VZCZCXRO7351
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHMO #0266/01 0361039
ZNY CCCCC ZZH
P 051039Z FEB 10
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6162
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000266 

SIPDIS 
NOFORN 

DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND GREENSTEIN, 
S/EEE MORNINGSTAR, EUR/WE, INR 
DOE FOR HEGBURG, EKIMOFF 
DOC FOR JBROUGHER 
NSC FOR MMCFAUL 

EO 12958 DECL: 02/05/2035 
TAGS EPET, ENRG, ECON, PREL, PINR, RS, IT 
SUBJECT: (C/NF) XXXXXXXXXXXX ON ENERGY INTERESTS, 
PUTIN-BERLUSCONI LINK (C-RE9-02730)
REF: A. STATE 8676  B. 09 MOSCOW 1273

Classified By: Econ MC Matthias Mitman for Reasons 1.4 (b/d)

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PUTIN-BERLUSCONI DIRECT LINK
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¶1. (C/NF) XXXXXXXXXXXX told us during a February 4 lunch that his Embassy and his Foreign Ministry often only learn of conversations between PM Berlusconi and PM Putin after the fact, and with little detail or background. He expressed frustration about the PMs’ “direct line,” which sometimes leaves the Embassy in the dark. He said if there is action to be taken, the cabinet secretary will instruct the Foreign Ministry or the Embassy without providing any background, and only note that Berlusconi and Putin had agreed on whatever the action item is. XXXXXXXXXXXX explained that while the close relationship is not ideal from the bureaucracy’s perspective and more detrimental than beneficial, it can be useful at times. He cited the case of the sale to Gazprom by Italian energy giant ENI of its 20% share in Gazprom’s oil subsidiary Gazpromneft.  He said Gazprom had insisted on paying far below the market price, but that it ultimately paid the market price after Berlusconi weighed in with Putin.

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ENI AND ENEL
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¶2. (C/NF) In response to our comment that ENI’s Moscow Representative, Ernesto Ferlenghi, won’t meet with us, XXXXXXXXXXXX said Ferlenghi “for some reason” doesn’t like to meet with foreign diplomats. (Note: We had a very open and friendly meeting with Ferlenghi about two years ago, but ever since, he has deflected our requests for a meeting. See also ref B.  End note.) XXXXXXXXXXXX said he believes Ferlenghi may have a directive from ENI headquarters to refer foreign governments to ENI’s Rome-based international governmental affairs director. While [XXXXXXXXXXXX, his cell phone rang -- it was Ferlenghi.  explained that although major projects such as the proposed South Stream gas pipeline gain the most attention, ENI’s main business in Russia is “buying gas.”

¶3. (C/NF) XXXXXXXXXXXX said the Italian Embassy is organizing a visit by a trade and investment delegation to Novy Urengoi, the Yamal region city that is a project site of Severenergia, an upstream joint-venture between Gazprom, ENI, and Italy’s Enel. Gazprom bought a controlling stake in Severenergia from ENI and Enel, which had set up Severenergia to purchase some of the assets of the former Yukos oil company at its bankruptcy auction. XXXXXXXXXXXX said that in addition to its investment in Severenergia, Enel also has approximately $6 billion invested in the Russian electricity sector and may raise its investment in that sector to $9 billion.

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SOUTH STREAM AND SAMSUN-CEYHAN
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¶4. (C/NF) XXXXXXXXXXXX also noted that ENI  XXXXXXXXXXXX and “we” (presumably the Italian government) have regular contact with Russian DPM and “Energy Czar” Igor Sechin. XXXXXXXXXXXX said that lately the discussions relate to an explicit business link between South Stream and the proposed Samsun-Ceyhan Turkish oil pipeline, of which ENI is the operating partner. He explained that ENI, and its Turkish partner (which he said is Turkish PM Erdogan’s son-in-law) need Russian oil to make Samsun-Ceyhan a reality, while Gazprom needs Turkish cooperation to move ahead on South Stream.

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COMMENT
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¶5. (C/NF) On major issues, it seems that Russian-Italian
MOSCOW 00000266 002 OF 002
economic relations are directed by PMs who have a direct line to each other as well as control over some of the largest assets of their respective economies. To whatever end they direct those assets, it is likely they are not doing so based solely on commercial or rate-of-return calculations. As our contact himself acknowledged -- “it seems that everything that happens at the lower levels is just for show.” Beyrle