TURKEY NUCLEAR QUEST AND U.S. TECHNOLOGY

UNCLAS SECTION 01 OF 02 ANKARA 005220 SIPDIS STATE FOR EUR/SE, EB/IFD, EB/CBA, EB/ESP, AND NP/RA USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK DOE FOR CHARLES WASHINGTON SENSITIVE EB/CBA FOR MERMOUD AND WALTERS E.O. 12958: N/A TAGS: ENRG EINV BEXP TU SUBJECT: TURKEY NUCLEAR QUEST AND U.S. TECHNOLOGY REF: A) 04 ANKARA 6948 B) ANKARA 3789 Sensitive But Unclassified. Please Handle Accordingly. ¶1. (SBU) SUMMARY: While Turkish officials prefer U.S. technology to implement its decision to develop a civilian nuclear power capability, Westinghouse and GE reps, both with previous bad experiences in Turkey, are skeptical about Turkey's will, capacity, and commitment to a transparent, non-political process. Post seeks to assure that U.S. technology gets a fair shot at the potential opportunity. End Summary. Announce it and they will come -------------- ¶2. (SBU) Turkey has announced its intention to diversify its energy mix by building three nuclear power plants (5000 MW) targeted for operation in 2011-2016 (Ref A). Press accounts have described high level discussions with France and Russia on nuclear technology. Meanwhile, GOT officials tell us they have a preference for U.S. technology, specifically Westinghouse's pressurized water reactors. Energy Officer made contacts with key providers of U.S. technology, GE and Westinghouse, to discuss their potential interest in the opportunity. Turkey pulled back from earlier attempts to develop civilian nuclear power for financial reasons. The Reticent Contenders -------------- ¶3. (SBU) Ankara-based Westinghouse rep Sukran Kose told EnergyOff on August 26 that Westinghouse would be ready to move forward on Turkey's projects, including helping to facilitate EXIM financing. She said that the 1997-2000 tender for the oft-delayed 1,300 MW plant at Akkuyu, on the southern Mediterranean, had been postponed (rather than cancelled) because of the economic crisis and corruption in the energy sector (Westinghouse was the leading contender). There was vigorous opposition from anti-nuclear and environmental groups. Kose said that the GOT aimed to build a second plant at Sinop on the Black Sea and the third site was yet to be determined. (Note: Post understands that Westinghouse has been busy working on projects in China and the owner of Westinghouse nuclear, BNFL, aims to sell this nuclear unit, so Westinghouse's appetite for new projects is unclear. Moreover, Westinghouse is still working on licensing of its newest AP1000 model. It is not clear to post if Ms. Kose still represents Westinghouse. An industry consultant gave us the following contact for Westinghouse nuclear project development overseas: Dan Lipman at 412 374 ¶6920. End Note.) ¶4. (SBU) General Electric, like Westinghouse, had an experience with an unsuccessful nuclear plant bid - in the 1980's. In an August 31 conference call with EnergyOff, Jaime Segura (GE Nuclear, Madrid) and Olcayto Yigit (GE Energy, Istanbul) expressed skepticism about Turkey's capacity and will to realize nuclear power projects. Emphasizing the cost of preparing a nuclear bid, they cited three criteria for evaluating investment: a) What are prospects for funding and what is the history of power generation? In their view, the experience in Turkey was bad: too much uncertainty in the rules of the game and dangling of BOO/BOT type investment models which were not acceptable. b) Adequate nuclear liability protection needed. They said Turkey fell short of EU standards. c) Interest in the GE Boiling Water Reactor type. They said that Turkey was neutral at best on this point. The GE reps said that without some sort of agreement or assurance that Turkey would favor U.S. technology, it might be difficult for them to proceed. They said that they had been approached by two partners (one from the defense sector and one energy) looking for potential collaboration, but they had not pursued it at this time. GE is focused on potential opportunities in the U.S. market. ¶4. (SBU) Comment: Both companies appear to not have approached the GOT to discuss the proposed nuclear projects. There are big obstacles for Turkey's quest: The biggest is how Turkey would generate the formidable financing need. GOT officials recognize that it represents a "long road". (It is not clear that GOT has established a comprehensive plan on timing, technology type, and location.) GOT officials interpret the failure of the U.S. to ratify the "Peaceful Uses of Nuclear Energy Agreement" as a serious impediment to adopting U.S. technology (Ref B). Finally, in light of Turkey's EU bid, there may be political pressure to advantage French or European technology. PM Erdogan first announced the most recent nuclear initiative while visiting France in July 2004 in what was seen as an attempt to curry French support for Turkey's EU bid. The GE reps said that GE's European Simplified Boiling Water Reactor (ESBWR) bid for the new Finland plant lost to French Framatone's EPR (European Pressurized Water) for political reasons. End Comment. McEldowney