ENERGY MIN TELLS A/S SULLIVAN READY TO TRANSIT

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 000407

SIPDIS

SIPDIS

USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
DOE FOR CHARLES WASHINGTON AND LANA EKIMOFF
EUR ALSO FOR MATT BRYZA
SCA ALSO FOR STEPHEN MANN

E.O. 12958: DECL: 02/26/2017
TAGS: ENRG EPET PREL TU GG AJ RS IZ
SUBJECT: ENERGY MIN TELLS A/S SULLIVAN READY TO TRANSIT
AZERI GAS TO EUROPE

REF: A. ANKARA 17

B. 06 ANKARA 6763

C. 06 ANKARA 6736

Classified By: AMBASSADOR ROSS WILSON FOR REASONS 1.5 (B AND D)


1. (C) SUMMARY: In February 10 meetings with EEB A/S Dan
Sullivan on the margins of U.S.-Turkey Economic Partnership
Committee meetings, Energy Minister Hilmi Guler and
state-owned pipeline company (BOTAS) acting Director General
Saltuk Duzyol emphasized that Turkey is ready facilitate
transit of Azeri and Caspian gas to Europe. At the same
time, they made clear that Turkey will want to negotiate with
Azerbaijan and other parties an appropriate share of the
overall financial benefits from the project. Recognizing
Turkey's interest in its "fair share," EUR DAS Matt Bryza
suggested that more detailed discussions of transit
mechanisms take place at the International Energy
Agency-hosted "southern gas corridor" meeting planned for
February 14 in Paris. This meeting will include producer,
transit, and consumer countries. Duzyol said that BOTAS's
two key strategic goals are to enhance supply security by
building links to producers and to reduce Turkey's energy
import bill by getting access to "cheap gas." The U.S. and
Turkish delegations stressed the need for continued
cooperation to counter threats from Russia and to develop
other new gas sources such as Iraq, Kazakhstan, and
Turkmenistan. Guler was pleased to learn about a potential
March 9 meeting with Iraqi experts in Turkey to discuss
development of Iraqi gas for domestic use and export. End
Summary.

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Energy Road Show Advanceive of thern gasnergy Qevelopment, noting that Turkish
MFA Energy
Coordinator Mithat Balkan's and his own speeches to a
business audience on February 8 in Istanbul gave
overwhelmingly the same message. Now there is a window of
opportunity to develop a workable South Caucasus transit
regime, but time is short. DAS Bryza called for mutual,
sequenced efforts by all the parties that would counter
dissonant messages from consumers and investors about lack of
clarity in Turkey's transit regime and lack of confidence in
Azerbaijan's will to bring quantities of gas as early as
possible to market. He noted that Azeri President Aliyev has
directed SOCAR to focus 100% of its development budget on
gas, including deep water deposits, in order to provide
enough gas for the Turkey-Italy-Greece (TGI) gas
interconnector and Phase I of the Nabucco project.


3. (C) Minister Guler said he had just returned from Georgia
and planned to attend the Presidential inauguration in
Turkmenistan. He called for concrete actions and messages,
observing that the Caspian should not remain an "unfinished
symphony." He called for more U.S. help to encourage visible
EU support for transit of Caspian gas through Turkey.
Repeating a regular theme, he complained that the EU did not
act with unity and that some EU countries (e.g., Austria) had
been talking directly with Iran. Guler lauded U.S.-Turkish
cooperation to achieve the BTC oil pipeline, noting that
there would be a commemoration of the loading of the 100th
tanker at Ceyhan the week of February 12.


4. (C) Sullivan said U.S. policy and law was clear on Iran;
the United States opposes pipelines through and from Iran.
SCA PDAS Mann emphasized that the United States and Turkey
should to work together to press the new leadership in

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Turkmenistan to revive plans for a trans-Caspian gas
pipeline. State Department lawyers had determined that a
five government agreement on Caspian delimitation was not
necessary to establish a trans-Caspian pipeline; rather
direct agreement between affected countries such as
Azerbaijan and Tukmenistan and/or Kazakhstan would be
sufficient. Mann dismissed any right of veto from Russia or
Iran.

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Bypasses, Iraqi and Qatari Gas
--------------


5. (C) Guler said that ground-breaking for Samsun-Ceyhan
would occur on March 26. In a new idea, he suggested
cooperation on a pipeline from Qatar that would join the
Middle East gas pipeline from Egypt to Turkey that is under
construction.


6. (C) Thanking Turkey for its important contributions to
reconstruction and stability in Iraq, Sullivan and Bryza gave
importance to the hoped-for Iraq gas meeting in Turkey on
March 9 as a way to build cooperation and to start long-term
dialogue on Iraq gas development foti noted that Tus and were eager to build n
this
experience to help Iraq and to consider export options.

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BOTAS: NOT ANOTHER GAZPROM
--------------


7. (C) In a separate meeting at BOTAS, Saltuk Duzyol
assured Sullivan's delegation that Turkey's desire for a fair
share of regional gas projects did not in any way mean that
Turkey intended to act "like a Gazprom." He said Turkey
hoped to use its strategic location to decrease its import
bill, for example through a "net-back" pricing approach.
Strategic Planning Department Head Cenk Pala lamented Russian
pressure on European and Caucasus countries to block new
supplies. He said Turkey opposed succumbing to Russian
pressure to transit Russian gas to Europe, because this would
shut-in Caspian production. Duzyol criticized Georgia's
intent to gain greater allocation of Shah Deniz gas, over and
beyond contractual amounts, and noted "they want it for
free." He emphasized Turkey's need for cheap Azeri gas for
diversification, transit to Europe, and reliable supply for
Turkey's east. Moreover, Duzyol noted that the 2001 natural
gas law prohibits BOTAS from making new import contracts
(winter spot contracts are done on a special exception
basis),which are now in the province of the private sector.

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COMMENT
--------------


8. (C) The meetings with Guler and Duzyol were marked by
positive energy and shared purpose, as was the discussion
with MFA Coordinator Balkan at an EPC luncheon the previous
day. Feeling that Turkey is not receiving its "fair share"
from BTC, Turkish officials want to ensure that it gains more
of the financial benefits of a new pipeline. However, they
understand investors' need for a clear, predictable
arrangement and should be able to work with the Azeris and
consumers to divide the pie in a way acceptable to all. The
IEA-hosted meeting in Paris should lay the groundwork for
this.


9. (U) This cable was cleared by A/S Sullivan.


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