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Viewing cable 06PARIS6558, FRANCE: ENERGY SECTOR UPDATE

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Reference ID Created Released Classification Origin
06PARIS6558 2006-10-02 16:51 2011-08-24 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Paris
null
Lucia A Keegan  10/03/2006 09:45:24 AM  From  DB/Inbox:  Lucia A Keegan

Cable 
Text:                                                                      
                                                                           
      
UNCLAS    SENSITIVE     PARIS 06558

SIPDIS
cxparis:
    ACTION: ECON
    INFO:   ENGO SCIO TRDO ESCI FCS POL ORA AMB AGR LABO
            DCM ECNO UNESCO ECSO SCI

DISSEMINATION: ECONOUT /1
CHARGE: PROG

APPROVED: ECON:SDWYER
DRAFTED: ECON:FRADOVIC
CLEARED: ECON:HSULLIVAN; POL:WOWEN

VZCZCFRI158
RR RUEHC RUCPDOC RHEBAAA RUCNMEM RUEANFA
DE RUEHFR #6558/01 2751651
ZNR UUUUU ZZH
R 021651Z OCT 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 1863
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/USDOE WASHDC
RUCNMEM/EU MEMBER STATES
RUEANFA/NRC WASHDC
UNCLAS SECTION 01 OF 02 PARIS 006558 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/WE; OES; NP; EB/ESC, AND EB/CBA 
USDOC FOR 4212/MAC/EUR/OEURA 
DOE FOR ROBERT PRICE PI-32 AND KP LAU NE-80 
 
E.O. 12958: N/A 
TAGS: ENRG ELAB EPET EIND EINV PREL PGOV FR
SUBJECT: FRANCE: ENERGY SECTOR UPDATE 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
1. (U) This is another in a series of occasional updates on the 
French energy sector.  Feedback is welcome to help us make this 
product as useful as possible for our inter-agency USG audience. 
 
Contents: 
 
-- French PM calls for EU Energy Summit and EU Energy Chief (para 
2) 
-- EU energy supplies dominate France-Germany-Russia talks 
para 3) 
-- France to introduce biofuel "green pumps" (para 4) 
-- The GOF energy bill: contents and timetable (para 5) 
-- Privatization of GDF (para 6) 
-- French-style implementation of EU energy deregulation (para 8) 
-- French union opposition to further privatization of GDF weak so 
far (para 9) 
 
2. (U) French Prime Minister Dominique de Villepin on September 22 
called for an energy summit bringing together European Union 
countries and the main neighboring oil and gas-producing countries. 
De Villepin announced that the summit should take place early next 
year and include major energy producers Russia, Algeria, Norway and 
countries such as Kazakhstan and Azerbaijan.  "At a time when energy 
occupies an increasingly important role in our exchanges with these 
countries, it is time for us to conclude agreements which 
specifically deal with this issue," he explained.  He further 
proposed that a new post of "special representative for energy" be 
set up at the European level.  He suggested that such a 
representative would work closely with the EU's foreign policy chief 
Javier Solana.  "We would carry more weight in negotiations with the 
producers by being able to speak with one voice," de Villepin noted. 
 
 
3. (SBU) EU energy supplies were at the forefront of the September 
23 summit near Paris between the leaders of France, Germany and 
Russia.  The French press said that the talks stressed the EU's 
eagerness to avoid a repeat of January's gas crisis, when Gazprom 
switched off its gas taps to Ukraine and impacted gas supplies in 
western Europe.  French papers further noted Russia's apparent drive 
to assert control over the country's vast energy reserves and muscle 
out foreign energy majors in favor of state-backed Russian ones. 
Earlier, they had given prominent coverage to Russia's alleged 
threat to revoke a license for French group Total to develop the 
Kharyaga oil field, accusing it of excessive delays.  Contacts told 
us Putin reportedly said that Russia was a law abiding country that 
would honor its commitments so long as firms investing in Russia 
followed Russian law and their Production Sharing Agreements. The 
Franco-Russian cooperation deals clinched during the summit that 
were worth more than 10 billion dollars were not in the energy 
sector, but rather in transportation and aviation. 
 
4.  (U)  French Finance, Economy and Industry Minister Thierry 
Breton revealed on September 24 his intention to launch biofuel 
"green pumps" serving bioethanol, which will offer motorists "a 
green fuel that costs much less."  The announcement follows an 
earlier series of proposals by the European Commission to encourage 
a switch to green fuels. 
 
5. (U)  The GOF energy draft bill presented to the National Assembly 
on September 7 would fully liberalize the French electricity and gas 
markets on July 1 2007, as required by two 2003 EU directives.  At 
the same time, the bill would expedite the further privatization of 
gas utility Gaz de France (GDF) prior to its 70.8 billion euro 
merger with Suez, the second largest electricity generator in 
France.  Parliamentary debate is taking place under a fast-track 
procedure, which requires only one reading by both houses, followed 
by re-conciliation procedures to agree on a final text to be voted 
on by both houses.  The National Assembly is expected to vote on the 
bill on October 3. 
 
6.  (SBU) On September 27, the National Assembly approved the 
controversial Article 10 of the GOF energy draft bill, providing for 
the further privatization of Gaz de France (GDF).  This article 
enables the GOF to reduce its minimal shareholding in GDF from 70 
percent to a third, thus paving the way for GDF's merger with Suez. 
The EU Commission has allowed the French Government to retain a 
"golden share" protecting GDF's gas distribution network, liquefied 
natural gas terminals and storage depots from takeovers.  Unveiled 
last February by Prime Minister Dominique de Villepin from his 
office, with the chairmen of both companies at his side, the deal 
was brokered to ward off hostile advances form Italian energy group 
Enel.  (Note: AFEP, the French private enterprise business 
association, told us they found the sight of a French PM announcing 
the deal in his office "very shocking."  End Note). 
 
7. (U) Even though the French administration has championed the 
merger, several other processes could derail the deal.  The Senate 
must also pass the bill after the National Assembly does so on 
October 3.  The European Commission must clear the merger.  The 
Commission prolonged its review of the merger proposals from the 
original October 25 deadline to November 17 after concessions the 
two companies provided in September failed to assuage concerns. 
Finally, Suez share holders must vote for the privatization. 
Tensions between France and Italy were eased somewhat when de 
Villepin and his Italian counterpart Romano Prodi met in Rome 
earlier this month to boost their two countries' cooperation in the 
energy sector.  The two countries' industry ministers met in Paris 
on September 28 in a bid to further defuse the situation. 
 
8.  (SBU) The original GOF energy draft bill's opening articles gave 
domestic consumers the right to choose their electricity and gas 
providers, in line with EU energy directives that come into force on 
July 1, 2007.  The text recently adopted by the National Assembly 
members (yet to be approved by the Senate), however, agreed to 
maintain government-regulated gas and electricity tariffs for an 
indefinite period beyond 2007.  The National Assembly also 
transformed the role and make-up of the French energy regulatory 
authority (CREG), which Members criticized as too independent and 
too market-oriented.  Cambridge Energy Research Associations 
Electricity and Gas Director Jean-Marie Chevalier told us that with 
elections in the offing Parliamentarians wanted to showing the 
French people "they are protected" from EU liberalization and market 
realities. 
 
9.  (SBU) Privatization is a sensitive issue for France's national 
trade union federations, traditionally quite strong in France's 
energy sector.  However, so far, the unions have not succeeded in 
challenging the GOF's energy draft bill.  They oppose both market 
deregulation and the further privatization of GDF.  Organized 
labor's first attempt to organize strikes and demonstrations on 
September 12 failed miserably.  However, the major trade union 
federations have announced that they plan to organize further 
demonstrations on October 3 and 14.  According to protest organizers 
the privatization of GDF may lead to 20,000 lost jobs. 
 
Stapleton