TURKEY - PUSHING ON THE SOUTHERN GAS CORRIDOR

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 001286

SIPDIS

SIPDIS

USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
EEB FOR A/S SULLIVAN
EUR FOR DAS BRYZA
SCA FOR DAS MANN
DOE FOR DAS HEGBURG
USTDA FOR DAN STEIN

E.O. 12958: DECL: 05/22/2017
TAGS: ENRG EPET PREL TU AJ RS IZ TX KZ
SUBJECT: TURKEY - PUSHING ON THE SOUTHERN GAS CORRIDOR

REF: A. ANKARA 1207


B. ANKARA 1121

Classified By: DCM NANCY MCELDOWNEY FOR REASONS 1.5 (B AND D)


1. (C) SUMMARY: Turkish officials express concern about the
announced Russia-Turkmenistan-Kazakhstan gas agreement,
worried that momentum is shifting away from the "southern gas
corridor" and Turkey's transit role. Turkish officials want
to redouble efforts to work with Turkmenistan, Iraq,
Azerbaijan, and other sources. We have urged Turkey to move
more quickly on gaining first Shah Deniz gas from Azerbaijan
-- for trans-shipment to Greece, as well as to initiate
serious discussions on the transit regime for future gas.
The EU-Turkey energy conference in Istanbul on June 5 should
be an opportunity for Turkey to harness EU interest and set
out Turkey's requirements for a transit regime, but there
remains the strong possibility that the EU will remain unable
to fashion a single vision and voice.


2. (C) In a May 23 meeting with MFA Energy Coordinator
Mithat Balkan, Ambassador pressed for concrete steps and
coordination on promoting links with Azerbaijan,
Turkmenistan, Iraq, EU, and others to advance the southern
gas corridor in the face of Russian pressure to augment its
control over Central Asian energy supplies. Noting that his
recent conversation with Energy Minister Guler (Ref B) had
been essentially the same as his conversation the year
before, Ambassador said we must avoid repeating the same
conversation (over and over) again. End Summary.

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Russia-Turkmenistan-Kazakhstan Deal Shifts Momentum
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3. (C) Ambassador characterized the three Presidents' May 12
agreement as:

-political rather than commercial;
-unclear as to what extent it was incremental;
-vague on the reference to a new pipeline; and
-a reaffirmation of existing agreements;

Balkan opined that in this region the political aspect is
all-important and a necessary precursor to anything
commercial. He noted that the GOT was concerned and had
organized high level meetings to assess the situation.
Ambassador described frequent, but quiet, visits by USG
officials to Ashgabat, which had made head-way in convincing
Turkmenistan to consider alternatives for new business,
without threatening existing business with Russia. Noting
that SCA DAS Steven Mann would travel again to Ashgabat June
3-5, Ambassador described efforts to explore short linkages
from western offshore Turkmenistan Petronas blocks over a
relatively short distance to connect to Azeri off-shore block
pipelines. Ambassador noted that BP was "intrigued" by the
concept. Balkan agreed that we cannot give up (because of
the Russian deal) and in fact we must redouble our efforts to
engage Turkmenistan on a Trans-Caspian Pipeline. He said
that Turkey was committed to send a high level delegation to
Ashgabat in June, but admitted that Ministerial level
participation may not be possible given the run-up to
national elections in Turkey. Balkan also reported that the
Azeri Foreign Minister was to travel to Ashgabat.

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First Critical Step is Azerbaijan - Another Invitation
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4. (C) Ambassador stressed that it was critical to get Azeri
gas into and through Turkey as a proof of concept for the
"southern gas corridor." He highlighted the importance of
starting symbolic gas flow by nominating volumes. Balkan
questioned whether the current flow from the Shah Deniz
wellhead was sufficient. Ambassador stressed the importance
of Turkey and Azerbaijan restarting high-level discussions,
noting that we had passed to Minister Guler information (from

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Embassy Baku) that SOCAR Head Abdullayev Rovnag had been
identified as chief negotiator. Balkan responded that Turkey
is ready, while the Azeris have not been, or have quibbled
about who in the Azeri government has competence to talk .
Ambassador noted that we understood that a new letter of
invitation from Guler to Natiq Aliyev was on the Minister's
desk for signature. Ambassador emphasized that the two
countries should meet to discuss the transit regime for
future gas flow. He noted Minister Guler's proposal that a
20-25% share of transit gas flow should be available to
Turkey at a "net-back" approach (downstream price less
transportation). Balkan -- and Energy U/S Sami Demirbilek in
a separate May 23 meeting -- noted that pricing for the
second year of the Shah Deniz I contract still had to be
negotiated. Demirbilek said directly that Azerbaijan should
request a meeting with Turkey, rather than the other way
around.

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Pushing EU - June 5 EU-Turkey Energy Gig
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5. (C) Balkan and Demirbilek placed great weight on the need
to get EU countries and the European Commission to be more
actively promoting the "southern gas corridor". Balkan
referred to the EU as a "loose link" in the chain, expressing
frustration that the commission is not active, and he
complained that the EU lacked any planned or common approach
to the region. Ambassador commented that the UK Ambassador
had voiced high hopes and low hopes for the June 5 EU-Turkey
energy conference in Istanbul. He saw it as a last chance to
educate and motivate both the commission and key EU members
to advance gas transit from the Caspian/Central Asia to
Europe via Turkey, but he admitted that it was not clear who
speaks for the EU. (Note: Our request for the Embassy to
observe the June 5 conference was denied by Brussels.)


6. (C) Noting that Austrian OMV remained focused on Iran as
a potential source for Nabucco, Balkan asked if the USG could
speak more to the Europeans on this and other issues.
Ambassador said that the USG policy on Iran was unchanged,
and we have expressed that clearly and strongly in European
capitals, including Vienna. Balkan hoped that the U.S. could
help Turkey make the Europeans understand that Turkey needed
a "good deal" on transit; i.e., something that the Minister
of Energy can sell politically. He suggested that there was
still lively discussion within the Ministry on the range of
transit and hub options.

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Next Step on Iraq Gas Trilateral?
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7. (C) Ambassador pressed Balkan on building on the first
Iraq Gas Trilateral meeting March 9 in Istanbul, proposing
that the next meeting be scheduled on the margin of the Iraq
Neighbors energy working group, presumably in Turkey. He
also proposed that a MOU might be a useful outcome of the
next meeting. Balkan agreed that the Iraq process should be
pursued, noting that the likelihood of a Trans-Caspian
pipeline had been reduced or delayed, thus increasing the
importance of Iraq as a source. Demirbilek, however,
expressed concern that Iraq was not clear on intent to export
gas and quantities of gas reserves. However, he endorsed the
long term process and accepted that the meeting could either
be a stand-alone in Amman or on the margins of a Neighbors
energy working group in Turkey, where appropriate Iraqi
experts would presumbably be in attendance.


8. (C) COMMENT: The Turkish "principles" for a transit
arrangement (option to purchase up to a set amount at a
net-back price) seems to be a good basis to start a transit
discussion with Azerbaijan and other southern corridor
partners. This is an important evolution in Turkish thinking
that is not well understood beyond Turkey. The EU-Turkey
conference, which includes companies, should be a mechanism
for laying out these principles. At the same time, we need

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to get beyond the question of who takes the first step with
Azerbaijan. We will keep up the pressure in Ankara.

Visit Ankara's Classified Web Site at
http://www.state.sgov.gov/p/eur/ankara/

WILSON