Identifier
Created
Classification
Origin
02ANKARA9166
2002-12-30 05:48:00
CONFIDENTIAL
Embassy Ankara
Cable title:  

AMB. MANN'S VISIT TO TURKEY

Tags:  ENRG ECON EPET AJ GG KZ TU 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 009166 

SIPDIS


STATE FOR E, EB/CBED, EB/ESC, EUR/SE
STATE PASS NSC FOR QUANRUD AND BRYZA
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO
USDOE FOR PUMPHREY/ROSSI


E.O. 12958: DECL: 12/20/2012
TAGS: ENRG ECON EPET AJ GG KZ TU
SUBJECT: AMB. MANN'S VISIT TO TURKEY

REF: A) ANKARA 8986 B) ATHENS 4043 C) ANKARA 6187


Classified by Econ Couns Scot Marciel, Reason 1.5 (b,d)


C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 009166

SIPDIS


STATE FOR E, EB/CBED, EB/ESC, EUR/SE
STATE PASS NSC FOR QUANRUD AND BRYZA
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO
USDOE FOR PUMPHREY/ROSSI


E.O. 12958: DECL: 12/20/2012
TAGS: ENRG ECON EPET AJ GG KZ TU
SUBJECT: AMB. MANN'S VISIT TO TURKEY

REF: A) ANKARA 8986 B) ATHENS 4043 C) ANKARA 6187


Classified by Econ Couns Scot Marciel, Reason 1.5 (b,d)



1. (C) Summary: AK party officials, including Energy
Minister Guler and three newly-elected parliamentarians,
confirmed their support for the BTC and Shah Deniz projects
to EB/CBED Ambassador Mann in his December 18-20 visit to
Ankara. Mann reviewed U.S. energy policy in the Caspian,
noting that U.S.-Turkish cooperation had been key to the
success of this policy and would be critical in the coming
months. Focusing on Shah Deniz in the run-up to February
sanction, Mann suggested that the U.S. and Turkey needed to
1) press Azerbaijan to do its part of the work as soon as
possible; and 2) press BP to fulfill its commitments, while
reassuring BP about the commercial conditions of the project.
Mann briefed the GOT on his recent meetings in Athens (ref
b),and agreed to relay a GOT proposal on price to the
Greeks. BP gas executives told Mann they were still
concerned about oversupply in the Turkish market. Mann
emphasized that, when assessing the economics of Shah Deniz,
BP must take into account the effect that failure to follow
through on the project would have on BP's other upstream
interests in Azerbaijan, and that BP CEO Lord Browne had
invested his personal credibility in supporting this project.
End summary.


Minister Supports BTC/Shah Deniz, Mann Outlines Next Steps
-------------- --------------



2. (U) New Energy Minister Guler emphasized to Ambassador
Mann and Ambassador Pearson in their December 19 meeting
that, personally and as a cabinet member, he was very
supportive of the BTC and Shah Deniz pipelines. He assured
us several times that he and the AK government would "do
their part" to ensure success of these projects. Noting that
he appreciated the key role the U.S. had played on East-West
energy corridor issues, Guler stressed that he looked forward
to continued close cooperation with the U.S.




3. (C) Mann reviewed U.S. policy in the Caspian, noting that
the East-West Energy Corridor was important in economic,
environmental, and energy terms, as well as strategically.
The BTC and Shah Deniz pipelines would fundamentally shift
the geo-strategic balance in the region, breaking the
Caucasus' dependence on Russia for energy resources and
energy transport. Mann noted that U.S.-Turkish cooperation
had been key to the success of BTC and Shah Deniz to date,
and would be critical in the coming months.



4. (C) On BTC, Mann emphasized that we had reached a critical
period in the construction phase. He urged Guler to help
ensure that BOTAS was able to carry out its operational
responsibilities. On Shah Deniz, Mann stressed that there
was much work to be done in the run-up to February 2003
sanction. He suggested that the U.S. and Turkey needed to 1)
press Azerbaijan to do its part of the work as soon as
possible; and 2) press BP to fulfill its commitments, while
reassuring BP that the commercial conditions were
sufficiently attractive for the company to go ahead with the
project. Mann noted that over the last month he had engaged
the Azeri government and BP officials on Shah Deniz, and he
urged Guler to do the same. Mann suggested it would be a
powerfully symbolic step if Minister Guler traveled to Baku
for his first foreign visit. Guler responded that he likely
would be accompanying AK Party Leader Erdogan to Russia the
following week, but he would seriously consider a separate or
adjoining visit to Azerbaijan.



5. (U) Guler also noted that the GOT would be engaging the
World Bank again on the issue of TPAO financing and the
negative pledge clause (ref c). He said he appreciated U.S.
engagement on the negative pledge clause in the past and
would value our continued support with the World Bank. Mann
responded that he would look into this issue upon his return
to Washington.


GOT Request for Help on Shah Deniz, Exports to Europe
-------------- --------------



6. (C) During the meeting with Energy Minister Guler, Energy
Undersecretary Yigitguden noted that the GOT had made good
progress on establishing a gas connection with Europe. He
had just returned from Brussels, where he had had a good
meeting with the European Commissioner, who said he wanted to
announce 2003 as the "Year of Connectors." However,
Yigitguden said, continued postponement of Shah Deniz
sanction was creating problems for the GOT in its efforts
with the Europeans. For example, BOTAS had stopped its gas
negotiations with Greece because of uncertainty about Shah
Deniz. BOTAS was unable to commit to the lower price needed
by the Greeks without knowing whether Shah Deniz gas would be
part of the picture. Yigitguden suggested that BOTAS could
propose to DEPA a multi-staged pricing structure whereby the
average price was lower than what DEPA was paying for Russian
gas.



7. (C) Yigitguden requested Mann's help in 1) encouraging the
investors to sanction Shah Deniz as soon as possible; and 2)
supporting their efforts with the Greeks. Mann responded
that his meeting in Athens the previous month had been very
positive; the Greeks were very enthusiastic about bringing
Caspian gas into Greece (ref b). Mann said he did not want
to interfere in the negotiations between DEPA and BOTAS, but
he would bring Yigitguden's proposal back to the Greeks and
encourage them to be flexible.



8. (C) MFA Deputy U/S for Economic Affairs Kilic also raised
Shah Deniz with Ambassador Mann. Kilic said that in an
October meeting with President Aliyev in Istanbul, President
Sezer had focused on Shah Deniz. Sezer told Aliyev that the
GOT believed SOCAR was impeding progress on the project, and
was extremely displeased at the delays. Sezer asked for --
and received -- Aliyev's personal intervention with SOCAR to
ensure the success of Shah Deniz. Ambassador Mann reiterated
that the U.S. and Turkey needed to 1) press Azerbaijan to do
its part of the work as soon as possible; and 2) press BP to
fulfill its commitments, and provide the company reassurances
about the Turkish market. Kilic noted that the GOT believed
-- even if Turkey only exported to Greece -- it could consume
all of the gas for which it had contracts. (Note: BOTAS GM
Bildaci told econoff December 19 that, unless there was a
significant change in other supply contracts or Turkey's gas
consumption, it would be difficult to convince BP that Turkey
could consume Shah Deniz gas when it came on line in 2006).



9. (C) Mann and Kilic agreed to talk and assess next steps on
Shah Deniz and exports to Europe after January 6, when
Ambassador Mann would be discussing these issues with
relevant U.S. Ambassadors at a regional Chiefs of Mission
conference in Washington.


AK Parliamentarians Support East-West Energy Corridor
-------------- --------------



10. (C) Over lunch December 19 with newly-elected AK Party
Parliamentarians Reha Denemec, Husnu Ordu, and Afif
Demirkiran, Mann reiterated U.S. policy in the Caspian and
again urged continued U.S.-Turkish cooperation. All three
parliamentarians were engaged, supportive, and well-informed.
Demirkiran noted that he did not anticipate any change in
GOT policy on either BTC or Shah Deniz.


BP Still has Commercial Concerns on Shah Deniz
-------------- -



11. (C) Alistair Ferguson, Business Unit Leader for the
Middle East and Mediterranean for BP Gas and Power, reviewed
for Ambassador Mann on December 18 his unit's commercial view
of Shah Deniz, including their continued concerns about
oversupply in the Turkish market (ref a). Ferguson said he
believed the GOT had the political desire to follow through
on Shah Deniz, but there was no commercial underpinning. He
noted that there were several steps the GOT could take to
help reassure BP that Turkey would take Shah Deniz gas at the
take-or-pay level; for example, establishment of an
entry/exit hybrid transit tariff and some type of political
protocol, whereby Turkish, Georgian, and Azeri leaders
reaffirmed their commitment to the project.



12. (C) Ambassador Mann responded that Turkish officials had
stressed to him that they were managing the gas market issues
in Turkey. Mann emphasized that when BP was assessing the
economics of the Shah Deniz project, it must take into
account two key issues: First, the effect that failure to
follow through on Shah Deniz would have on BP's other
upstream interests in Azerbaijan. Mann noted that Shah Deniz
and BTC were inextricably linked in President Aliyev's mind.
Second, BP must take into account that BP CEO Lord Browne had
invested his personal credibility in supporting this project.



13. (U) Ambassador Mann did not have an opportunity to clear
this cable.
PEARSON