TURKISH PM ERDOGAN'S JULY 27-29 VISIT TO IRAN

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 004421

SIPDIS

E.O. 12958: DECL: 08/05/2014
TAGS: ENRG EPET IR IZ KNNP PREL PTER TU
SUBJECT: TURKISH PM ERDOGAN'S JULY 27-29 VISIT TO IRAN

Classified by CDA Robert Deutsch, E.O. 12958, reasons 1.4 (b)
and (d).


1. (C) Summary: According to MFA and ruling AKP contacts,
PM Erdogan urged the Iranians to cooperate with IAEA on their
nuclear program. The visit failed to produce an agreement on
an expanded project to transship Iranian natural gas: the
Turks sought a price reduction on their 1996 gas deal with
Iran, but the Iranians conditioned reduction on Turkish
agreement to ship Iranian gas to Europe, which the Turks
declined. The two sides will continue to negotiate on
Iranian gas, with the AKP government more inclined to deal
than the bureaucracy. The Iranians linked other commercial
and economic deals to a gas agreement; when it fell through,
so did they. End Summary.

Erdogan Depicts Visit as Part of Effort to Reach Out to
Neighbors


2. (C) PM Erdogan's July 27-29 visit to Iran was the first
by a Turkish PM in 11 years. Erdogan met with President
Khatami, First VP Aref, former President Rafsanjani, Islamic
Advisory Council President Adel, FM Kharazi, and the
Ministers of Defense and Oil. We spoke with AKP Vice Chair
for Foreign Affairs Saban Disli, PM Erdogan Senior Foreign
Policy Adviser Ahmet Davutoglu, and MFA DDG for South Asia
Ergin Soner. While Disli spun the visit as a success, Soner
dubbed it unsuccessful because of the failure to reach a gas
agreement; Soner said the Turks' expectations for the visit
were too high.


3. (C) Erdogan adviser Davutoglu downplayed the notion that
the visit was extraordinary. He asserted it was instead a
"normal" part of Erdogan's ongoing effort to reach out to
Turkey's neighbors. This was Erdogan's public line on the
visit. Davutoglu said the GOT set aside May through
September as a time to focus on relations with its neighbors,
pointing out that in that period Erdogan has also visited
Bulgaria, Greece and Romania; he is scheduled to visit
Georgia soon.

Gas Deal Falls Through...


4. (C) Erdogan and his delegation pressed the Iranians hard
to reduce gas prices under Turkey's 1996 agreement with Iran.
According to Soner, the Turks initially asked for an 18%
decrease, later lowering their request to 6%. The Iranians
refused to consider any reduction unless Turkey agreed to a
50-year deal to export Iranian gas to Europe. Soner said the
Turks estimate the deal the Iranians proposed would give Iran
$150 billion in sales revenue; in return, the Iranians only
proposed to give the Turks a "modest" transit fee. MFA
Deputy U/S for Economics Alev Kilic said that such a deal
would require significant infrastructure development and
compete with the transit commitments for the Shah Deniz
pipeline. Soner said the Iranians surprised the Turks by
presenting them with a draft agreement for the deal.


5. (C) Soner said that Erdogan initially told the Iranians
an agreement of this magnitude would take years to negotiate
and he could not agree to it during this visit. However, as
the visit progressed, Erdogan himself appeared to lean more
toward signing the deal. In the end, Soner said, Erdogan was
talked out of it both by MFA officials and his other
advisers. Energy Minister Guler affirmed this account,
telling us before the visit that he was fighting hard against
Gul and Erdogan's interest in the deal and noting afterwards
that he had expended maximal effort in Tehran to keep Erdogan
from caving. In a last-ditch effort to reach agreement,
Erdogan delayed his scheduled departure over five hours, but
to no avail.


6. (C) Both Soner and Disli (who accompanied Erdogan)
expressed displeasure at the Iranians' negotiating style on
the gas question. Disli described the Iranians as "very
stubborn" and "asking terrible things" during negotiations.
Soner, who was not present but claimed to have been
extensively briefed and read into the visit, characterized
the Iranians as "maximalist" and "not pleasant."


7. (C) However, according to Soner, one Iranian official
hinted that their delegation was not empowered to agree to
anything absent a deal on gas to Europe, even though ongoing
international arbitration on gas prices could result in a
more substantial reduction than the Turks were asking. Soner
interprets this a a sign that other Iranian officials behind
the scenes dictated the Iranian negotiating position.


8. (C) Davutoglu told us Turkey and Iran will continue to
negotiate on gas. Soner views the pipeline proposal as not
in Turkey's interest because it undermines demand for gas
from Turkey's Central Asian allies; is opposed by the U.S.;
and could result in surplus gas supply which Turkey could not
sell. Soner implied this is the MFA view, but told us the AK
government does not share this view. Indeed, despite the
failure to reach a deal, Disli asserted to us a pipeline will
give Turkey "influence" over Iran. Davutoglu said Turkey
will rely on the Shah Deniz pipeline and Central Asia for
transiting gas to Europe, but he added that Turkey needs to
diversify domestic gas supply sources.
... And So Do Other Ventures


9. (C) According to Disli and Soner, the Iranians linked
other economic and commercial issues, including better access
to Iran for Turkish companies, to agreement on gas export to
Europe. The Turks opposed this approach and sought to
negotiate each issue separately. Absent a gas deal, the
Iranians refused to reconsider allowing the Turkish-Austrian
consortium TAV to operate Khomeini International Airport. A
July 29 Tehran press report quoted Iranian Deputy Security
Minister Ahmadi as saying that Iran would not sign a security
deal absent a gas agreement, although the GOI later backed
off and signed.

Iran's Nuclear Program


10. (C) Soner said the Turkish side "extensively" discussed
Iran's nuclear program during the visit; Disli claimed
Erdogan talked about it with every interlocutor. Although
the Iranian press spun Erdogan's message as support for
Iran's nuclear program, Disli, Soner and Davutoglu all told
us that Erdogan's message was that the Iranians should work
with the IAEA and EU-3. Erdogan told the Iranians pressure,
including from the U.S., and resulting tensions, could
escalate if the Iranians did not take the IAEA seriously.
According to Soner, Erdogan encouraged the Iranians to make
"complete" disclosures to the IAEA about their nuclear
program. Davutoglu said Erdogan told the Iranians the Middle
East should be a "nuclear free zone." The Iranians gave
their stock reply that they are only developing nuclear power
for peaceful energy purposes. Asked why a country rich in
petroleum resources would want to do so, the reply was that
Iran wants to use its petroleum resources for export revenue.


11. (C) Soner claimed the MFA bureaucracy and the TGS are
convinced Iran is working to develop nuclear weapons, is
playing for time, and that this is a serious problem for
Turkey. However, Soner sees the AKP government as not
sharing these concerns. Indeed, PM adviser Davutoglu told
CDA that the nuclear issue affects Turkey only "indirectly"
and asserted it is not a "hot bilateral issue" for Turkey.
When CDA asked whether Davutoglu believes Iranian assertions
that they are only developing nuclear energy for peaceful
purposes, Davutoglu avoided the question, saying "it is
difficult to believe anyone" on the nuclear issue, and turned
the conversation toward Israel's nuclear capability.
Davutoglu said there needs to be "stronger evidence" of
Iran's intentions (alluding to the Iraq WMD allegations) and
for now does not see it as Turkey's role to challenge the
Iranian claim. Davutoglu added, without explanation, that
"the IAEA needs to do more."

Security Agreement


12. (C) The two sides signed a anti-terrorism agreement.
The Iranians promised to prevent PKK members from transiting
or operating in Iran, to share intelligence on the PKK, and
to turn over PKK members to Turkey. Turkey promised to do
the same with MEK members. The agreement does not give the
Turks the right of hot pursuit of PKK members fleeing into
Iran. Davutoglu and Disli portrayed the agreement as the
most important achievement of the trip, but according to
Soner, the two sides actually reached this agreement on the
technical level in Ankara two weeks before Erdogan's visit.


13. (C) Soner estimated there are currently 1000-2000 PKK
members in Iran. Both he and Disli attributed Iran's
willingness to reach agreement on the PKK to the Iranians'
professed recent problems with the PKK, including reported
clashes between the PKK and Iranian security forces.
Davutoglu said the absence of action against PKK/Kongra Gel
facilities in Iraq makes cooperation with Iran and Syria
essential to preventing infiltration of fighters into Turkey.

Iranian Internal Politics


14. (C) Both Soner and Disli said the Turks' observations
during the visit convinced them that conservatives are
gaining the upper hand in government while Iranian society as
a whole is becoming more liberal. Soner claimed the GOT
intended the visit as support for "reformists" like Khatami.
According to Soner, Khatami will visit Turkey at the end of
September "this time for sure." He claimed Erdogan turned
down an Iranian proposal that Supreme Leader Khamenei visit
Turkey.


15. (C) Soner said Erdogan reiterated the need for reform,
democracy, transparency and accountability in government, but
the Iranian response was "weak." Khatami told Erdogan he has
no base of support in the Iranian Parliament, which the Turks
interpret as a sign that he is in a poor position to make
reforms.

Iraq


16. (C) On Iraq, both sides expressed support for Iraq's
territorial integrity and equal distribution of resources,
and support for the IIG's efforts to prepare the country for
elections. Erdogan expressed concern for the situation in
Kirkuk. Erdogan did not raise Iran's attempts at undue
influence or questionable activities in Iraq. According to
Davutoglu, Erdogan stressed that no county should have any
ambitions in Iraq that would affect a peaceful transition to
an elected government. However, Davutoglu expressed
skepticism about Iranian sincerity on Iraq, adding his
assessment that Iran believes it stands to benefit from
internal chaos.


17. Minimize Considered. DEUTSCH