PRESIDENT GUL TELLS SECRETARY BODMAN OF SOUTHERN

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 001147 SIPDIS E.O. 12958: DECL: 12/02/2018 TAGS: PGOV PREL AJ TU ENRG SUBJECT: PRESIDENT GUL TELLS SECRETARY BODMAN OF SOUTHERN CORRIDOR SUPPORT Classified By: Ambassador Anne E. Derse, Reasons 1.4 (b,d) ¶1. (C) SUMMARY: In a November 13 meeting with President Gul, Energy Secretary Bodman stressed U.S. support for the region and the Southern Corridor, with Gul expressing appreciation for USG support and noting its importance to future projects. Gul indicated that Turkey and Azerbaijan are close to a transit agreement and that both countries are engaging with Turkmenistan to hold a leaders, meeting there soon. Gul reiterated that Turkey prioritizes providing energy to Turkey first and then supplies to Europe. Gul sought USG,s help on engaging Iraq in projects and serving as a transport country for Iraqi gas to go west. END SUMMARY. ¶2. (C) On November 13 Energy Secretary Samuel Bodman met with Turkish President Abdollah Gul. Other USG participants included Special Envoy C. Boyden Gray, Ambassador Derse, EUR DAS Matthew Bryza, DOE Director of Russian and Eurasian Affairs Lana Ekimoff, and DOE Chief of Staff Adam Ingols. ¶3. (C) Turkish President Gul said this Energy Summit's agenda was broader than the three previous Summits and that he wanted to include Turkish projects. He went on to note the close energy relationship that Turkey has with the U.S., especially in recent years. He explained that Turkish energy policy priorities are first to secure its own energy supplies and second to contribute to Europe,s energy supplies. Turkey has limited sources of energy noting Russia, BTC, and Baku-Tbilisi-Erzerum. Turkey is working on natural gas pipelines and diversifying its sources of gas with the aim of reducing its dependence on Russian gas. Bodman encouraged the President not to be dependent on any one source. EUROPE'S GAS SUPPLIES ¶4. (C) Gul said it wasn't true that Turkey does not attach importance to getting gas supplies to Europe. Turkey supports the Nabucco pipeline, whose strategic importance justifies its initialization, even with low volumes of gas. If the pipeline is started, additional volumes will come. He recognized that there are political problems with the pipeline but pushed for its realization, noting that BTC,s first days were called a dream. REGIONAL GAS SUPPLIES ¶5. (C) Gul noted that Azerbaijani gas would not be sufficient to meet all of Turkey,s needs; therefore, it is important to engage with Turkmenistan and to pursue its gas for cross-Caspian export. Over the last year, Turkey has been in constant contact with Turkmenistan and Azerbaijan. Azerbaijan and Turkmenistan have some political issues but emphasized the importance of all three countries working together. Turkey is planning for a meeting soon with all three countries/leaders, and initially wanted the meeting in Turkey but now supports going to Turkmenistan (NOTE: This trilateral HOS meeting will take place November 28-29 in Ashgabat. END NOTE). President Aliyev plans to travel to Turkmenistan a day ahead of the meeting of the three, indicating the significant gesture being made by Aliyev. The talks will include the possibility of an understanding to connect Turkman and Azerbaijan infrastructure in the Caspian. Gul cautioned the need to be sensitive to the issue and to keep it close hold. He raised the recent reserve figures announced by Turkmenistan as a result of the Gaffney-Cline audit. The audit helps to assure Turkmen President Berdimukhamedov,s promise of providing 10 bcm to Turkey, but Gul again called for patience in dealing with the Turkmen. IRAQ ¶6. (C) Gul began the discussion on Iraq by stating his support for President Bush and the fight to combat terrorism. He talked about the importance of developing Irqi oil and gas resources to send west through Turey. He sought strong USG support for Turkey to elp develop Iraqi fields, stressing that this is important for European supply. Energy Minister Guler said that Turkey wants to form a joint venture with Shell to develop a plan to work in Iraq. TPAO plans to bid on six fields with Shell and Japanese companies. Turkey is considering a constructing a pipeline parallel to the Kirkuk-Ceyhan oil pipeline. BAKU 00001147 002 OF 002 POTUS LETTER ¶7. (C) Gul expressed gratitude for the President,s letter to him. He especially appreciated that it recognized Turkey,s needs and affirmed U.S. readiness to assist Turkey in meeting its needs. Bodman noted that a delegation already met with Turkish officials and that he and Minister Guler had talked about possible cooperation on clean coal technology and renewable energy. Guler noted that discussion with the U.S. delegation helped identify ways to reduce Turkey,s gas demand. Gul again reiterated the need for USG support to realize projects and without it would be difficult. GOT-GOAJ GAS AGREEMENT ¶8. (C) Energy Minister Guler said that a conclusion has almost been reached with Azerbaijan on current gas purchases. He said that Turkey is prepared to pay "market prices" for gas. BP and Statoil are demanding $400 per thousand cubic meters. Turkey is currently paying $130 to $140 per mcm for Azerbaijani gas supplies. ¶9. (C) COMMENT: As in previous meetings with USG interlocutors, President Gul made all the right statements about supporting the Southern Corridor. Somehow however, these general statements of support have not been translated into concrete implementing action by Energy Minister Guler or Botas President Duzyol, and many here in Azerbaijan are convinced that there will be no deal on transit until and unless Gul (or Erdogan) orders Guler to make it happen. According to our Azerbaijan interlocutors, Azerbaijan came close to such a deal during the Baku Energy Summit (septel), with Guler backing out at the last minute (doubtless the Turkish version of events differs). It is still unclear whether there was substantial progress towards resolving transit during last week's trilateral meeting among Gul, Aliyev and Berdimuhamedov in Ashgabat, although initial indications are that there wasn't. As a European diplomat who recently served as Ambassador to Turkey told the DCM in a meeting today, it is likely that Turkey will continue to "bargain hard" with Azerbaijan on gas supplies, waiting until the last minute before seeking to eliminate the Southern Corridor barriers. END SUMMARY. ¶10. (U) Secretary Bodman has cleared this cable. DERSE