Energy Secretary Bodman Meets with Turkish Energy Minister

UNCLAS SECTION 01 OF 03 ISTANBUL 001014 SIPDIS SENSITIVE SIPDIS EEB FOR A/S SULLIVAN EUR FOR DAS BRYZA SCA FOR MANN DO FOR HEGBURG USTDA FOR DAN STEIN REF: ANKARA 2720 BAKU 1049 E.O. 12958: N/A TAGS: ENRG EPET AJ IR IZ KZ RS TU SUBJECT: Energy Secretary Bodman Meets with Turkish Energy Minister Guler Sensitive but Unclassified. Please protect Accordingly. ¶1. (SBU) Summary: On November 15, U.S. Energy Secretary Samuel Bodman met Turkish Energy Minister Hilmi Guler in Istanbul. They reaffirmed the U.S.-Turkey strategic energy vision for the development of Caspian resources and delivery systems to bring them to market, including the Trans-Caspian pipeline. Bodman informed Guler of progress within the U.S. government to approve the bilateral agreement with Turkey on the Peaceful Uses of Nuclear Energy. Bodman urged Guler to move forward in negotiations with the Azeri government to purchase additional gas volumes. Guler defended the pricing mechanism in the gas agreement with Greece and Italy, which is opposed by Azerbaijan, but said striking a deal with the Azeris was his "number one priority". Guler reaffirmed his support for the U.S. Department of Energy-sponsored Clean Energy Conference to be held in January 2008 in Istanbul. Guler sought and received U.S. support for Turkey's bid to host the World Energy Congress in ¶2011. Bodman reaffirmed U.S. support to bring the PKK to justice. Bodman reiterated USG policy on Iran and cautioned against energy deals with Iran. End summary. -------------- NEGOTIATING WITH AZERIS -------------- ¶2. (U) Bodman noted the importance of Turkey as a transit state for natural gas to Europe. He commended Turkey's helpful, pragmatic approach to the Baku-Tbilisi-Ceyhan oil pipeline opened in June 2006 and recommended Turkey take a similar approach in negotiations with Azerbaijan for gas volumes for the Turkey-Greece-Italy pipeline. ¶3. (SBU) Guler said reaching an agreement on gas issues with Azerbaijan was his "number one priority". Guler repeated arguments that we have heard before defending the transit terms of the Turkey-Greece-Italy intergovernmental agreement (reftel A) to which Azerbaijan, the key supplier, is not a party. (Note: According to the agreement, Turkey will receive 15 percent of total gas transited from Azerbaijan to Greece at a "net back price". Simply put, the price of gas would be calculated by the end delivery price minus the cost of transportation across Turkey.) Guler went further than we have heard previously to defend his position. He said that Turkey had consulted and received agreement from both Ilham and Natiq Aliev (Azerbaijan's President and Energy Minister, respectively) before completing the intergovernmental agreement. This assertion is refuted by Embassy Baku reporting in reftel B. Guler claimed that EU Energy Commissioner Piebalgs also approved of Turkey's net-back pricing scheme. Guler said he was hopeful a gas-supply agreement with the Azeris could be reached soon. Bodman said he would not weigh in on the details of the commercial arrangements but said he hoped negotiations could be concluded swiftly. -------------- TURKEY'S NUCLEAR AMBITIONS -------------- ¶4. (SBU) Bodman told Guler that on November 15, he and Secretary Rice had recommended to the President to forward to Congress the bilateral agreement with Turkey on the Peaceful Uses of Nuclear Technology (also know as the "123 Agreement"). Bodman explained that once the agreement reaches Congress a 90-day clock begins, and if Congress does not act, the agreement takes force. ¶5. (SBU) Guler said the development of nuclear power wll help meet Turkey's growing demand for energy. He thanked Bodman for the good news on the 123 greement and said he was looking forward to U.S.company investment in Turkey's civilian nuclear poer sector. In response to Secretary Bodman's invtation to join the Global Nuclear Energy Partnerhip (GNEP),Guler said Turkey would consider theoffer and was looking favorably toward joining. -------------- TURKMAN GAS AND TRANS-CASPIAN PIPELINE -------------- ISTANBUL 00001014 002 OF 003 ¶6. (SBU) Bodman relayed some of the details of his meeting with Turkmen President Berdimuhamedov on November 14 (septel) to Guler. Bodman said a Trans-Caspian pipeline (TCP) would benefit Turkmenistan, Turkey and the broader region. He said the Turkmen president listened to the merits of the project but appeared "reticent" to make a commitment to its development. Bodman urged Guler personally to become more engaged with Turkmenistan and help to develop the TCP. ¶5. (SBU) Guler agreed and noted that Europe needs Turkmen gas at least as much as Turkey. He said a delay in developing this source encourages "other sources" (we believe he meant Russia) to continue to increase market share. Guler said that in addition to Turkmenistan, Turkey sees Iraq and Azerbaijan as important gas suppliers. He said that all three countries need investment to realize the additional volumes demanded by consumers. He added the U.S. could play a major role in getting any one of these three countries to move up their timeline for gas field development. Guler urged more U.S. involvement in regional gas development and recommended countries in the region send presidential delegations to Turkmenistan to impress upon them the importance of increasing gas output. He said Turkey would do this. He hinted that Russia and Iran are competitors in the same market and are waiting to see what projects materialize before making their decisions on increasing gas supply to Europe. Guler said Russia is still considering building a "Blue Stream II" (a pipeline that would bring natural gas from Russia to either the Balkans or Israel through Turkey). Guler said Turkey is continuing to develop its plans with Israel to build a so-called "peace pipeline" that would bring oil, gas, water, electricity, and fiber optic cables to Israel. (Note: According to preliminary feasibility studies conducted by Calik Energy, oil and gas pipelines are more profitable than water and electricity. Telecommunications has not yet been studied.) -------------- CLEAN ENERGY CONFERENCE -------------- ¶6. (U) Guler reaffirmed his support for the Department of Energy's Clean Energy Conference, which is scheduled to take place in Istanbul at the end of January. He said he would like to establish some joint working groups on energy efficiency and energy savings. Bodman said we would be happy to share information with the Ministry of Energy. He also invited Guler or others from the Energy Ministry to Colorado to visit the U.S. Department of Energy's Renewable Energy Laboratory that is doing research on solar, wind and biofuels. Bodman also proposed inviting experts from this lab to participate in the conference in January. -------------- WORLD ENERGY CONGRESS -------------- ¶7. (U) Guler requested U.S. support for Turkey's candidacy to host the World Energy Congress in 2011 in Istanbul. The vote will take place in Uruguay at the end of November. Bodman said we would be supportive. -------------- PKK AND WAR ON TERROR -------------- ¶8. (SBU) Bodman thanked Guler for Turkey's steadfast support in the War on Terror. He noted U.S. designation of the PKK as a terrorist organization and pledged U.S. government support to "bring the PKK to justice". Guler responded that terrorism knows no national boundaries and that Turkey and the U.S. are acting together to fight it. -------------- CAUTIONS ON IRAN -------------- ISTANBUL 00001014 003 OF 003 ¶9. (SBU) Secretary Bodman reiterated to Minister Guler the U.S. policy on Iran and expressed concerns about Turkey's energy agreement with Iran. The Secretary noted that Iran was not a reliable partner and cooperating with them could create problems for Turkey in the long term. Guler acknowledged that the GOT was aware of and respected U.S. concerns, but noted that Turkey must have alternatives to meet increasing demand in the future. ¶10. (U) This message was cleared by Secretary Bodman.