ENERGY MIN TELLS A/S SULLIVAN READY TO TRANSIT AZERI GAS TO EUROPE

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. -------------- -------------- 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 ANKARA 00000407 002 OF 003 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. -------------- 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. -------------- 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. -------------- 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. ANKARA 00000407 003 OF 003 Visit Ankara's Classified Web Site at http://www.state.sgov.gov/p/eur/ankara/ WILSON