TURKISH OFFICIALS QUESTION IRAQ IMPACT ON ENERGY

C O N F I D E N T I A L ANKARA 000400

SIPDIS


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


E.O. 12958: DECL: 01/16/2013
TAGS: ENRG ECON EPET ETTC IZ AJ GG KZ TU UNSC
SUBJECT: TURKISH OFFICIALS QUESTION IRAQ IMPACT ON ENERGY
INTERESTS

Classified by DCM Robert Deutsch, Reason 1.5 (b,d)



1. (C) Summary: Turkish officials have begun to ask about
the potential impact of an Iraq operation on Turkish energy
interests, raising with us the possible effect on BTC, Shah
Deniz, the Kirkuk-Ceyhan pipeline, and Turkey's oil supply.
BOTAS is worried about the potential impact on Iskenderun
port, where all BTC pipe is scheduled to be delivered and
stored. End summary.



2. (C) Recent conversations with and quotes from Turkish
government officials indicate that they are starting to focus
more on the potential impact of an Iraq operation on Turkish
energy interests. In his December 27 meeting with Treasury
U/S Taylor and U/S Grossman, State Minister Babacan expressed
concern about the potential impact of an Iraq operation on
the Baku-Tbilisi-Ceyhan (BTC) and Shah Deniz pipelines, as
well as on the Kirkuk-Ceyhan oil pipeline. Other GOT
officials have expressed concern about the possibility or an
interruption in oil supplies.



3. (C) BOTAS General Manager Bildaci asked econoff January 6
if there was anything the U.S. could share regarding the
potential impact on Iskenderun port in the event of an Iraq
operation. Bildaci noted that delivery of pipe for the BTC
pipeline is scheduled to begin in mid-February and continue
throughout 2003. All pipe is scheduled to be delivered and
stored at Iskenderun port. Bildaci said that BTC Co had
asked BOTAS to agree to use other ports for pipe delivery and
storage in the case of an Iraq operation. He said agreeing
to this proposal would involve delays, contractual issues,
higher costs, and other operational issues. On the other
hand, Bildaci said, if an Iraq operation resulted in
restrictions on his use of Iskenderun port, he would face the
same problems.



4. (C) We told Bildaci we could not assess the potential
impact of an Iraq operation in a particular port for him,
recommending that he consult with Turkish MFA and military
officials. Regarding concerns about an interruption in oil
supply, we note that, according to the International Energy
Agency( IEA),as of October 1, 2002, Turkey's emergency oil
reserves were at 96 days of net import coverage (in days of
2001 Net Oil Imports),surpassing IEA's recommended net
import coverage of 90 days. Ministry of Energy officials
claim that Turkey is currently at a net import coverage of
approximately 104 days.



5. (C) Comment: The GOT may be concerned about a possible
cut-off of Middle East Oil, but they appear to have adequate
reserves to cover all but the most pessimistic scenarios.
BOTAS has a clear interest in keeping BTC costs down -- if
the price tag comes in under the USD 1.4 billion turnkey
contract fee, BOTAS keeps the profits. Still, even though
Bildaci is motivated in part by the bottom line, his concerns
about possible delays in BTC likely are genuine. End comment.
PEARSON