TURKEY U/S FOR ENERGY SAMI DEMIRBILEK BLAMES

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 001787 SIPDIS SIPDIS EUR FOR DAS BRYZA USDOE FOR ALAN HEGBURG USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK TDA FOR DAN STEIN E.O. 12958: DECL: 07/12/2017 TAGS: ENRG EPET EINV TU SUBJECT: TURKEY U/S FOR ENERGY SAMI DEMIRBILEK BLAMES GREECE FOR IGA STALEMATE REF: A. ATHENS 1398 ¶B. ROME 1511 ¶C. ANKARA 1709 Classified By: ECON Counselor Tom Goldberger. Reasons 1.4 (b) and (d) ¶1. (C) Summary: Turkey's Under Secretary for Energy Sami Demirbilek discussed stalled negotiations with Greece and Italy for Turkish transit of Azeri gas. Demirbilek voiced frustration with the Greek position, which insists on excluding Greek gas distributors from the requirement of 15 percent "net-back" reserves for gas that transits through Turkey. He explained that if the Greeks would get serious and agree, "The IGA could be signed in two days." Demirbilek was also not pleased, and blamed both BOTAS and SOCAR, for the slow rate of flow of initial Shah Deniz gas through BTE, but his most pressing concern is for Greece to get serious so that a draft Turkey-Greece-Italy gas agreement can be signed quickly. End summary. ¶2. (C) After reporting the efforts of EUR DAS Bryza to encourage Greece and Italy to accelerate the signing of the Turkey-Greece-Italy Inter-Government Agreement (IGA),we asked Minister of Energy Under Secretary Sami Demirbilek to share his views of the IGA negotiations. The question unleashed a storm of comments that pointed to Greece as the only reason an agreement has not yet been signed. Demirbilek expressed his frustration with Greek Ministry of Development General Secretary Nikos Stefanou, explaining "Two weeks ago it was one issue; one week ago it was another; and next week they'll insist on still another issue." ¶3. (C) Demirbilek went on to explain that the only issue left to be resolved is the application of "net-back" pricing on 15 percent reserves for the gas that will be distributed within Greece by independent companies. The Greeks cite the precedent set by the current DEPA (Greece) gas purchase agreement -- which does not include "net-back" reserves -- from BOTAS (Turkey) through the Turkey-Greece interconnector. Greece claims EU internal market legislation will not allow it to agree to terms for Greek independents that are different from DEPA's current agreement with Turkey. Demirilek calls this argument "illogical." He explained the BOTAS-DEPA agreement was made to show "good will" to Greece, 
and this gas comes from Turkey not Azerbaijan. The transit IGA is a new and different agreement for Azeri gas. Clearly exasperated, Demirbilek repeated the rational for Turkey's transit principle. The "net-back" modality is a simple principle that causes "no cost increases" to Greek customers and "makes no changes to Greek and Italian markets". The principle plainly recognizes a fraction of gas transiting Turkey is reserved for purchase at a price discounted from the destination price by the true cost of transit. Italy has fully signed-on to these terms for all gas to flow through the still-to-be-constructed Poseidon pipeline under the Ionian Sea. So too have the Azeris. The bottleneck is Greece. ¶4. (C) U/S Demirbilek made clear his desire to complete a draft agreement quickly and said, "The IGA could be signed in two days." He explained that he is "98 percent sure" that Turkish Energy Minister Gler would sign the draft agreement if the Greeks would accept the "net-back" modality. He said a draft agreement would then have to be approved by GOT cabinet ministers. While this might take time, it was, according to Demirbilek, a formality. When asked about the July 12 date as a possible cut-off date for GOT actions set 10 days before the elections, Demirbilek said there is no such deadline. However, he gave a warning to Greece, "If Greece wants to be certain who they are dealing with, they need to sign the IGA before the elections." ¶5. (C) Asked about the target commencement date for Shah Deniz Phase 1 flow to Turkey and about plans for the August 10 inauguration ceremony for the Turkey-Greece interconnector, Demirbilek said he is "still waiting for Azeri response" to Turkey's proposal that commencement begin upon first delivery (i.e. July 2, 2007). He also made several derogatory comments about Shah Deniz gas flows. Technical "mistakes" have been made by both BOTAS and SOCAR, and, by ANKARA 00001787 002 OF 002 way of example, Demirbilek described BOTAS reports of "blown membranes" by SOCAR and SOCAR's claims of "broken compressors" by BOTAS. Saying he will not worry about these "until they come across my desk", Demirbilek added, "There will be a hell of a lot of problems if the gas flows don't increase." Concerning the August 10 date for the inauguration, Demirbilek said, "Who knows?" He noted it is not certain whether or not Hilimi Gler will be Minister of Energy or whether a new government will be in place following the July 22 elections. Besides, without a draft IGA, there's not much to celebrate. ¶6. (C) Comment: As Demirbilek describes it, Turkey's position has been clear and unchanging throughout the IGA discussions. He could not have been clearer about his frustration with Greek negotiators and with his desire to quickly achieve agreement on terms for TGI gas transit. With the looming time pressure of elections, Demirbilek was reaching out for a U.S. intervention that could bring about change in the Greek position. End comment. Visit Ankara's Classified Web Site at http://www.state.sgov.gov/p/eur/ankara/ WILSON