Cablegate: High Level Energy Dicussions in Brazil Reveal Opportunities

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R 311705Z AUG 09
FM AMEMBASSY BRASILIA
TO SECSTATE WASHDC 4976
NSC WASHDC
DEPT OF ENERGY WASHDC
DEPT OF COMMERCE WASHDC
INFO AMCONSUL SAO PAULO
AMCONSUL RIO DE JANEIRO
AMCONSUL RECIFE
AMCONSUL LAGOS

C O N F I D E N T I A L BRASILIA 001092

CONFIDENTIAL

NSC FOR GARY SAMORE, RACHEL WALSH, LUIS ROSELLO, JOYCE CONNERY
DOE FOR ED MCGUINESS, GARY WARD, RUSS ROTH
COMMERCE FOR ITA/MAC/ANNE DRISCOLL, LORRIE FUSSELL
DEPT PASS EXIM FOR JOHN MORAN
DEPT PASS TDA FOR NATHAN YOUNGE
DEPT FOR WHA/FO, WHA/EPSC, WHA/BSC
DEPT ALSO FOR EEB MATT MCMANUS, BRIAN DUGGAN

E.O. 12958: DECL: 08/13/2019
TAGS: ENRG EINV SENV PREL MNUC BR NI
SUBJECT: HIGH LEVEL ENERGY DICUSSIONS IN BRAZIL REVEAL OPPORTUNITIES

REF: A)Brasilia 304, B) Brasilia 387, C) Rio 052, D) Rio 051,
E)Brasilia 765, F)Rio 014, G)Brasilia 253, H)862 Brasilia, I)
Brasilia 809

Classified By: Charge d'Affaires Lisa Kubiske, for reasons
1.4 (b) and (d).

1. (SBU) SUMMARY: High-level U.S. policy makers explored
opportunities for bilateral energy cooperation with Brazil, ranging
from oil exploration to civilian nuclear power, in multiple meetings
during the week of August 4 - 8. White House National Security
Advisor General Jones discussed with the Energy Minister and the
Presidential Chief of Staff the importance of bilateral cooperation.
Chief of Staff Dilma Rousseff called this a moment of opportunity for
building close relations, and, having previously suggested to other
interlocutors that we should have a strategic dialogue on energy,
cited energy as a primary component of enhanced relations. General
Jones also explored Petrobras' position in Iran and possible
cooperation in Nigeria. He heard from Petrobras executives of missed
opportunities for U.S. companies, with CEO Gabrielli saying that
Petrobras wants and needs U.S. cooperation in exploring Brazil's
promising pre-salt oil reserves, but finds partnering with the United
States difficult and cumbersome. They discussed a possible follow up
meeting to bring in more U.S. commercial interests. NSC's Dr. Gary
Samore met with the Ministry of External Relations (MRE) to discuss
the formation of a bilateral energy commission at the Department of
Energy Deputy Secretary level, an idea that was met with great
enthusiasm. The Ministry now awaits a draft proposal. MRE also
confirmed Brazilian interest in working with the NRC to cooperate on
regulatory matters. Samore got readings on Brazil's long term
civilian nuclear energy plans from both MRE and Rio nuclear sector
leaders. He also heard further detail on some Brazilian interests
for nuclear cooperation and insight into U.S. commercial prospects as
Westinghouse prepares to bid for the planned contracts for 4 - 8 new
nuclear plants. With these visits and reciprocal visits by Brazilian
Energy officials to Washington (Septel), we have developed an
extensive list of possible opportunities for energy cooperation.
What remains to be done now is to select the most promising
possibilities and define a path forward. END SUMMARY

JONES - Ministry of Mines and Energy (MME)
-------------------------------------------
2. (C) At MME, General Jones received a complete briefing on the
energy sector in Brazil, led by Minister Edison Lobao and Deputy
Minister Marcio Zimmermann, with multiple industry and governmental
energy sector leaders in attendance, many having flown in from Rio.
General Jones expressed U.S. interest in cooperation with Brazil in
the energy sector. Responding to General Jones' question on
operations in Iran, Petrobras CEO Sergio Gabrielli said Petrobras
explored two dry wells in Iran and is now terminating exploratory
activity, although a small office is being left open. (see reftels
A-C) Turning to Nigeria, Jones cautioned that the country risks
becoming a failed state in less than 10 years, with ramifications for
both public and private investment. Though Gabrielli observed that
Petrobras's investment in Nigeria is far off-shore, General Jones
pointed out that a Shell platform had been attacked 100 miles
off-coast. General Jones noted the importance of leadership of oil
companies in staving off potential collapse and invited Petrobras to
participate in that effort. Gabrielli made no commitment.

3. (SBU) In a smaller pull aside immediately following, Gabrielli
told General Jones that Petrobras wants and needs U.S. cooperation in
exploring Brazil's promising pre-salt oil reserves, but too often
dealing with U.S partners, such as Exim Bank, involves a lot of
paperwork and slow response. Petrobras is attracting investment from
China, Canada, France, Norway and others. In Gabrielli's judgment
the United States is under-represented (Reftel D and F). Petrobras'
CFO Barbossa said Petrobras' planned capital expenditure of USD 174
billion offers "lots of opportunity," as well as more indirect
investment through the supply chain that supports Petrobras. He
advocated opening new ways of cooperating, extending credit, working
with the Brazilian national development bank BNDES, etc. Barbossa's
assessment was that it will take too long to access the USD 10
billion offered by Exim and still not fulfill all the needs.
Ambassador Sobel's suggestion that Petrobras host a set of meetings
for a group of 3-4 major US companies, headed on the U.S. side by NSC
Deputy Director Michael Froman or other senior USG official, was well
received by all in attendance.

Jones with Dilma Rousseff - "Moment of Opportunity" for Energy
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
4. (C) Presidential Chief of Staff, and President Lula's preferred
choice as a successor, Dilma Rousseff, raised what she called her
"favorite subject," energy, in a separate meeting with General Jones.
Responding to General Jones' stated desire to ensure the Brazilian
energy community has the right U.S. counterparts to move energy
cooperation forward, Rousseff concurred these ties are extremely
important. She cited specifically the need for goods and services to
support the exploitation of pre-salt oil reserves. She pointed out
that Brazil is moving closer to operationalizing these reserves and
in fact the committee developing the new regulatory framework was set
to present its proposal to President Lula the following day, August
6. (Note: The report is due to be made public August 31) (Reftel E).
Saying it is "frightening" when Brazil has relatively closer
relations with other countries than with the United States, given the
historic relationship between our two nations, she called this a
moment of opportunity for building close relations. She highlighted
biofuels, nuclear, and hydropower as significant areas of
opportunity. To build on these areas of opportunity, Ambassador
Sobel noted that in a meeting on July 30, the head of Brazil's
national development bank, BNDES, and the Head of Exim Bank discussed
new ways to work together on projects with input from both sides,
including possible joint financing for projects in Sub-Saharan
Africa.

Samore at MRE - U/S Amado
--------------------------
5. (C) On August 7, WMD Coordinator and Special Advisor to the
President, Dr. Gary Samore, met with the MRE Under Secretary for
Energy and High Technology Andre Amado to discuss civilian nuclear
energy cooperation. Amado, opining on the Brazilian civilian nuclear
energy program, speculated that any significant decisions regarding
the contracting of 4 - 8 new nuclear plants would probably be delayed
until after the 2010 Presidential election, particularly since site
selection for the new plants would be greatly complicated by election
year politics. Additionally, financing and the type of technology to
seek are questions to be resolved. "There are a few key people with
differing positions. We have to get our act together." He confirmed
that he sees the eventual goal as producing reactors domestically (a
statement at odds with the view expressed by the President of
Brazil's Nuclear regulatory body, para 9). Regarding nuclear waste,
he acknowledged "we know we have to deal with it," but "it's not a
pressing problem." He offered that technology transfer will be a key
issue in contracting.

6. (SBU) Dr. Samore explored increasing cooperation through a
bilateral commission on energy with a heavy nuclear focus, to be
headed on the U.S. side by Deputy Energy Secretary Daniel Poneman.
Amado was enthusiastic. DOE's Deputy Assistant Secretary for Global
Partnership in Nuclear Energy Ed McGuiness pointed out that DOE is
better positioned than ever to cooperate on nuclear issues and to
leverage technology expertise in our national labs, including small
to medium reactors. The idea of a commission would elevate the
concept of a working group that has been previously explored for
technical cooperation and help align the policy with the technology.
McGuiness also highlighted the role Exim can have in financing, how
the USG can help bring in suppliers on the nuclear side, how we can
cooperate on R&D, development of human capital, light water reactors,
and exchange of experts from Oak Ridge labs. Samore repeated the idea
of an exchange with MOD Chief of Staff Murilo Barbosa, who expressed
interest and suggested that Samore tour a Brazilian navy nuclear
factory on his next visit to Brazil.

7. (C) Amado was interested but cautioned wariness of institutional
infighting. Amado said that it is not clear who is in charge of
specific nuclear issues even within his own Ministry (Note: Amado
occupies a newly created position which has very recently added a
nuclear section, apparently one factor in said infighting. End Note).
To avoid pitfalls, Amado offered to be the conduit to pass along
initiatives to very specific working groups in the other ministries.
Econoff noted that to take advantage of DAS McGuiness' presence, the
Embassy was seeking meetings with MME and the Ministry of Science and
Technology to discuss the idea in more detail with the technical
agencies. (Note: Time did not permit the scheduling of such meetings
but MME in particular was very open to the idea. More important was
the signal to MRE that there would be direct communication on this
issue between the technical agencies). Dr. Samore committed to send
a proposal further outlining the idea. Dr. Samore also raised
cooperation between the GOB and the Nuclear Regulatory Commission.
Amado noted GOB interest, said it was a workable idea, and Brazil has
a clear interest in going ahead.

Samore Visits Nuclear Experts in Rio
-------------------------------------

8. (SBU) In Rio, Dr. Samore met with Brazilian Nuclear Energy
Commission (CNEN) President Odair Dias Goncalves. Discussing
bilateral cooperation, Goncalves noted that CNEN is reviewing its
goals on all bilateral cooperation, to focus on: 1) developing a new
research reactor, 2) storage of medium and low level radioactive
waste, 3) gaining public acceptance of long-term waste storage, and
4) establishing a new nuclear regulatory agency separate from CNEN, a
process which has already begun. In response to Dr. Samore's
suggestion that the U.S. and Brazil establish a special energy
commission, Goncalves observed that CNEN does not have sufficient
independent resources for exchanges that an energy commission would
entail. (Note: there are other parts of the GOB that potentially
could engage in such exchanges. End Note.)

9. (SBU) Regarding Brazil's broad nuclear plans, Goncalves said that
in spite of the GOB's strategic plan to increase nuclear power to 5
percent of the Brazilian energy matrix by 2030, CNEN is not striving
for excess nuclear capacity; has no plans to export yellow cake; and
has very little interest in developing reactor indigenous technology.
Of the latter, Goncalves said "It's not the best business in the
world."

10. (C) Electronuclear President Othon Pinheiro separately told Dr.
Samore that in the pending development of the civilian nuclear energy
sector, he believed that Electronuclear would be best served by a
public-private partnership to sell energy (51 percent government, 49
percent private would be ideal). Pinheiro also praised Westinghouse
as the strongest competitor for the 4 - 8 new reactors Brazil plans
to contract due to Westinghouse's safety record and the
characteristics of the Brazilian grid.

11. (C) COMMENT: This series of meetings builds on several recent
high level consultations to explore the most promising areas for
U.S.-Brazilian energy cooperation. A next step will be for Post to
meet with Brazilian officials further explore the many excellent
possibilities and to hear GOB Ministries' wish lists on cooperation
now that they are more aware of what we have to offer (this meeting
has been postponed until September 9). With that list in hand,
policy makers on both sides can begin to refine how exactly we choose
to cooperate. It will be important to work with MRE, a central
partner in this effort, but we will want to be careful to maintain
independent links to the technical agencies involved to allow for
ease of coordination and the most effective exchange of information.
Post would welcome the chance to comment on the proposal for a
bilateral commission. Based on Dr. Samore's meetings, it is clear
that cooperation on civilian nuclear energy stands to be a central,
and very positive, aspect of any future U.S.-Brazil bilateral energy
partnership. END COMMENT

12. (U) This cable was cleared with the respective delegations and
coordinated with AmConsulate Rio.

KUBISKE

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