Cablegate: Protecting U.S. Interests As Italy Goes Nuclear

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C O N F I D E N T I A L ROME 001191

SIPDIS

EEB FOR CBA/FRANK MERMOUD
EEB FOR SPECIAL ENVOY GRAY
EEB FOR DAS HENGEL
EEB FOR DAS BRYZA
STATE PASS TO DOC DAS JAIME ESTRADA AND DOE DAS DENNIS
MIOTLA

E.O. 12958: DECL: 09/17/2018
TAGS: EINV ENRG ETRD ETTC IT KNNP

SUBJECT: PROTECTING U.S. INTERESTS AS ITALY GOES NUCLEAR

REF: ROME 1184

Classified By: Economic Minister Counselor Thomas Delare for reasons 1.
4b and d

1. (C) Summary: The Berlusconi Government tells us it is
serious about re-launching the Italian nuclear energy sector.
If the GOI actually follows through, there will be tens of
billions of dollars in commercial contracts. Already, we see
high-level lobbying by British, French and Russian government
leaders, all of whom are apparently seeking to ensure that
their firms participate in this potentially enormous project.
Italy will be making key decisions in the next 6 to 12
months; the USG should weigh in with the GOI to ensure that
U.S. firms face a level playing field. We should also push
for the GOI to factor energy security considerations into its
decision-making. GOI officials tell us that Russian nuclear
energy technology and companies could win contracts to build
Italian nuclear power plants. POTUS may want to discuss USG
interests on these issues with Berlusconi during his October
Washington visit. End Summary.

2. (C) The new Berlusconi government followed through on its
election platform promise and announced last May that it
intends to bring back nuclear power to Italy. On September
16, EmbOffs met with Daniele Mancini, Diplomatic Advisor to
the Ministry for Economic Development, to get an up-date on
progress in this endeavor. Mancini told EmbOffs that the GOI
is committed to reviving Italy's nuclear energy program, with
a goal of starting construction of nuclear energy plants in
five years. Mancini explained that Economic Development
Minister Scajola's objective is to achieve an Italian energy
mix of 50 percent traditional sources (oil and clean coal),
25 percent renewable and 25 percent nuclear. Mancini told us
Italy would be purchasing nuclear power plants
""off-the-shelf"", and added that the exact procedure under
which the purchasing decisions would be made is still
unclear. Asked if the GOI would be purchasing plants
directly, or if an Italian firm would be tasked with managing
the sub-contracting, Mancini reiterated that these aspects
are still unknown. He made strong references, however, to
Italian electricity parastal ENEL, and suggested it will have
a key role in the process (i.e. prime contractor). On next
practical steps, Mancini said the GOI expects to have by
year's end an approved plan for the storage of nuclear waste
and the identification of 4 to 5 sites where the new nuclear
plants will be built. The decision process on choosing who
will build the plants will follow.

3. (C) Mancini's comments suggests that the French and the
Russians are already maneuvering and lobbying for contracts.
Firms from both companies may enjoy advantages derived from
already established ties with ENEL. Mancini said that ENEL
has already entered the nuclear field indirectly through
business deals with the French and Russians, and that
Minister Scajola has scheduled Fall visits to France and
Finland to learn more about the new nuclear plants being
built there. (Note: ENEL has a deal with France's EDF for a
12 percent stake on its new nuclear plants, the first new one
being built by French Areva in Flamanville. ENEL also bought
a nuclear power plant in Slovakia built by the Russians,
thereby acquiring Russian nuclear technology -- it is
developing expertise on how to run it. Areva is building
Finland's newest nuclear plant at Olkiluoto. End note).

4. (C) On a separate September 11 meeting with EconOff and
FCS officers, Westinghouse representatives raised concerns
about French and Russian competition. Westinghouse said it
is interested in participating in a future Italian nuclear
energy sector, and would offer to build the company's newest
nuclear plant model (the AP 1000). Due to ENEL's French and
Russian business deals referenced above, however,
Westinghouse is concerned that the GOI will only consider
French or Russian nuclear technology options for the building
of power plants. In addition, ENEL reportedly told
Westinghouse that the French and the Russians are lobbying
the GOI at very high levels, but that the GOI is not hearing
from the U.S.

5. (C) Mancini also told us that foreign governments and
companies have started lobbying the GOI, and said
Westinghouse and its Italian partner Ansaldo Nucleare had
already scheduled to meet with him (Note: Germany's E.ON CEO
was in Rome on September 10 - 11 to discuss energy business
opportunities and, according to press reports, met with
Under-Secretary Gianni Letta, Environment Minister Stefania
Prestigiacomo and the President of Italian Energy Authority
Sandro Ortis. End note).

6. (C) Comment: We too have noticed that the GOI is being
lobbied by foreign governments at very high levels in an
effort to sway the Italians on its choice of nuclear
technology. During his September 10 trip to the UK, we
understand from press reports that Berlusconi discussed
nuclear energy cooperation with Gordon Brown. Moreover,
energy cooperation is likely to be a topic of discussion
during Berlusconi's scheduled November 7 trip to Russia, with
the signing of some type of energy cooperation agreement
already foreshadowed. Who Italy chooses to build its nuclear
power plants has important implications for U.S. interests.
Given ENEL's nuclear business stake with French EDF, its
growing commercial deals with Russia and Berlusconi's close
relationship with Putin, there is a possibility of an Italian
top down decision to go with either French or Russian nuclear
technology. In addition, corruption is pervasive in Italy,
and we fear that it may be one of the factors we will have to
contend with as this matter evolves. Either French or
Russian choice will shut U.S. companies out of of potentially
lucrative business opportunities. More importantly, a
decision to choose Russian nuclear technology will make Italy
further dependent on Russia for its energy supplies,
decreasing its energy security.

7. (C) Comment continued: That said, there is still time for
the U.S. to weigh in on Italy's choice of nuclear technology
partners. That decision will likely be made at the top
echelons of the GOI, and we should engage at the highest
levels if we want to ensure favorable consideration of U.S.
companies and protection of U.S. geo-political/energy
security interests. We recommend that Italy's nuclear power
options be on the USG's agenda during Berlusconi's Washington
October visit.

8. (C) Comment continued: The up-coming visits by Department
of Energy DAS Dennis Miotla, Department of Commerce DAS Jaime
Estrada/State CBA Special Representative Frank Mermoud and
Special Envoy Boyden Gray are excellent opportunities to
start engaging with the GOI, and to present U.S. nuclear
technology as a strong option to be considered. We recommend
that the DAS's, Special Representative and Special Envoy be
prepared to comment on U.S. views on possible Russian
participation in Italy's nuclear power program. The visiting
officials should also be prepared to remind their Italian
interlocutors of their obligations to carry out a fair and
transparent bidding process for future nuclear energy
contracts. These visits will be an excellent start for USG
efforts on this subject, but it is important to realize that
competitor countries are weighing in at the highest levels;
in our efforts to protect U.S. commercial and geopolitical
interests, we should be prepared to do the same. End comment.
SPOGLI "

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