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IdentifierCreatedClassificationOrigin
03ANKARA2459 2003-04-15 12:17:00 CONFIDENTIAL Embassy Ankara
Cable title:  

BTC OPERATIONAL ISSUES: PROGRESS, BUT CHALLENGES

Tags:   ENRG ECON EPET AJ GG KZ TU 
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					  C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 002459 

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: 04/15/2013
TAGS: ENRG ECON EPET AJ GG KZ TU
SUBJECT: BTC OPERATIONAL ISSUES: PROGRESS, BUT CHALLENGES
REMAIN


REF: A) ANKARA 2165 B) ANKARA 1724 C) ANKARA 1448


Classified by EconCouns Scot Marciel, Reason 1.5 (b,d)




1. (C) Summary: The GOT has made progress on outstanding BTC
operational issues since BTC Co sent a "material breach"
letter to Energy Minister Guler on April 7. Guler has named
a new manager for the BTC Directorate, and has committed to
increasing the project manager's authority. These
developments are promising, but we will continue to monitor
the situation closely to ensure that these initial steps lead
to resolution of the outstanding problems, which could
seriously jeopardize BTC if left unchecked. We will meet
with GOT officials over the next several days to reiterate
our concerns, and ascertain the GOT's action plan for
resolving all remaining issues. End summary.


Progress on BTC Co's Key Concerns


--------------------------






2. (C) BP's Turkey BTC Co General Manager, Yashar Latifov,
told econoff April 15 that important progress has been made
since BTC Co sent a "material breach" letter to Energy
Minister Guler on April 7. The letter, signed by BTC Co CEO
Michael Townshend, advises the Minister that the GOT is in
"material breach of its obligations under the Host Government
Agreement, and, therefore, under the Intergovernmental
Agreement," due to improper management of the Turkish segment
of BTC. Townshend requests that the Minister 1) give BOTAS
the necessary authority to manage the project; and 2) appoint
a qualified director of the BTC Directorate, BOTAS' BTC
subsidiary.




3. (C) Energy Minister Guler confirmed to Latifov on April 15
that progress had been made on both of these requests.
First, the Minister said, he had designated Fatih Ocali to
replace the current general manager of the BTC Directorate.
Latifov told econoff that Ocali was acceptable to BTC Co --
he had the right credentials (10 years as BOTAS Deputy
General Manager, from 1985-1995) and was close to Minister
Guler. Minister Guler also said he was working to ensure
that Ocali would have sufficient authority to implement the
BTC turnkey contract, but was still figuring out the
legal/administrative means of achieving this. Guler told
Latifov not to worry, "this is a one-party government and we
will get done what we need to get done." The BOTAS Board is
scheduled to approve the appointment of Ocali at its next
meeting on April 17.




4. (C) MFA officials told econoff that they shared many of
the concerns relayed in the "material breach" letter, and
they had briefed FM Gul to that effect. They noted that the
project already had experienced some delays due to BOTAS'
limited authority, but the situation had been exacerbated
with the dismissals of BOTAS GM Bildaci and Energy U/S
Yigitguden. MFA officials said U.S. concern about this issue
had definitely been registered -- the MFA had reported the
contents of E/CBED Ambassador Mann's letter to Minister Guler
to the Prime Ministry and to the Presidency. On the positive
side, these officials said, the BTC Co and Mann letters had
caused senior officials to focus on the problem and how to
resolve it.




5. (C) In addition to the steps mentioned above, other recent
developments may also contribute to resolution of the
outstanding BTC operational problems. Over the last week:


-- The GOT named Sami Demirbilek as the new Energy
Undersecretary, replacing Yurdakul Yigitguden;


-- Minister Guler appointed one of his personal advisors,
Mehmet Calil, to act as "BTC Coordinator;"


-- The Foreign Minister reportedly convened a meeting to
discuss an action plan for addressing the outstanding
problems.


Meet the Press


--------------------------






6. (C) The Turkish daily Radikal reported April 13 that BTC
Co had sent Minister Guler a letter, but got most of the
other facts wrong. For example, the article claims that BTC
Co notified the GOT that the project was three months behind
schedule, and had instructed the Minister to stop making
political appointments to BOTAS. Latifov spent most of April
14 doing press interviews to respond to the inaccuracies of
the Radikal article, with positive results: many of the
Turkish dailies on April 15 quoted an unnamed BTC Co official
as stating that BTC construction was not significantly
delayed in Turkey, and none of the existing problems were
insurmountable.




7. (C) In connection with the BTC Co letter story, at least
two Turkish dailies have reported that the U.S. no longer
supports the BTC project since it will soon have access to
cheap Iraqi oil. We are responding to these articles,
reiterating U.S. support for Caspian energy development and
successful completion of the BTC pipeline.


Comment


--------------------------






8. (C) BTC Co's "material breach" letter, followed by E/CBED
Amb. Mann's letter, seems to have spurred the Turks into
action. Guler's commitments to BTC Co are promising, but he
must now translate his words into results. We will continue
to monitor the situation closely to ensure that these initial
steps lead to resolution of the outstanding problems, which
could seriously jeopardize BTC if left unchecked. The GOT is
clearly aware of U.S. interest on this issue, but we will
meet with the new Energy U/S and the Prime Minister's Chief
Advisor over the next several days to reiterate our concerns,
and ascertain the GOT's action plan for resolving the
outstanding issues.
PEARSON