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DE RUEHLO #2384/01 2631021
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O 191021Z SEP 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9807
RHEGGTN/USDOE GERMANTOWN MD IMMEDIATE
RUEHBS/USEU BRUSSELS IMMEDIATE
INFO RUEHMO/AMEMBASSY MOSCOW PRIORITY 2722

C O N F I D E N T I A L LONDON 002384

 SIPDIS USDOE FOR JEFFREY KUPFER, KATHY FREDRIKSEN USEU FOR RICHARD FROST E.O. 12958: DECL: 09/20/2018 TAGS: ENRG TRGY UK

SUBJECT: READOUT OF DEPUTY SECRETARY KUPFER MEETINGS WITH JOHN HUTTON AND JONATHAN PORTES ON ENERGY SECURITY AND LONDON SUMMIT

 Classified By: E/MIN Mark Tokola for reasons 1.4 b, d.

¶1. (C) Summary: During his visit to the UK on September 16th and 17th, Acting Deputy Secretary of Energy Kupfer met separately with Secretary of State for Business, Enterprise and Regulatory Reform (BERR) John Hutton and the Prime Minister,s Special Envoy for Energy Jonathan Portes to discuss energy security issues. Hutton pointed out that the United States and the UK need to have a dialogue on energy security, which he said was a political issue, not a market issue. Both Hutton and Portes discussed the upcoming Jeddah Summit follow-up meeting in December in London. HMG hopes to discuss supply and demand, new capacity, market transparency and efficiency. Both Hutton and Portes urged the USG to send high-level representation but acknowledged that the U.S. political calendar might make that difficult. End summary. 

Energy Security Risks are Rising --------------------------------

¶2. (C) Hutton said that &risks to our energy security are rising,8 and because they are a political issue, they need to be addressed at the government to government level. He noted that the UK was becoming more exposed to energy security risks, and that consumers were in no mood to pay more for energy. Hutton said that the United States and the UK need to discuss energy security more often.

 EU Response to Georgia &Feeble8 -------------------------------

¶3. (C) Hutton stated that the &EU is never going to speak with one voice on energy security,8 pointing out that each country has dealt with supply issues independently. He pointed to the growing European dependence on Russian gas, and the fact that much of Gazprom,s board was former Federal Security Service (FSB). These factors, Hutton said, contributed to the EU,s &feeble8 response to the Russian invasion of Georgia. Hutton went on to say that dealing with Russia would require a multi-lateral effort on the part of &like-minded states.8 He added that Nabucco is &an important project for us.8 Although the UK would like to have better relations with the Russians, and invited them to attend the energy summit in December, Hutton said that an improvement in relations was &unlikely.8 

Unbundling: Scared to Say Yes, Scared to Say No --------------------------------------------- --

¶4. (C) Hutton sought to clarify the ongoing issues regarding unbundling legislation in the EU. He said that Eastern European governments are fearful that their assets will be purchased by Gazprom if they are forced to unbundle. However, they are also afraid to say no to the Russians if offers are made. As a result, Hutton stated that the Eastern Europeans need the European Commission to provide cover for them to keep Gazprom from purchasing their transmission assets. 

London Summit: Hutton and Portes Want High-Level --------------------------------------------- --- U.S. Participation ------------------

¶5. (C) Hutton said that the summit planned for December 19th has no agreed format or outcome yet. He noted that he would like to see more oil and gas resources unlocked, and for them to be exploited more efficiently. Although he cautioned that more price falls might remove the impetus for the summit, Hutton stated that the memory of high prices will continue to spur action. Hutton also pointed out that neither Iranian President Ahmedinejad nor Venezuelan President Chavez were invited, but that the energy ministers from both countries were invited to attend. Hutton did not want to give any excuse for OPEC not to show up.

¶6. (SBU) Jonathan Portes elaborated on the format of the planned summit, saying that discussions may include supply and demand issues, new capacity, market transparency, and efficiency improvement. He pointed out that the Japanese-hosted G8 3 meeting scheduled for November to discuss efficiency and demand management will send a signal to producing countries that the major consuming countries are working on demand reduction and efficiency, not simply asking producers to do more. Both Hutton and Portes said they would like to see more involvement from the international oil companies at the London summit, although neither suggested in what capacity. Portes would like to convene a Sherpa Group of perhaps ten countries to prepare for the summit, possibly meeting at the end of October. Although both Hutton and Portes acknowledged that the U.S. political calendar could make the timing of the London summit difficult, they pushed for high-level representation to underscore continued USG engagement.

¶7. (SBU) Portes said that the UK would like to see more cooperation between OPEC and the IEA on research and analysis. He commented that current international institutions like the G8 are &unsuitable8 for effectively discussing energy issues. He said that there was scope for change in the future, although he was unsure of what the correct forum would be.

¶8. (SBU) Comment: It is a good time to engage HMG on energy security since security of supply issues are a top priority. Visit London's Classified Website: XXXXXXXXXXXX
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