US embassy cable - 05YEREVAN1096

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 001096 
 
SIPDIS 
 
DEPT FOR EUR/CACEN, EUR/ACE, EB/ESC 
DEPT PLEASE PASS TO USAID EGAT FOR WALTER HALL 
DOE FOR CHARLES WASHINGTON 
 
E.O. 12958: DECL: 06/22/2015 
TAGS: ENRG, EAID, AM 
SUBJECT: GOAM WON'T COMMIT TO SHUTDOWN DATE FOR NUCLEAR 
PLANT, SPURNS EU OFFER 
 
REF: A. 04 YEREVAN 382 B. YEREVAN 1039 
 
Classified By: A.F. Godfrey for reasons 1.4 (b,d) 
 
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SUMMARY 
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1. (C) During a June 22 conference on Armenia Nuclear Power 
Plant (ANPP) Decommissioning, delegates from the European 
Commission reiterated their call for Armenia to close its 
nuclear power plant "reasonably early" due to safety 
concerns, and renewed an offer of 100 million euro in 
assistance to build new electricity generation capacity in 
exchange for setting a "relatively early date certain" for 
decommissioning.  The Minister of Energy said that the GOAM's 
position had not changed:  it will close the plant 
prematurely only if foreign donors provide adequate 
replacement that does not reduce Armenia's energy security or 
dramatically increase tariffs.  End Summary. 
 
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EUROPEAN COMMISSION TO RESTART DIALOGUE ON ANPP CLOSURE 
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2. (C) European Commission delegate Silvia Zehe used the 
conference to announce that the commission wants to "restart 
(their) dialogue on decommissioning and finding alternatives 
to the Armenia Nuclear Power Plant."  Adding that the EU, 
through TACIS, would continue its assistance to upgrade 
safety and security at the current plant, the European 
commission was "prepared to give 100 million euros towards 
building replacement capacity in exchange for Armenia setting 
a relatively early date certain for decommissioning ANPP." 
The EU offered the same deal that Armenia rejected in early 
2004 (ref A). Zehe added that she was "sorry" that it 
appeared that 100 million euros wouldn't be enough, and the 
Commission will look to other donors to help.  She suggested 
that the European Commission could work with the government 
of Armenia to assembly a "true donor conference." 
 
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TO CLOSE ANPP "PREMATURELY," GOAM NEEDS DIVERSITY 
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3.  (C) The Minister of Energy said that the GOAM's position 
had not changed:  The GOAM is "ready to decommission 
prematurely if adequate replacement is put in place."  The 
Minister stressed that adequate replacement means more than 
just 400 MW of generation capacity to replace that of ANPP. 
Replacement options should not dramatically increase 
electricity tariffs and must preserve Armenia's energy 
security with diversified sources.  (Were ANPP to close 
today, Armenia would depend on the single, poorly maintained 
gas pipeline through Georgia for 85 percent of it 
electricity.)  The Minister said that the minimum assistance 
necessary for Armenia to plan premature decommissioning would 
be soft financing for the remainder of the Iran-Armenia gas 
pipeline (septel) and new thermal generation capacity.  He 
estimated that such assistance would amount to USD 540 
million, not including any actual decommissioning costs of 
the ANPP itself. 
 
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COSTS OF CLOSING ANPP EARLY ARE PROHIBITIVE 
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4. (C) Even if the GOAM is able to guarantee diverse sources 
of fuel and energy, both Ministry of Energy officials and 
visiting US-funded experts have pointed out that the costs of 
closing ANPP early are nonetheless prohibitive.  The GOAM has 
set no money aside for actual decommissioning and spent fuel 
disposal costs, which could amount to more than USD 850 
million.  Aside from decommissioning, the cost of moving from 
cheap nuclear production, where Armenia bears neither the 
original construction costs nor the costs for 
decommissioning, to gas-fired generation or new nuclear 
generation that includes the life-cycle costs could reach USD 
100 million per year.  This alone would be more than double 
Armenia's total electricity generation costs. 
 
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GOAM PLANS TO OPERATE PLANT UNTIL 2016, MAYBE LONGER 
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5. (C)  In the absence of donor assistance to establish 
Armenia's energy security and generation needs, the Ministry 
intends to run the plant at least until it has been used for 
its thirty-year design life (until 2016). Nuclear experts 
from the U.S. Department of Energy who work with the plant 
have told us that there is no physical reason that the GOAM 
could not operate the plant until 2025, assuming the Ministry 
could pressure their friends at the Armenia Nuclear 
Regulatory Agency into granting an extended license.  Western 
energy experts tell us that the plant is much safer now than 
it was ten years ago (thanks to nearly USD 80 million in 
foreign assistance, including USD 43 million from the USG), 
but that continued operation will require more investment in 
safety, especially training for a new, second generation of 
personnel. 
 
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COMMENT:  ANPP WILL REMAIN OPEN, NOW WHAT? 
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6. (C) Since missing the first decommissioning deadline in 
2004, Armenia has been consistent in its position that it 
will not set a decommissioning date until its has guaranteed 
diversity in its electricity supply and reasonable end-user 
electricity tariffs.  The European Commission has floated the 
same offer that Armenia rejected last year.  The amounts that 
Armenia needs to establish diverse supply, to cover the 
higher of costs of non-nuclear generation, to replace its 
aging thermal power plants, and to pay for the 
decommissioning of the ANPP are daunting even if Armenia puts 
off decommissioning another 15 years.  American energy 
experts say, and we agree, that there is no viable 
alternative to operating ANPP at least until its planned life 
expires in 2016.  Accepting a deferred decommissioning, we 
are encouraging Armenia to start now to assess 
decommissioning costs and plan for its energy future.  ANPP 
will close someday, and Armenia will do well to tackle these 
challenges early, in a transparent fashion, that responsibly 
accounts for costs that are coming, inevitably, in the future. 
EVANS