TURKEY'S NUCLEAR POWER QUEST AS BEAUTY CONTEST

UNCLAS SECTION 01 OF 02 ANKARA 006056 SIPDIS USDOE FOR CHARLES WASHINGTON USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK STATE ALSO FOR EB/CBA FRANK MERMOUD SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ENRG EINV BEXP TU SUBJECT: TURKEY'S NUCLEAR POWER QUEST AS BEAUTY CONTEST REF: A) ANKARA 2143 B) 05 ANKARA 7390 Sensitive But Unclassified. Please handle accordingly. ¶1. (SBU) SUMMARY: Energy Ministry U/S Sami Demirbilek explained that due to legal and financial limitations, Turkey will rely on the private sector to realize its decision to add nuclear power to its energy mix. He told us that the government's role is limited to providing an electricity purchase guarantee, establishing clarity for the appropriate legal and regulatory environment, and encouraging companies to make the most attractive applications for licenses, terming the process a "beauty contest". Progress on ratification of the "Cooperation on Peaceful Uses of Nuclear Power" ("123") agreement would help American companies participate in this potential opportunity. The USG should consider offering assistance with its NRC (Nuclear Regulatory Commission) regulatory model and including Turkey in the Global Nuclear Energy Partnership (GNEP), building on discussions between Energy Minister Guler and Secretary Bodman in the U.S. last spring. Demirbilek looks forward to a possible meeting with the U.S. NRC at an IAEA meeting in Vienna in November. End Summary. -------------- --- Turkey's Passive Nuclear Quest as Beauty Contest -------------- --- ¶2. (SBU) In a September 28 meeting, Demirbilek cited the limitations of alternative sources (hydro, indigenous lignite, expensive natural gas imports) as a compelling reason for Turkey to add nuclear power to its energy mix. He emphasized that nuclear power would meet projected electricity supply shortfalls, promote grid reliability, increase diversification of supply, and reduce reliance on imported energy sources. Underscoring that the 2001 electricity law identified the private sector as the sole source of new energy investment, Demirbilek said the GOT was not going to build nuclear plants. Rather, the government's role is to 1) establish legal clarity and remove uncertainties for interested companies, 2) provide a purchase guarantee for electricity off-take, and 3) establish an appropriate regulatory regime. ¶3. (SBU) Demirbilek admitted that there was still lively debate within the GOT on the exact process and conditions for holding and awarding the "beauty contest" through which companies would apply for permits, but it would involve some combination of minimum electricity price and minimum purchase guarantee from the GOT. The U/S said a draft Nuclear Energy Law - aiming to establish clear legal and operating environment - was under consideration by the Cabinet of Ministers, but there was still some disagreement at the Prime Ministry and the State Planning Organization about the extent of state support that would be made available. Press accounts have reported a series of planning meetings of domestic and foreign companies convened by the Energy Ministry to hone next steps. Demirbilek said that the winner(s) of a potential "beauty contest" would be awarded a license and a purchase guarantee. He expected that domestic companies would partner with international ones to bring appropriate expertise and financing capability. -------------- -- Need for Assistance on Regulator - NRC as Model -------------- -- ¶4. (SBU) Demirbilek elaborated on Turkey's need for help in developing a regulatory approach, noting that the existing Turkish Atomic Energy Agency (TAEK) and the energy regulator (EMRA) were not equipped to play this critical role. Citing the U.S. NRC as a natural model, he said he hoped to meet with the U.S. NRC at an IAEA meeting in Vienna in November. Reminding us of discussions on cooperation for nuclear power with Secretary Bodman on Minister Guler's visit to Washington last spring, he noted that lack of ratification by the U.S. of the "Cooperation on Peaceful Uses of Nuclear Energy" was an impediment to U.S. companies' participation in projects. MFA told us that the GOT was also looking to Finland as a potential regulatory model for nuclear power. ¶5. (SBU) COMMENT: The U.S. is a natural model and partner for commercial and regulatory aspects of Turkey's quest to add nuclear power to its energy mix. Including Turkey in the Global Nuclear Energy Program (GNEP) - targeting developing countries seeking to embark on new programs, offering our NRC as proven regulatory model, and seeking to advance the stalled "Peaceful Uses" ("123") agreement would facilitate U.S. contribution to this opportunity and help dissuade Turkey for aiming at lowest cost alternative providers. It is not clear how timely or successful Turkey's "beauty contest" will be in attracting the responsible international community to ANKARA 00006056 002 OF 002 supporting Turkey's peaceful nuclear power quest. Wilson