TURKEY NUCLEAR ENERGY - ANNOUNCE IT AND THEY WILL

UNCLAS SECTION 01 OF 02 ANKARA 006948 SIPDIS SENSITIVE E.O.12958: N/A TAGS: ENRG EINV TRGY TU SUBJECT: TURKEY NUCLEAR ENERGY - ANNOUNCE IT AND THEY WILL COME REFS: A. ANKARA 6802 ¶B. ANKARA 6867 ¶1. (SBU) SUMMARY: Turkey is pursuing the ambitious goal of adding nuclear energy to its power mix over the next decade, and is seeking U.S. or French know-how as its technology of choice. Raised earlier this year when PM Erdogan visited France, nuclear energy cooperation was also hastily added to the energy laundry list for President Putin's recent visit. Given a strong environmental lobby and the challenge of gaining either private or government financing, it is not clear that Turkey's nuclear dream will be realized. End Summary. ¶2. (U) As mentioned in his September 21 meeting with Secretary Abraham and following up on statements made during SIPDIS PM Erdogan's July visit to France, Turkey Energy Minister Hilmi Guler announced in November that Turkey intended to build three nuclear power plants that would come into operation in 2011-2012. Guler asserted that the three plants would diversify Turkey's energy mix and stem an electricity shortage forecast for 2010 and beyond. He said the plants would meet up to 10% of Turkey's total energy consumption. Turkey has tried on two other occasions in the last thirty years to build a nuclear power station, but cancelled the tenders each time for cost and environmental reasons. In 2000, the GOT decided to abandon a planned - but oft-delayed - $4 billion 1,300 MW nuclear power plant at Akkuyu on the southern coast due to financial problems and opposition from environmental and anti-nuclear groups. ¶3. (SBU) Turkish Atomic Energy Authority (TAEK) President Okay Cakiroglu told EmbOffs in a December 3 meeting (Ref A) that the GOT was targeting three to four nuclear plants with 5,000 MW of generating capacity. He said the GOT's application of a special model for projecting technical limits and energy mix for hydroelectric, wind, coal, and gas generation had yielded the above amount of nuclear power as output. Cakiroglu said the plan was for the plants to come on line 2012-2015, but admitted that this was an aggressive schedule. The TAEK head stressed that the GOT would target only U.S. or French technology and that the negotiations would be "short and focused", aiming for financing by 2006 and construction start by 2007. Cakiroglu said they were talking to Westinghouse and other companies, focusing on the pressurized water reactor type. He noted the French were ahead because they were putting in place this technology in a new plant in Finland, whereas Westinghouse's new design was not yet licensed. In response to EconOff's query on financing, Cakiroglu recognized that private investors would have limited appetite for nuclear in general and this size of a project in particular. Therefore, he said that they would have to depend on government financing. Finally, Cakiroglu noted that TAEK now reported directly to the Energy Ministry, rather than the previous direct line to the Prime Ministry. ¶4. (SBU) In the aftermath of President Putin's visit, nuclear cooperation was included in the broad list of general energy cooperation (Ref B). The press reported that the Russian Energy Minister promised to send Russian nuclear experts and to help Turkey begin construction of nuclear plants. ¶5. (SBU) At a meeting at Baymina natural gas fueled thermal power plant in late November, plant management claimed that the government had "cooked" its model to gain the nuclear result. They described this as a political, rather than economic, decision, and contrary to the free market. Moreover, they noted it would increase Turkey's inflexible base production (to the detriment of natural gas, which is more flexible). The managers were skeptical of the GOT's ability to finance nuclear power plants. ¶6. (SBU) COMMENT: The GOT does seem serious about pursuing a nuclear option, but we agree that this is more for political than economic reasons. The assumption that the Turkish Government would provide the sizeable financing seems particularly unrealistic given Turkey's current IMF-supported efforts to reduce government spending and high debt. At the same time, Turkey's track record of unresolved problems with foreign investment in the energy sector make it similarly unlikely that foreign firms will be ready to fund expensive new nuclear plojects. Nevertheless, with strong economic growth seemingly set to continue and some observers predicting that electricity demand will outstrip supply by 2007, Turkey does need to start thinking creatively now about how to increase its production base. End Comment ¶7. (U) Baghdad minimize considered. EDELMAN