem
detection and prevention so that it can warn downstream
nations of potential supply issues as soon as possible.
Russia further stated that the Energy Charter (which it has
not ratified) is not sufficient to resolve problems, and that
a better mechanism for information exchange and joint
resolution of international energy issues is needed. Russia
seeks long-term contracts for countries to attain access to
Russian supplies. In terms of projects, Russia mentioned a
new pipeline that will connect the Caspian with Europe, and
that it is developing SouthStream with Greece, Serbia and
Bulgaria for the benefit of all of Southern Europe. Russia
said it is committed to renewable energy, and cited a project
to use hydrogen-powered transport for the 2014 Winter
Olympics in Sochi.

- Serbia is strongly interested in developing its gas and
power markets for international investments, citing that it
will have fully liberalized both by 2015. Serbia is focused
on efficiency, securing supplies, environmental issues, and
EU directives. Serbia is very hopeful for SouthStream, as it
intends to develop 800 million cubic meters of gas storage
for its own use and the use of neighboring Montenegro and
Bosnia/Herzegovina. Serbia mentioned the importance of a 1319
km oil pipeline project from Romania to Italy that transits
Serbia and will provide fuel for Southern Europe. It is also
investing in 3000MW of new power production, renewable energy
sources and energy efficiency, in anticipation of amendments
to its energy law later this year that will encourage such
innovations.

- Turkey expressed its support for BSEC, citing it as the
appropriate forum to address regional energy and economic
challenges. Turkey is happy with all its neighbors, claiming

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to have "good relations" with all of them, and it plans to
increase dialogue and cooperation with all due to its
strategic position as a transport and transit nation. The
region will benefit and achieve greater stability through
stronger economic linkages and the diversification of energy
supplies and routes. Turkey said that the US role in the
Black Sea region is significant, but did not explain why or
how. Turkey also voiced its strong support for Nabucco as the
best near-term option for gas supply diversification for
Europe, as the 30bcma is needed for Europe and is not in
competition with any other planned pipelines. Turkey said it
looks to BSEC to help resolve technical issues and solve
regional problems. In a sidebar with representatives of the
Turkish Ministry of Energy, officials affirmed to the USAID
representative from Embassy Tbilisi a commitment to develop
renewable energy such that it represents 20 percent of its
electric capacity, including some 10 GW of wind power, by

2015. In addition, plans are in high gear to develop some
3.5 to 5.5 GW of nuclear power generation by 2018. (Note:
Turkish officials did not specify where these plants were
located or whether they might compete with Armenia's plans
for a replacement nuclear power plant, the feasibility of
which will most likely depend on being able to sell
electricity to Turkey. End Note).

- Following its disputes with Russia in late 2008, Ukraine
stressed a need to rethink energy policies from both European
and regional perspectives. Ukraine stated that cooperation is
only possible when political and economic conditions are
stable. Ukraine counseled the Black Sea countries to be more
active and involved in the stimulation of new technology
development, looking to neighboring EU countries and beyond
as examples.


9. (C) Armenia cited its development and adoption of a new
Energy Security Strategy as the keystone to its strong
commitment to the development of its energy systems. This
strategy has four pillars: nuclear; renewables and energy
efficiency; diversification of supplies and routes; and
Regional Cooperation, especially through bodies like BSEC.
Diversification represents a challenge for Armenia, yet the
new gas connection with Iran represents a step towards gas
security. In terms of cooperation, Armenia mentioned a new
MOU with Iran on energy cooperation and parallel power system
operations, and plans for the development of two new 440 kV
lines to Iran and Georgia. It closed voicing strong support
for BSEC.


9. (C) International bodies and observer nations were then
asked to speak. One of the most interesting comments was made
by the representative of the Energy Charter Treaty
Secretariat. Representing 53 member countries, the Energy
Charter Treaty sees itself in a support role to BSEC and
other international bodies. The representative turned to the
January energy crisis (Ukraine/Russia) and affirmed the
Energy Charter Treaty was not at fault (especially as Russia
has not ratified). He did agree, however, that these events
have prompted interest in revisiting (but not renegotiating)
the 1994 treaty with fresh eyes to strengthen support among
member states and allow the treaty to better respond to
international energy disputes. Regarding BSEC, the Energy
Charter representative stated that BSEC coordination is
important in promoting appropriate international energy
policy dialogue toward EU objectives.

ARMENIA-GEORGIA INTERCONNECTION
--------------


10. (C) After the Plenary Session, representatives from the
US Missions in Georgia and Armenia met with the Deputy
Ministers of Energy of the two countries. In this sidebar
meeting, the USG floated the idea of an Armenia-Georgia
Electricity Interconnection Working Group, to which USAID in
each country would provide technical assistance and training
for specific activities of mutual interest. The Working Group
would look to the future synchronous operation of the
Georgian and Armenian power systems and examine a set of
technical, regulatory, and market issues that need to be
considered in such a future scenario. The US proposed that
the three governments sign a memorandum of cooperation, and
passed out a draft prospectus for the Delegations to take
back to their respective Ministers for review.

COMMENT
--------------

11. (C) We are encouraged by the interest in energy
cooperation by the BSEC members, who clearly have strong
motivation to improve their energy security, diversify their
sources and improve efficiency. The Russian delegation
seemed to come to the meeting prepared to block any
substantive initiative or concrete action towards cooperation

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with the EU. It also seemed to have on its agenda promotion
of its bilateral projects with individual countries in order
to undermine multilateral initiatives of BSEC member
countries. Of particular note, Russia expressed its interest
and intent to develop mechanisms for enlisting European
allies against transit countries in the event of future
supply disruptions, such as the one that occurred in its
dispute with Ukraine in January. End Comment.
PENNINGTON