Identifier
Created
Classification
Origin
07ANKARA1945
2007-07-31 03:49:00
CONFIDENTIAL
Embassy Ankara
Cable title:  

TURKISH ENERGY MINISTER ON GAS TRANSIT AND

Tags:  EPET ENRG TU 
pdf how-to read a cable
VZCZCXRO6440
PP RUEHAG RUEHDBU RUEHROV
DE RUEHAK #1945/01 2120349
ZNY CCCCC ZZH
P 310349Z JUL 07
FM AMEMBASSY ANKARA
TO RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHTH/AMEMBASSY ATHENS PRIORITY 8252
RUEHKB/AMEMBASSY BAKU PRIORITY 1525
RUEHRO/AMEMBASSY ROME PRIORITY 6670
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 3193
INFO RUEHIT/AMCONSUL ISTANBUL PRIORITY 3081
C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 001945 

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EUR FOR DAS BRYZA
USDOE FOR ALAN HEGBURG
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
TDA FOR DAN STEIN

E.O. 12958: DECL: 07/30/2017
TAGS: EPET ENRG TU
SUBJECT: TURKISH ENERGY MINISTER ON GAS TRANSIT AND
IRAN-TURKEY GAS MOU

REF: A. A) SECSTATE 99411

B. B) ATHENS 1464

C. C) BAKU 0917

D. D) ASHGABAT 0729

E. E) ANKARA 1850

Classified By: Classified by Ambassador Ross Wilson for reasons 1.4(b)
and (d).

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 001945

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: 07/30/2017
TAGS: EPET ENRG TU
SUBJECT: TURKISH ENERGY MINISTER ON GAS TRANSIT AND
IRAN-TURKEY GAS MOU

REF: A. A) SECSTATE 99411

B. B) ATHENS 1464

C. C) BAKU 0917

D. D) ASHGABAT 0729

E. E) ANKARA 1850

Classified By: Classified by Ambassador Ross Wilson for reasons 1.4(b)
and (d).


1. (C) Summary: On July 24, Energy Minister Hilmi Guler met
with Ambassador to discuss gas transit, energy security, and
the preliminary Iran-Turkey gas memorandum of understanding
(MOU). Guler expressed frustration with negotiations with
Azerbaijan about gas purchase and transit. Guler defended
the Turkey-Iran MOU as supporting Turkish and EU energy
security. The Ambassador expressed U.S. concerns and
explained the potential damage of Turkey's supposed
cooperation with Iran. Ambassador pressed Guler to build on
the success of TGI and complete the Azeri gas deal as the key
next step in Caspian gas strategy. End summary.

--------------
Turkey, Greece, Italy Transit Agreement
--------------


2. (SBU) Energy Minister Hilmi Guler confirmed that the TGI
agreement signed with Greece and Italy stipulates the
"net-back" pricing on 15 per percent transit volume that
Turkey sought. Guler believes the TGI gas agreement will
serve as a model for future Turkey transit agreements.
Regarding the changing dates for the first gas ceremony at
the Turkey-Greece border, Guler said Turkey and Greece are
now looking at September 15.

-------------- --------------
Gas Transit and Purchase Agreement with Azerbaijan
-------------- --------------


3. (C) Guler said that Azeri gas deliveries, which began this
month, had stopped "for a couple of days" because of pipeline
problems on the Azeri side. Turkey's measuring unit,
pipelines, and compressors are ready to receive gas. Guler
expressed frustration over the first gas commencement date
issue and his disagreement with the Azeri proposal for a
March 2007 start date. "If we can not agree on commencement
date, how can we ever reach agreements on the necessary
amendments for gas volumes and price after the initial
period? We want to see this issue resolved." Guler noted

appreciation for USG efforts to move the gas transit
negotiation forward. Ambassador said the U.S. understands
Azerbaijan is ready to meet and that a letter of invitation
was sent from FonMin Mammedyarov to Turkish FonMin Gul. Guler
was unaware of this letter and asked why the letter was not
sent to him. Guler agreed the U.S. could tell Baku of
Turkey's readiness to start negotiations.


4. (C) In a separate meeting on July 23, Energy
Undersecretary Sami Demirbilek told us he hoped the Azeris
would recognize that without Turkey's purchase commitments,
Shah Deniz investments would never have been made.
Demirbilek explained that the original intention of the
supply contract was delivery of 3.3 bcm of gas to Turkey at
discounted prices. With the Azeri-proposed commencement date
of March 2007, Turkey will likely receive 2 bcm or less.
Demirbilek said that the Azeris should reconsider their
position on the commencement date so that Turkey can receive
the intended volume of discounted gas.

--------------
Turkmenistan First
--------------


5. (C) The Ambassador briefed Guler on the messages PDAS Mann
and others had delivered to Turkmenistan (ref D),regarding
the need to create attractive commercial conditions for
investment, near-term opportunities to pipe PETRONAS gas
westward, and promising discussions beginning on a TCP to be
filled from new Turkmen production. The Ambassador
downplayed the significance of the May 12
Russo-Turkmen-Kazakh deal. The Ambassador explained the need

ANKARA 00001945 002 OF 003


to engage Turkmenistan at an appropriate pace. Recognizing
the progress in Turkmenistan, the Ambassador asked pointedly,
"How do we get a TCP finalized if there is an Iranian
pipeline for Turkmen gas?"

--------------
Iran-Turkey MOU
--------------


6. (C) Guler explained the Iran-Turkey MOU was signed to meet
the energy security needs of Turkey and Europe. EU countries
and companies are in continuous negotiation with Iran.
Turkey is about to lose its comparative advantage for Turkmen
gas because of recent agreements with Russia and China.
Guler noted that the U.S. doesn't support Blue Stream II
expansion, and there is no clarity on Azeri gas volumes or on
the time frame for Iraqi gas. "Where do we buy gas?" Guler
emphasized that he does not view Iranian gas as a "Turkey
issue" but rather as an EU and U.S. issue. Guler also said
the investment envisioned in the Iran MOU would require "at
least 3 to 10 years" to realize.


7. (C) In the separate meeting, Demirbilek characterized the
Iran-Turkey MOU as "good PR" just prior to the election. He
said the MOU lacked important details such as transit terms.
Demirbilek believes long and challenging negotiations and "at
least 5 to 6 years" would be required.


8. (C) The Ambassador conveyed serious USG concerns to Guler
as stated in ref. A. The sudden announcement of the possible
transit of Turkmen gas across Iran sends the wrong message to
Ashgabat. The Ambassador urged Guler to restate Turkey's
priority for TCP to Berdimuhammedov. Iranian control over
Turkmen gas will be no more helpful to Turkey than Russian
control of Turkey's supply. The Ambassador brought up UNSC
resolutions 1737 and 1747, and the likelihood of additional
sanctions, and he questioned Turkey's possible investment in
Iran's energy sector. Since the Iran nuclear crisis began,
not a single MOU by a foreign country or company has been
realized because companies recognize the risks. The
Ambassador also raised the Iran Sanctions Act (ISA). The
Ambassador said the U.S. has not had a big problem with
Turkey's limited volume purchases of Iranian gas but has many
concerns about investment in Iran, large-scale energy
reliance on Iran, and Turkmen gas transit through Iran that
could render TCP unviable.

--------------
How do I do my job?
--------------


9. (C) Guler recounted several meetings with Ambassador,
Secretary Bodman and others where he had explained Turkey's

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gas needs. The U.S. has given Turkey few alternatives: the
USG is against Blue Stream II; by 2011, the first Russian
Westward contract expires; Azerbaijan is without clarity;
Iran is risky and unreliable; and there has been no progress
in either Turkmenistan or Iraq. "How do I do my job?"


10. (C) The Ambassador explained that Blue Stream expansion
increases Turkey's reliance on Russia and bottles up Caspian
gas. Iran is unreliable and high risk. We recognize and
sympathize with Turkey's situation but the answer for Turkey
and for Europe is to work together and "make the Caspian
Energy Strategy work." The key next step is to complete
Turkey's purchase and transit agreement with Azerbaijan
thereby countering those who doubt Azeri gas will ever reach
Turkey and Europe. Turkey will send a strong signal to
Turkmenistan, Kazakhstan, and others that there exists a
working route to market for Caspian gas. Building on
Turkey's success with Greece and Italy, this agreement will
get the East-West Energy Strategy back on track.


11. (C) Guler reiterated Turkish support for TCP which he
said he had conveyed to President Berdimuhammedov. Guler
explained, however, that concrete steps for TCP must be taken
quickly. Guler repeated that energy supply security is vital
for Turkey. Turkmenistan has signed a deal with China, but
the U.S. has not responded. The U.S. also had no reaction
when Russia took a majority share of the

ANKARA 00001945 003 OF 003


Bourgas-Alexandroupolis (BA) oil bypass. Shell, Total, and
PETRONAS are doing business in Iran. What if Russia builds
the South Stream pipeline? Winter is coming; there's not
enough water to make electricity for our dams. Turkey has no
agreement on the commencement date with the Azeris. The U.S.
ISA legislation matters, and Turkey understands U.S.
sensitivities about Iran. But the U.S. needs to consider
Turkey's energy needs which are time-dependent.


12. (C) Comment: Although TCP remains a priority for Turkey,
Guler also views Turkey's transit country aspirations being
preempted by Russia's recent gas transit announcements and
the prospects that some European countries will make
premature and long-term contracts with Gazprom. The key to
breaking through Guler's laments is to get progress on the
Caspian and perhaps also Iraqi pieces of our regional energy
efforts. Ambassador recognized that all these are legitimate
issues. The key to overcoming Turkey's and the region's
energy problems is to realize progress on the pieces we have
worked--without sufficient success--for over a year. He
expressed frustration that both the Azeris and the Turks have
expressed readiness for a month or more to hold talks on a
transit agreement, but nothing has happened. This isn't what
countries that need to sell and buy gas should do. An equally
frustrated Guler concluded that he is ready to cancel all his
appointments and meet immediately with the Azeris and any
others to get matters moving. End comment.

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

WILSON