02 April 1998
TRANSCRIPT: ENERGY SEC. PENA ROUNDTABLE WITH PRESS IN MOSCOW
(April 1 event with U.S. correspondents based in Russia) (5730) Moscow -- Secretary of Energy Federico Pena told journalists April 1 that the Russian officials he met with expressed a commitment to continuing the "very positive and constructive relationship" between the two governments and to continuing the progress made under the Gore-Chernomyrdin Commission. "All the understandings and relationships we've had in the past will continue, and there will be no change in all of that at all," Pena said during a roundtable discussion with U.S. correspondents based in Moscow. Pena was in Russia for a meeting of energy ministers from the G-8 countries and to meet with Yevgeniy Adamov, acting minister of atomic energy, and other top officials. He noted that the energy ministers agreed on the need for "more transparency, stabilization of legal regimes and tax regimes, and all of the infrastructure that is necessary to invite and support investment." They also discussed the relationship between energy and global climate change, the role of nuclear energy and renewable energy, and nuclear safety, Pena said. The secretary said he congratulated Russian President Boris Yeltsin "on his public commitment to continue the economic progress of Russia in opening markets" and stressed the importance of continuing to try to resolve issues important to U.S. energy companies with investments in Russia. Pena said he also discussed Caspian Sea issues and reiterated U.S. support for "a multiple pipeline policy in the Caspian, including the Trans-Caspian pipeline from Baku to Dzheikhan, and we support the Caspian Pipeline Consortium (CPC)." Pena answered questions about a number of issues, including the U.S.-Russian partnership aimed at creating civilian ventures in formerly "closed" Russian nuclear cities; the Highly Enriched Uranium (HEU) agreement; sale of supercomputers to Russia; Iran; safety of nuclear reactors; START II and III; plans for a Clinton-Yeltsin summit; decommissioning of Russian nuclear submarines; the investment climate in Russia; and the increase in oil prices. U.S. Ambassador to Russia James Collins also participated in the roundtable. Following is a transcript of the event prepared by USIS Moscow: (Begin transcript) PRESS ROUNDTABLE WITH U.S. SECRETARY OF ENERGY FEDERICO PENA MARRIOTT TVERSKAYA HOTEL, MOSCOW APRIL 1, 1998 SECRETARY PENA: First of all, let me thank all of you very much for being with us this afternoon. If I might, let me just start with a few opening introductory comments and, of course, I will be happy to answer your questions. As you know, I am here primarily to participate in the Energy Ministerial, which we just had. This came out of the request President Yeltsin made in Denver at the Meeting of the Eight to which President Clinton and all the other leaders agreed. Since the United States chaired the G-7 all of last year, I had them working on preparing for this until the end of December of last year. We then passed the torch on to our friends in the United Kingdom, and they continued preparing for this ministerial. It has been an historic meeting. Never before have we all come together to talk about all these issues. I think it is not only symbolic, but important that the meeting was held here in Russia, given the important role energy plays in the Russian economy. I am very delighted to be here. I think you've all seen the communique we issued this afternoon after all the discussion we had, so I won't go over it with you. Let me simply summarize the general principles that we reached. One principle is that we all agreed that opening markets is important to all of the countries involved, that we want to see more transparency, stabilization of legal regimes and tax regimes, and all of the infrastructure that is necessary to invite and support investment. That was a major theme we discussed at the ministerial. Secondly, we talked about the importance of a number of energy issues, the interaction between energy and global climate change. We talked about Kyoto, how we can work together to meet our respective obligations there. We talked about the role of nuclear energy and renewable energy; we talked about safety. A whole range of issues have been discussed today in the ministerial. I am very pleased that it went well and, of course, you can ask me questions about the communique. The other purpose of my visit here, to Moscow -- this is my third trip in less than a year, I think -- was to have some very important meetings. One was to meet Minister Adamov, whom I had met the last time I was here, but of course now he is the Acting Minister for Atomic Energy. We talked about a number of issues. Let me quickly summarize the topics we discussed. First of all, we reinforced the very positive work we have done in the materials protection control and accounting project. We are now involved in 53 sites, including Russia and the newly-independent states, where we are helping secure sites which have sensitive materials -- that includes everything like fences, special pass keys, special locks, computerized accounting systems -- to track materials so that we know precisely and they know precisely what those materials are. That program has worked very well. Later on, in May, we'll have a delegation here from the United States Government to help commemorate some additional sites which have been completed. We talked about continuous progress there. We discussed at length a new initiative, which is also historic, and that is the Nuclear Cities initiative. Several weeks ago in Washington, D.C., when we held the 10th Gore-Chernomyrdin Commission (GCC) meeting, the Russian Government announced publicly that it has made a decision to convert 10 formerly-closed nuclear cities to civilian operations. Yesterday, we signed an agreement committing ourselves to work with the Russian government to do a number of things. Number one, by bringing in our own laboratories in the United States as part of the Department of Energy and our technicians and scientists there, by bringing in U.S. companies, and by refocusing another program we have called the Initiatives for Proliferation Prevention (IPP). This is a program that has been successfully used in Russia: to involve U.S. companies and laboratories to help Russian scientists who have been previously involved in nuclear/military work, to help them convert into a civilian manufacturing process. We signed that agreement yesterday, committing ourselves to work together on this Nuclear Cities Initiative. This is the story, and we are very pleased to be a part of this. We indicated some more progress we have made in our plutonium disposition cooperative strategy. As you know, the United States has a dual track effort to deal with plutonium disposition, and we noted the progress that we had made there. We look forward to a final completion of a major comprehensive agreement which will cover our cooperative efforts in plutonium disposition. We did talk about nuclear safety and the role of nuclear energy in Russia. The main message there is that safety is the number one priority. In fact, that was discussed in the ministerial meeting today, along with several other issues. Secondly, we had an opportunity to meet with First Deputy Prime Minister Nemtsov and I've also met with Prime Minister-designate Kiriyenko. Basically, the message there was that we, on behalf of the President and the Vice President, reemphasized the important relationship and strong partnership that exists between the United States and Russia, that we look forward to continuing the progress we have made over the last several years between President Clinton and President Yeltsin in particular, that a number of understandings, for example, were reached in the last GCC meeting in Washington that we want to see continue. There is agreement on all those fronts. We also congratulated President Yeltsin on his public commitment to continue the economic progress of Russia in opening markets, and to continue the momentum he started several years ago, which we will of course support. We also raised in these meetings the importance of continuing the progress we've made in trying to resolve a number of issues important to U.S. energy companies with investments here in Russia. We made a lot of progress in Washington several weeks ago, and we reached an understanding that we are going to continue that progress in the future. That relates to both continued work with the Duma and passing the amended PSA [Production Sharing Agreement] legislation, hopefully ultimately seeing the Duma pass a new tax reform legislation, and other issues related to opening the markets here and supporting our national investment here. We had a number of discussions about the Caspian Sea. As you know, that has been an area where we had a number of conversations over the last several months. Basically, we restated the policy of the United States: we support the development of the energy resources in the Caspian Sea. They are important to the future economic prosperity of the countries involved. It is also important to our own national security interests to diversify oil supplies. We restated the position we have had for some time now: we support a multiple pipeline policy in the Caspian, including the Trans-Caspian pipeline from Baku to Dzheikhan, and we support the Caspian Pipeline Consortium (CPC). These are examples of the kind of multiple pipeline strategy we support. Let me stop there. I think I've gone on too long already, giving you a flavor of some of the meetings we had and some of the subjects we covered. This has been a very productive trip. We have some more meetings and things to do today and tomorrow. I want to thank the ambassador and his team for once again paving the way to a lot of very helpful meetings. Q: Could you please tell us specifically which cities are involved in this closed cities agreement and what the program is? There is already a lot of interaction between laboratories. Are these laboratory cities? Is Snezhinsk one of the cities, or are these new cities that were engaged in production? SECRETARY PENA: I don't have a list with me today, but I believe we can produce a list. We'll get you the list of the ten cities. It is my understanding that several weeks ago in Washington this was the first formal official pronouncement by the Russian Government: they were going to specifically focus on these ten nuclear, previously-closed cities and open them up. So we will formally engage with the Ministry of Atomic Energy, pursuant to the agreement we signed yesterday, to work, for example, on the Initiatives for Proliferation Prevention. These initiatives will be an effort on the part of the United States Government, working through our laboratories, to work with their cities to create new civilian business opportunities for their physicists, for their engineers and their other technicians to do work that is not related to the work they used to do in the old days. Q: What's new here? This has been going on for some time. SECRETARY PENA: What's new is that most of our IPP work has been focused on the non-nuclear, open cities. In fact, we have already supported 3,500 scientists and other engineers here in Russia. Now we are going to refocus our IPP program and other programs specifically on the ten nuclear closed cities. In that sense, it's going to be a shift in our emphasis: we will focus on these ten facilities in a way that we have not done before. AMBASSADOR COLLINS: I think it would help to say that what I heard that's new is they are opening these cities, they are basically eliminating the restrictions on business development and other things in them. In other words, they are putting them into the civilian economy. You'll still have some closed facilities in them, but what they are really looking for is how you convert what was a mono-economy into something that will support a town based on science. They will also have to have school teachers, and stores, and all that kind of thing. They are taking them off the government rolls. This is really important. As you know, there are different flavors of these nuclear cities. Some involve laboratories with weapons research, and some of them are simply production facilities which are there. They have been trying for five years to find businesses for these and it's been a big, serious thing. SECRETARY PENA: Now we are going to engage and focus on resources, particularly on those 10 cities. Q: Am I right in understanding that this project will include production of civilian products that would specifically need the type of scientists that are in these areas? We are not just talking about the infrastructure... SECRETARY PENA: Yes, let me give you an example. No, I used the word infrastructure in a different context. At one of our laboratories in New Mexico, we have taken work that was previously done for military purposes -- those scientists and engineers have now formed companies, and they are now producing these products in the economy. Q: What company ... (off mike) ... SECRETARY PENA: GPS -- Global Positioning Satellite technology. Years ago, one of our laboratories developed a technology that was used for other purposes. They have transported that into a civilian use, and GPS is now available in the regular civilian economy. There are many examples like that: things we have done in our own laboratories, where people have left the laboratory system and formed their own companies. We want to share that expertise and that experience with the Russians, and they want to learn from that. That's an example of how we are going to engage. The idea is to form incubator companies where the scientists can now do regular work as business people, diversifying their economy. As the Ambassador said, getting them off the system they used to be in. This is a high priority for them, and we want to engage. Q: Will they continue to have some respect for themselves as scientists? SECRETARY PENA: Well, these are brilliant people, they are brilliant people and they've got tremendous talents. As we've seen in the United States, a number of our scientists have been able to transition into a civilian opportunity, and they are doing quite well. Q: I understand that the issue you discussed with Mr. Adamov, but didn't mention just now, is the Highly Enriched Uranium (HEU) agreement and ... (inaudible)... I've heard that idea floating around Moscow to change the implementing agent on the U.S. side, from the U.S. ... (inaudible) ... corporation to some agent that could pay for everything... and it's been suggested to me that ... SECRETARY PENA: (inaudible) ... two points. First of all, there are two parts of the HEU relationship. One part has worked very well -- our purchase of the low-enriched uranium. That has been a successful part of the relationship. You are right that we had some difficulties in addressing the natural uranium component. The Russian Government has sent us a proposal which is now being examined in the United States. This proposal will provide some other options of addressing this issue. We would like very much to resolve it. I would like very much to resolve it. After all, this is money we think will be very helpful to the Russian Government. We think there are some creative and new approaches we can explore to finally resolve this issue once and for all. Q: -- (inaudible) -- SECRETARY PENA: We have not seen the details of this proposal. We talked generally about this, but I think there is a way in which we can address this issue to resolve the concerns of the Russian Government and our concerns. Q: Mr. Pena, I'd like to make a point if I might. An incident which did not happen on your beat, but in fact remains a very -- many unanswered questions. It's concerning the supercomputers. There are two details of this which are relevant. The first is that the U.S. Government granted visas -- and I understand from various embassy sources that this was done almost certainly on a State Department level -- to at least three senior nuclear scientists from Arzamas-16 in 1996 to visit the IBM corporation. Their visas were supported by the IBM corporation. The clear understanding was that they would receive the supercomputers on the basis of that trip, and Minatom selected the supercomputers for which an export license was virtually declined. Now what I am trying to get a sense of is at what level was that decision taken? This is my first question. AMBASSADOR COLLINS: I am not aware of that. SECRETARY PENA: I don't know either. Q: The second question is to what extent that continues to damage relations? I think, as our State Department colleague mentioned last week off the record, that it was a debacle, a nadir, a low point in our natural nuclear cooperation. I was wondering to what extent that incident -- whereby Russia's Atomic Energy Ministry was denied access to supercomputers, but got them anyway -- was left with a high degree of resentment of the United States. Have there been any consequences, is there still a feeling of resentment? SECRETARY PENA: Let me go on record. We have expressed our concerns and disagreement about the fact that these computers were sold. As you know, there is an investigation ongoing in the United States both by the Commerce Department and the Justice Department. That investigation has not been completed, but we have expressed our concern about that sale some time ago. Until that investigation is completed, there really is not much more I can say about it. Our position is very clear. Q: Could I also ask what was the reaction of the then head of Minatom, Mikhailov? Was there generally a breakdown of dialogue with Mikhailov, and was there any pressure brought by the United States to remove him? SECRETARY PENA: Let me say I had a very constructive and positive relationship with Minister Mikhailov. I worked with him for almost a year. We saw lots of progress on the Materials Protection Control and Accounting program, on plutonium disposition, on the Mayak facility, on many issues. This was a Russian Government decision. We were not involved in that at all. We don't get involved in internal Russian politics. I can say that I met Minister Adamov on my last trip here when we cut the ribbon for the new nuclear safety center he was heading. I spent five and a half hours with him yesterday and that is a reflection of how seriously and how positively he takes the relationship between the U.S. Department of Energy and the Russian Ministry of Atomic Energy. As you can see, we covered a wide range of subjects. I think that is very positive because it shows we are going to continue to work together very constructively in the future. Q: Nevertheless, what differences have you had? SECRETARY PENA: We've objected to Bushehr for some time now. We stated very directly and publicly that we do not believe doing that work in Iran is the appropriate thing to do; Iran's a country with which we have very serious questions as respects the support it has for a number of activities. That continues to be an objection of ours. Q: If you win an export deal, if the Russians decided to abandon that export tomorrow, would you arrive rapidly at the conclusion of a government-to-government nuclear cooperation agreement? SECRETARY PENA: We are not entertaining a hypothetical question like that. Generally speaking, let me say that probably the biggest obstacle to agreeing to what we call a 123 nuclear agreement with Russia has to do with activities in Iran. Q: Is there something else hidden there? SECRETARY PENA: That is the principle concern. Q: I had a conversation with some of the specialists in nuclear energy in Russia, and they were going over the list of some of the improvements that have taken place since the Chernobyl accident to that same type of reactor and to other reactors as well. I'm wondering, since this issue did come up, to some degree at least, what is your view of nuclear energy here, in this country, at this point? How safe is it and how ... (inaudible) ... should develop? SECRETARY PENA: We do believe there is an appropriate role for nuclear energy as part of the energy mix of any country. In the United States, we have approximately 110 nuclear reactors that play an important role in our energy mix, providing about 21 percent of our electricity. Our concern is safety. We have discussed the position that we all have, and that is that safety is the number one priority. That was discussed with the ministers this afternoon, and that has been our continuing concern. As long as international safety standards are being met, as long as we have assurances that those standards can be verified through international review, we think there is an appropriate role for nuclear energy here in Russia and anywhere else. Q: I guess my question was whether the standards are being met here, in Russia? SECRETARY PENA: We do have concerns about some of the older reactors. We do have concerns and we express those about the Kursk reactor. We have discussed the need to follow the agreements with the European Bank for Reconstruction and Development. The Russian Government has agreed to make available to us all documents -- appropriate documents and reviews -- to ensure that international standards have been met. Until such time, until these guarantees can be provided both to European Bank and to others, we believe that that reactor in particular, under the agreement with European Bank, should have a date set for its ultimate closure. Q: (Off mike) ... SECRETARY PENA: That's the main one. We've been very clear about our opposition to doing business in Iran in the energy field -- for a country that is engaged in the activities that Iran is engaged in -- and so we very much oppose this proposed pipeline that is going through Iran. We think that that's inappropriate, and so we are working, as you know, on another multiple pipeline strategy, which is economically feasible and which we believe will bring more economic benefits to more of the countries than other routes that have been considered. These can be business decisions made by companies. The United States Government is not building these pipelines; they have to be economically financeable. We think the Trans-Caspian Baku-Dzheikhan route is one of those. We also support the CPC. Those are a couple of examples. Q: -- (inaudible) -- the Iranian pipeline? SECRETARY PENA: As you know, there have been at least some tentative agreements reached between some parties in Turkmenistan and Iran and Turkey about the possibility of building a pipeline through Iran, with the involvement of some companies. We do not believe that is a wise option. Q: Which companies are involved? AMBASSADOR COLLINS: There is another basic point that I think is important to it. It doesn't really make a lot of sense to dump all the oil out of the Caspian down in the Persian Gulf, if you are looking for diversified, more secure ways of getting oil out on the market. Q: -- (off mike) -- SECRETARY PENA: We have raised that question also. We share the concerns that the Turkish government has about the congestion in the Bosporus. That's why we think that the Baku-Dzheikhan route makes sense: to ensure there are other options available. There have been accidents in the Bosporus and we very much hope that there aren't any in the future. I think it would be an unwise policy to rely exclusively or so heavily on the Bosporus. Q: The communique deals in some detail with the importance of restructuring the electricity sector. One of the problems the Russian nuclear plant operators always bring up is that they don't have any money to make safety improvements that they would need, that this feeds back into the restructuring idea. Did you get a sense of real commitment from Moscow to take up this problem? SECRETARY PENA: We've actually talked very specifically about what we believe to be a very direct connection between restructuring, furthering the economic viability of their power plants in particular, which then can lead to increased safety of those power plants. We think there is a synergism among restructuring, competition, additional revenue being brought in and safety. We certainly have seen that in the United States, and we talked about that at length and made that part of our communique. The other thing we talked about is how you can restructure either the electricity sector or the natural gas sector and still make sure that we are satisfying environmental concerns. The United States was proposing everything from a public benefits fund, which would make monies available for research and development, energy conservation, other things like that... We are also supporting a portfolio standard, which would require that by the year 2010, 5.5 percent of the electricity sold in the United States would have to come from a renewable energy source. A number of the countries that are going through restructuring are also being very attentive to this environmental impact. We talked a lot about that today during the energy ministerial, and there is a lot of sensitivity to try to do both: restructure our economies, but still be sensitive and supportive of environmental concerns. Q: What did the Russians say about this, if anything? SECRETARY PENA: They are very open to it. I'd say they want to understand how this is working in other countries. This is moving in a new direction for Russia, and, of course, there is experience, not only in the United States, but in other countries in this regard. We talked at length about how we can share those experiences among all of the eight ministers to support not only the Russian restructuring effort, but frankly, restructuring efforts that are still going on, for example, in the United Kingdom and some of the other countries, and in our own country. Q: In a broader sense, it's been two years since President Clinton was here, and it's been a year since the last summit meeting. Any discussion about the broad future of U.S.-Russian relations, and what will happen next? SECRETARY PENA: Yes. First, the message, on behalf of the President and the Vice President, is that we want to see the very positive and constructive relationship we've had between the United States and Russia continue, and the response was total agreement. The understandings we reached today were that all the agreements that we've reached, for example, in the Gore-Chernomyrdin Commission meetings, will continue. All the understandings and relationships we've had in the past will continue, and there will be no change in all of that at all. I think what was also very helpful was to hear from a number of Russian officials that they want to find a way to enhance these relationships. In the energy area, for example, where they recognized the importance of international investment, they are trying to find ways to not only support current investments, but to further those investments and that kind of support in the future. We are very pleased with the meetings we had. Q: Did they discuss the possibility of a summit soon? Did they bring up START II ratification? SECRETARY PENA: As you know, President Clinton has a proposed trip here, to Russia. He would very much like to begin to have specific discussions and negotiations on START III. We simply urged Russian officials to continue to work with the Duma to get START II approved as soon as possible. They will support that and they will exercise efforts to try to get START II ratified by the Duma. In addition, they will be meeting in Birmingham May 15-17, and so some of these issues I am sure will come up in the Birmingham Eight. We had very good conversations about these subjects. Q: You said the President has a proposed trip, that the President said he would not come basically until START II is ratified SECRETARY PENA: He would like to come here to begin negotiations on START III and to do that we have to have START II ratified by the Duma. I think that is a more positive way of describing it. Q: Did they talk about any projected time table for START II ratification? Next month? -- (off mike) -- SECRETARY PENA: We were generally talking about some time in April. That is, we were talking about it some time ago, but they are going through this transition now. They are focused on this. This is a very important priority for them and they have assured us that they are going to work as hard as they can to try and encourage the Duma to get it ratified as soon as possible. We very much understand this is a transition time for the Russian Government. The commitment and the motivation is still there and we were very pleased to hear that. Q: And President Clinton proposed that the summit take place in June basically? SECRETARY PENA: Perhaps not as specifically, but as I said, he would very much like to begin the specific negotiations on START III and to be there we obviously have to have START II ratified. Q: Was there a discussion of the problem of Russian nuclear submarine (decommissioning?) and the enormous costs that are involved-- (inaudible) -- SECRETARY PENA: I raised this in my last trip here in Moscow. I had two meetings with the Russian Navy. Number one, it was back in May or June of last year. We started our first pilot project in securing materials from the Russian Navy. They have been so pleased with that project that the leadership of the Russian Navy came to Washington several months ago to meet with me to expand our work with them. We have a relationship in the U.S. Department of Energy with the Russian Navy to secure certain materials, and I believe the U.S. Department of Defense has a parallel relationship with the Russian Navy. I think we are making progress, at least from this perspective, in helping the Russian Navy take care of the materials, to make sure that they are secure, as we have done with the ... (inaudible) ... in Russia. And ... (inaudible) ... Q: (inaudible)... how would you describe the development of the investor climate in the energy sector? Secondly, you are the first U.S. minister to meet Kiriyenko (inaudible)... SECRETARY PENA: Let me answer the first question first. If you were to have asked me this question six months ago, I would have said to you that, speaking on behalf of the U.S. energy companies, there were lots of questions and concerns about the future investment climate in Russia. Today, I think, most U.S. energy officials will tell you that the climate has improved, and they are much more optimistic about future investments in Russia. There is support for more movement. Specifically, the passage of the PSA legislation, the tax legislation we talked about and some other related issues like that. I must say that the momentum is positive, our companies are feeling better about the investment climate here. Four weeks ago in Washington, one of our companies signed an agreement with a Russian company, and we are hopeful, very soon, that another will be signed in the near future to resolve some of the issues that we've seen in the past. Q: ... (inaudible) ... SECRETARY PENA: I think there has been a very positive sentiment expressed by Russian companies themselves to form partnerships with U.S. companies and other international companies. That, I think, is quite positive, and we've seen that at a number of levels and in a number of energy sectors in Russia. Again, ask the U.S. companies about how they feel. I will speak with them, but I will simply report to you what they are telling me. They are feeling much better about the private sector climate in Russia, and also the governmental climate in Russia. I think all of them have been very positive. Obviously, there is more work to be done, but we are clearly moving in the right direction. Q: (inaudible) ... SECRETARY PENA: The ones that our energy companies raise with me fairly consistently: we need to get the tax reform done and the PSA legislation done. Obviously, the law of lists, but we have seen some progress there. Those are the main areas that people have concerns about. Q: (inaudible) ... Kiriyenko... SECRETARY PENA: As you know, I have known the former Minister of Energy and Fuel, Kiriyenko, for almost a year now. I have found him to be a very tough negotiator, someone who works hard, very bright. We had a constructive relationship; that's the way I can describe that relationship. As you know, he is spending a lot of time right now with the Duma members. We are very pleased we were able to spend some time today having a conversation. Q: What do you think Russia should be doing -- (inaudible) -- a glut of oil? SECRETARY PENA: You don't want me to speak about cartels, do you? Let me simply state what the U.S. position is, and I won't speak for the Russian Government. We recognize that with U.S. consumers there are events beyond the control of governments which have caused a decline in prices and an increase in prices. It's everything from the weather to the slowdown of the Asian economies to increased production by a number of countries. That can cause an oversupply of oil compared to world demand which, of course, drove prices down. Now we are seeing some of those forces go in the other direction. We are going to continue to be vigilant about this, obviously focused on what is best for you as consumers. That is our highest priority. Thank you all very much. (End transcript)
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