SCENESETTER FOR DOE DEP SEC KUPFER'S OCT 30-31

UNCLAS SECTION 01 OF 02 ANKARA 001846

SIPDIS

DOE FOR LANA EKIMOFF, TYLER TILLER
USTDA FOR DAN STEIN
OPIC FOR DULCE ZAHNISER

E.O. 12958: N/A
TAGS: ENRG EPET TU
SUBJECT: SCENESETTER FOR DOE DEP SEC KUPFER'S OCT 30-31
VISIT TO ISTANBUL


1. (SBU) Turkey remains the vital link in our strategy to
bring gas from the Caspian Basin and Central Asia to Europe
through a Southern Corridor. Turkish leaders with whom you
will meet believe Turkey is facing acute electricity
shortages as early as 2009 and natural gas shortages of up to
16 bcm by 2015. They do not believe that there is sufficient
gas available in the short- to medium-term to meet Turkey's
needs and also fill both the Turkey-Greece-Italy
Interconnector and Nabucco. The global economic crisis may
slow Turkey's energy demand, but some drivers of demand --
like expansion of the gas pipeline network for residential
heating nationwide -- will continue unabated. This energy
supply insecurity is driving the GOT,s "Turkey First"
position on energy transit, that natural gas will flow
westward only when Turkey's future energy needs are met.
Your goal is to convince the GOT that cooperation with other
consumers (and producers) is the way toward energy security,
that the U.S. is serious about helping Turkey meet its energy
demand and that realistic ways are available to reduce future
reliance on gas.


2. (SBU) The GOT understands and appreciates your mission to
offer U.S. government assistance, financing and other
guarantees to attract U.S. private sector investment into
Turkey's energy sector. However, they are skeptical that we
can or will actually deliver. Timing is an issue. The GOT
told us it needs to make real, concrete decisions affecting
energy security within the next six months, and so far there
is nothing on the table to compensate for the sacrifices
Turkey is being asked to make. It will therefore be key to
put specific, concrete, substantive proposals on financing or
guarantees on the table to make clear to the GOT that our
effort is serious and substantive.


3. (SBU) We expect that the delegation will meet with PM
Erdogan, Foreign Minister Babacan, Energy Minister Guler and
Treasury Minister Simsek along with U.S. and Turkish business
leaders working in the energy sector. Below are some key
questions and messages for your meetings. As you relay these
messages, a little background on each interlocutor might be
helpful.

--PM Erdogan will make the ultimate decisions about
Azerbaijan gas off-take and the future of Turkey as a transit
country for Europe. He understands the strategic reasons for
Turkey becoming a reliable gas transit partner for Europe but
also believes he must secure gas for Turkey. This country,s
transit location is leverage to accomplish that.

--Foreign Minister Babacan is the Turkish EU accession
coordinator and may be the most supportive of the strategic
vision for developing the Southern Corridor.

--Minister Guler leads the "Turkey first" faction within the
GOT and appears to has the PM,s ear on this issue. He will
be the most skeptical of our offers to help.

--Minister Simsek is in charge of relations with the IFIs and
will be knowledgeable about EXIM and OPIC operations. He can
help make the case to the PM for how project financing works
and may have ideas of how to leverage U.S. proposals with
what the EU or IFIs are planning.

Key messages for the delegation to deliver:
--------------

4. (SBU) In addition to offering possible U.S government
assistance, you should reinforce our key energy policy
messages.

-- Achievement of a viable Southern Corridor will be a
strategic achievement for Turkey, the U.S. and our partners
that will surpass the importance of the Baku-Tbilisi-Ceyhan
oil pipeline.

-- The Azeris have a strategic goal in providing gas to
Europe, not a commercial one. Without strategic connection
to Europe of the Southern Corridor, Azerbaijan appears
unlikely to develop Shah Deniz Phase II gas at this time.

-- A viable Southern Corridor can unlock not only Azeri gas,

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but also Turkmen and Iraqi gas, and make larger quantities of
gas available to Turkey in the long run.

Key questions to ask the GOT:
--------------


5. (SBU) We recognize that Turkey faces an energy crunch.
The U.S. wants to help Turkey develop energy supplies within
a strategic framework that includes a Southern Corridor. To
meet Turkey,s needs and move the Corridor forward, we need
to understand the following:

-- What is the GOT's overall energy strategy and your
projected future energy mix?

-- What are GOT priorities for U.S. government assistance,
i.e., energy efficiency and conservation, new generation,
upgrading of existing generation, renewables, etc.?

-- Are there international or bilateral funding mechanisms
already in place? To what extent can U.S. government
assistance leverage EU or IFI financing?

Visit Ankara's Classified Web Site at
http://www.intelink.sgov.gov/wiki/Portal:Turk ey

WILSON