TURKEY SAYS IT PLANS TO CUT STRAITS OIL TRAFFIC IN

UNCLAS SECTION 01 OF 02 ANKARA 000544 SIPDIS SENSITIVE SIPDIS USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK DOE FOR CHARLES WASHINGTON EUR ALSO FOR MATT BRYZA AND STEVE MANN E.O. 12958: N/A TAGS: EPET ENRG EWWT SENV TU RU SUBJECT: TURKEY SAYS IT PLANS TO CUT STRAITS OIL TRAFFIC IN HALF REF: A. 05 ANKARA 7078 ¶B. 05 ANKARA 6769 ¶C. 05 ANKARA 5080 ¶1. (sbu) SUMMARY: With oil transit traffic in the congested Turkish Straits continuing to grow, the Straits are regarded by some as nearing their capacity for maximum safe throughput. Yet, despite the commercial arguments, regional governments and oil companies have not been able to come to a consensus on additional Bosphorus "bypass" routes because of the old "first mover/free rider" conundrum. In what appears to be a strategy designed to break the conundrum and build support for Turkey's favored Samsun-Ceyhan pipeline project, Turkish officials have recently begun saying they will aim to cut tanker traffic in the Straits by more than half its current 3 mbd. Energy Minister Guler's February 8-9 visit is an opportunity to discuss these issues with senior Turkish energy officials. End Summary. Straits Conundrum -------------- ¶2. (sbu) The Turkish government is increasingly concerned about the continuing growth of oil tanker traffic in the Bosphorus and Dardanelles Straits and passing through the historic megalopolis of Istanbul. Current volumes of 140-150 million tons per year (3 million b/d),primarily come from Russia, but significant incremental volumes will increasingly come from Kazakhstan. ¶3. (sbu) While generally obligated to guarantee free commercial passage under the long-standing Montreux Convention, the GOT has over the years succeeded in imposing safety-linked limits on large tanker traffic (spacing, weather, and nighttime restrictions) and has done a good job of managing traffic growth. In its third year, the Vessel Traffic System (VTS) is seen as having done a good job in improving safety and efficiency in Straits management, particularly during the winter seasons, although key oil companies, such as Chevron and BP, are cautiously pushing for incremental improvements and efficiency in safety practices. The companies point out that the greatest safety risks come from small tankers, freighters and local traffic, not from the 7-8 well-regulated very large crude carriers used by major western companies that move through the Straits daily. ¶4. (sbu) Despite improvements in traffic management, there is broad consensus that the Straits are close to capacity and cannot handle unlimited increases in volumes. There is also recognition that the use of the Straits is not cost-free. Companies pay in the form of the extra costs of queuing and delays, which mount significantly during the winter. In addition, a Straits closure due to a major accident could be a significant disruption to global markets and a potential catastrophe for affected companies and Turkey. Given these considerations, there has been genuine commercial interest in potential Bosphorus bypass projects. The Bulgaria-Greece Burgos-Alexandropolos and the Turkish Samsun-Ceyhan routes are generally perceived as front-runners. The former is seen as cheaper and supported by Russian companies, while the latter is championed by the GOT as part of its vision of Ceyhan as a regional energy hub. ¶5. (sbu) Still, all parties are frustrated by their inability to move forward on potential pipeline bypass or multiple bypass solutions. The long-recognized first-mover/free-rider conundrum remains the stumbling block: Companies that commit to the investment and costs of a bypass would incur extra costs, while non-participants could continue to use the "free" existing Straits passage. ¶6. (SBU) In a new development that seems aimed at breaking ANKARA 00000544 002 OF 002 the impasse, the GOT has privately been spreading word that the current level of 140 million tons per annum of oil transit is untenable. Recent statements by GOT officials to us and company reps have cited a target of 65 million tons per year (a number put forth by the IMO 10 years ago as a safe capacity limit). This appears to be a carefully vetted position of the GOT. Company reps have told us they fear that this could be a prelude to a public relations campaign that would -- citing the risk of a disaster in Istanbul -- demonize the big oil companies without getting at the other factors that affect Straits safety. ¶7. (sbu) Comment: If this is indeed the GOT's strategy -- to force a consensus on Samsun-Ceyhan by raising the rhetoric about Straits and perhaps imposing artificial limits not justified by safety needs -- it seems like a non-transparent strategy that would be very likely to backfire. The GOT needs the support and good will of the companies for the major investments required to make Samsun-Ceyhan viable. A more transparent way to deal with the myriad issues linked to Straits transit and bypass issues would be for the GOT to work with regional producing and transit countries, as well as major consumers and companies, to build a broad consensus on the need for alternative routes and an understanding that "first movers" would not be penalized. Since this idea was discussed by Energy Under Secretary Sami Demirbilek and DAS Bryza in August (ref c),local reps of Chevron, BP, and BOTAS have told us their companies would support a broad participation conference that could create a genuine consensus on a bypass route (as well as assuring safety in the Straits). Minister Guler's upcoming Washington visit would be an excellent opportunity to review these issues. WILSON