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Viewing cable 07ROME1329, EDISON: PROBLEMATIC EU DECISION ON POSEIDON

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Reference ID Created Released Classification Origin
07ROME1329 2007-06-15 17:00 2011-08-24 01:00 UNCLASSIFIED Embassy Rome
VZCZCXRO6815
PP RUEHAG RUEHDF RUEHIK RUEHKW RUEHLZ RUEHPOD RUEHROV
DE RUEHRO #1329 1661700
ZNR UUUUU ZZH
P 151700Z JUN 07
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC PRIORITY 8351
INFO RUCNMUC/EU CANDIDATE STATES COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHFL/AMCONSUL FLORENCE PRIORITY 2462
RUEHMIL/AMCONSUL MILAN PRIORITY 8746
RUEHNP/AMCONSUL NAPLES PRIORITY 2623
RUEHBS/USEU BRUSSELS PRIORITY 4536
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
UNCLAS ROME 001329 
 
SIPDIS 
 
SIPDIS 
 
EUR FOR DAS MATT BRYZA 
EB FOR DAS PAUL SIMONS 
 
E.O. 12958: N/A 
TAGS: ENTG ETRD AJ GR TU IT
SUBJECT: EDISON: PROBLEMATIC EU DECISION ON POSEIDON 
PIPELINE CLEARS THE WAY FOR CONSTRUCTION AND SUPPLY 
CONTRACTS 
 
REF: A. ATHENS 1184 
 
     B. ROME 725 
 
1.  (U)  This cable is sensitive but unclassified.  Not for 
internet distribution. 
 
2.  (SBU) Summary.  Italian energy company Edison views the 
EU Commission's May 22 ruling on third party access exemption 
for the Poseidon pipeline as flawed but sufficient for 
construction to proceed.  Edison's final analysis is that 
while the EU Commission's decision contains conditions which 
reflect the Commission's bias in favor of the Nabucco 
pipeline, it gives Edison and its Greek partner, DEPA, 
exclusive rights to sell natural gas imported using the 
Poseidon pipeline.  This makes the pipeline economically 
viable, and allows Edison to begin negotiations for natural 
gas deliveries.  End summary. 
 
3.  (SBU) In a June 4 conversation with Economic Specialist 
Elio Ruggeri, the Edison official in charge of the "Poseidon" 
underwater natural gas pipeline said Edison is not satisfied 
with the May 22 EU Commission ruling exempting Poseidon from 
EU third-party access rules.  (Exemption will give Edison and 
DEPA, Edison's Greek partner, exclusive rights to sell 
natural gas imported into Italy using the Poseidon pipeline. 
As reported in Ref B, Edison views exemption from EU 
third-party access requirements essential for the Poseidon 
pipeline to be economically feasible.)  Ruggeri said the 
exemption from third-party access requirements contains 
conditions that, in Edison's view, reflect EU institutional 
bias in favor of the Nabucco project.  However, he emphasized 
that Edison can now begin construction of the Poseidon 
pipeline and negotiations for the delivery of Azeri natural 
gas to Italy via Turkey and Greece. 
 
4.  (SBU) Ruggeri focused on only one of the four Commission 
recommendations: that the Italian government cancel the 
exemption, should Edison and DEPA not complete Poseidon's 
construction by 2012.  According to Ruggeri, this 
recommendation, if strictly applied, all but guarantees that 
the exemption will eventually be canceled. In a project the 
size of the Poseidon pipeline, delays are almost certain, and 
they may push Poseidon's completion past 2012. 
 
5.  (SBU) That said, Ruggeri explained, Italian law could 
over-ride the EU recommendation. Specifically the Italian law 
upon which the Commission based its recommendation contains 
clauses that provide for a waiver under certain conditions. 
Although Ruggeri did not explain the circumstances under 
which the law could be waived, he said GOI regulators will 
exercise the Italian law's flexibility.  In a wider sense, 
however, Edison interprets the Commission's decision to 
include this recommendation in their decision as a symbol of 
continued EU preference for the Nabucco pipeline project over 
the Poseidon pipeline. 
 
6.  (SBU) Comment.  Edison's confidence in the face of these 
additional conditions the EU Commission proposes for 
Poseidon's exemption from EU third-party access requirements 
is surprising.  Ruggeri made clear that while the exemption 
is not all that Edison wanted, it is sufficient for Edison 
and DEPA to proceed with financing and building the Poseidon 
pipeline.  Most importantly, Edison can begin negotiating 
natural gas supply contracts for gas to fill Poseidon when it 
is completed -- hopefully in 2012, or earlier.  End comment. 
Spogli