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2003-03-19 10:36:00
Embassy Ankara
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						C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 001724 



E.O. 12958: DECL: 03/17/2013


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

1. (C) Summary: During CBED Ambassador Mann,s March 12
visit to Ankara, MFA and Ministry of Energy officials
requested his intervention with the World Bank on the
negative pledge clause issue (reftel) and with Greece on the
Interconnector Turkey-Greece (ITG). MFA Deputy U/S Kilic
also pressed for Ambassador Mann,s assistance in making
progress on the Balkan export route for Caspian gas to
Europe, suggesting a Turkey-Greece-U.S. meeting on this issue
on the margins of an April 3-4 conference in Istanbul. In
meetings with MFA and Ministry of Energy Officials, as well
as with the President and Prime Minister,s advisors,
Ambassador Mann emphasized that BOTAS needed sufficient
authority to meet its obligations under the BTC turnkey
contract. Ambassador Mann,s interlocutors uniformly
responded that they were aware of this issue and were working
to resolve it. End summary.

GOT Request for Help: TPAO, Greece Connection



2. (C) In a cordial, one-hour meeting on March 12, Ministry
of Energy Deputy U/S Nermin Berki and MFA Deputy Director
General Hakki Akil thanked Ambassador Mann for his continued
work toward the realization of the East West Energy Corridor.
Berki noted that February 2003 had been an important month
-- BTC had reached the "point of no return," the Shah Deniz
project had been sanctioned, and, on February 23, Turkey and
Greece had signed the Intergovernmental Agreement for the
Interconnector Turkey-Greece (ITG). Berki and Akil asked for
Ambassador Mann,s assistance on two issues: with the World
Bank on applicability of the negative pledge clause to TPAO
(reftel) and with Greece on the ITG.

3. (C) Berki said the World Bank,s negative pledge clause,
which prohibits TPAO from pledging its potential future
revenues in order to secure financing, presented a real
problem for the GOT. She said the World Bank had not yet
responded to the GOT,s request for a waiver of the clause,
but indications were that the waiver would be denied. Berki
said the GOT would appreciate Amb. Mann's support with the
World Bank on this issue. Amb. Mann responded that he could
not provide the formal USG position on a TPAO waiver without
further discussing the issue in Washington; however, he would
look into all the available options for TPAO with an eye
toward finding a positive way forward. Mann also encouraged
the Ministry of Energy to send an expert team to Washington
to discuss TPAO,s alternatives directly with the World Bank.

Caspian Gas to Europe and the ITG


4. (C) On the Interconnector Turkey-Greece, Berki and Akil

requested that Ambassador Mann intervene directly with the
Greeks (DEPA) to 1) urge them to conclude the sales purchase
agreement with BOTAS as soon as possible; and 2) urge more
flexibility on price. Akil noted that BOTAS was willing to
make concessions by not charging a transit tariff, but BOTAS
could not charge less than what it was paying for Shah Deniz
-- its cheapest -- gas. He added that what Gazprom was
currently charging DEPA was not a "real price," and was
designed by Russia to undercut the East-West Energy Corridor.
Russia,s recent attempt to increase the volumes in its
Western lines into Europe was another concrete sign of its
policy to undercut Caspian gas. Akil said the GOT was trying
to urge Greece to "think strategically" about its gas policy.

5. (C) Ambassador Mann responded that he understood both the
Greek and Turkish positions on this issue -- Greece,s
Gazprom contracts were indeed cheaper than what BOTAS was
offering, but it was difficult for BOTAS to charge less than
the Shah Deniz price. He emphasized that there must be a
sharing of incentives and risks. Amb. Mann added that he
could be more effective on this issue if he were better
informed about gas pricing policies in Turkey. Berki agreed
to try to send a BOTAS representative to Washington to
discuss these policies with Mann as soon as possible.

6. (C) BOTAS General Manager Bildaci, who was unable to meet
with Ambassador Mann, told econoff March 17 that, in his
view, the most important ITG issue on which Amb. Mann could
help was getting DEPA to commit to taking 2-3 bcm of gas
annually through the ITG, ramping up over several years from
the 1/2 bcm to which DEPA was currently committed to taking
(reftel). Bildaci emphasized to econoff that the volume
issue was more important than price. Bildaci added that the
Russians, latest plan was to transfer the gas Gazprom was
currently exporting to Turkey through the two Russia West
pipelines to the Blue Stream pipeline; that way, he said,
Russia could use the West pipelines to increase its exports
to Europe.

7. (C) In a separate meeting, MFA Deputy U/S for Economic
Affairs Alev Kilic asked for Ambassador Mann,s thoughts on
"next steps" for exporting Caspian gas through Turkey to
Europe via the Balkans route. Kilic emphasized the GOT
desire that the U.S., working together with Turkey and
Greece, engage to bring the Balkan countries rapidly and
concretely into their gas transportation network. Akil noted
that the Greek Development Minister Aksi Tsohatzopoulos, who
could be helpful on this issue, would be attending the
TURKIOG Oil and Gas Congress in Istanbul April 3-4. He said
the MFA had also formally invited Ambassador Mann to speak at
this conference, and thought this might be a good opportunity
for a U.S.-Turkey-Greece discussion of next steps.

BTC: Financing and BOTAS


8. (C) In all of his meetings, including with Chief Advisor
to the Prime Minister Ahmet Davutoglu, Presidential Energy
Advisor Volkan Ediger, MFA Deputy U/S Alev Kilic, and MENR
Deputy U/S Nermin Berki, Ambassador Mann emphasized the need
for successful implementation of the BTC contract in Turkey.
Mann asked each of his interlocutors for their help in
ensuring that BOTAS had sufficient authority to meet its
obligations under the BTC turnkey contract. Davutoglu told
Amb. Mann that he had discussed the "BOTAS problem" with
Energy Minister Guler, who was an old fried. He said he
would raise the issue again with the Minister, and would do
his best to fix the problem.

9. (C) Berki and Akil told Mann that Bildaci had presented a
comprehensive explanation of the problem at a recent lunch
with Foreign Minister Yakis and Energy Minister Guler. Berki
said Guler is committed to resolving this issue as soon as
possible. Ambassador Kilic also gave his reassurances that
the GOT was working on a resolution of this issue.

10. (C) Kilic and Akil both thanked Amb. Mann for his
assistance in facilitating the recent
Turkish-Azeri-Georgian-BP visit to Washington to discuss
financing. Both said there were still concerns about the
delay in finalizing the financing deal. Ambassador Mann said
he felt confident that the financing arrangements were in
good shape. The IFC had told President Aliyev it would make
a final decision on financing by September, and Mann believed
that date would stick.

Meetings with Advisors and Parliamentarians


11. (C) In a meeting with Chief Advisor to the Prime Minister
Ahmet Davutoglu, and lunch with Presidential Energy Advisor
Volkan Ediger and AK party parliamentarians, Ambassador Mann
reviewed U.S. energy policy in the Caspian, noting that
U.S.-Turkish cooperation had been and would continue to be
key to the success of this policy. Davutoglu began a
spirited discussion of Iraq. Ambassador Mann strongly
reaffirmed the need to work positively within the U.N. to
deal with the threat proposed by the Iraqi regime.



12. (C) Ambassador Mann,s visit was extremely valuable in
getting the GOT to focus on BOTAS implementation of the BTC
contract in Turkey. Mann,s interlocutors seemingly had
anticipated his raising the issue, and uniformly responded
that they were aware of the problem and were working to fix
it. We note the MFA pressed hard to make progress on the
Balkan export route, directly requesting USG assistance on
next steps. End comment.