AZERBAIJAN: AMBASSADOR MANN TALKS ENERGY WITH FM

C O N F I D E N T I A L BAKU 000224

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/02/2018
TAGS: PGOV PREL AJ TX ENRG
SUBJECT: AZERBAIJAN: AMBASSADOR MANN TALKS ENERGY WITH FM
MAMMADYAROV


Classified By: Ambassador Anne E. Derse, reasons 1.4 (b,d)


1. (C) SUMMARY: Eurasian Energy Coordinator Ambassador Mann
told Foreign Minister Mammadyarov that BTC expansion was
"imperative." On Turkmenistan, Mann said President Aliyev
and Azerbaijan could provide a good example to Berdimuhamedov
of how to invite foreign energy companies into a productive
partnership, and how to conduct balanced relations with
Russia. Mammadyarov said that first, one has to be sure that
the Turkmen were "on board," and not using the prospect of
GOTX-GOAJ enhanced cooperation merely to derive greater value
from Russia and Iran. Mammadyarov also questioned whether
Europe was ready to move forward to implement a coherent
energy security policy. Mammadyarov, like President Aliyev,
reflects the prevalent GOAJ viewpoint that now it is time for
Ashgabat to commit to practical steps towards enhanced
bilateral cooperation. END SUMMARY.


2. (C) On February 25, Ambassador for Eurasian Energy
Diplomacy Steve Mann and Ambassador Derse met with Foreign
Minister Mammadyarov to discuss energy issues. Also present
were USTDA Regional Director Dan Stein, USTDA Azerbaijan Desk
Officer Jamie Merriman, and Embassy Energy Officer
(notetaker).


3. (C) Ambassador Mann said the USG deemed BTC expansion
imperative, that he had heard a good clarification from the
President and SOCAR on the reasons for GOAJ reluctance for
approving this expansion, and he hoped that all concerned
could move forward. CPC expansion was in trouble, and as
such new Kazakh oil volumes needed to come west through
Azerbaijan. The TGI, TAP and Nabucco pipelines were seeking
Shah Deniz Phase Two (SD2) volumes, and the USG hoped
Azerbaijan would move ahead to assure the progress necessary
to further explore these projects. The Nabucco project
seemed the closest to actualization, and he hoped Azerbaijan
would work with Turkey to solve transit issues. The window
was open in which SD2 and ACG Deep Gas could supply Nabucco,
and given the uncertain future Mann said experience has
taught him that "if it is possible to create a new channel to
Europe, do it." The USG and GOTX also have to work on
getting "early gas" from Turkmenistan.

TURKMENISTAN
--------------


4. (C) Regarding the GOTX, FM Mammadyarov said that firQ,
one has to be sure that the Turkmen were "on board," and not
using the prospect of GOTX-GOAJ enhanced cooperation merely
to derive greater value from Russia and Iran. Mann agreed,
saying he had cautioned Berdimuhamedov that although he can
sign contracts with Russia, if Russia changes the terms, the
GOTX will have "no options." Mann said he thought that
currently the GOTX had no fixed positions, but was largely
"dining on the leftovers of the Niyazov era." Berdimuhamedov
was continuing the policies of his predecessor until he was
prepared to change them, hence comments such as "we will sell
our gas at our border." As for delimitation, Berdimuhamedov
was understandably loath to unilaterally renounce GOTX ACG
claimsQnd the associated billions of dollars of lost
revenue. However, Mann said he had told both the GOTX
President and Foreign Minister in August 2006 that "no one
else on the planet uses the GOTX method of delimitation."


5. (C) Ambassador Mann said President Aliyev and Azerbaijan
could provide a good example to Berdimuhamedov of both how to
invite foreign energy companies into a productive
partnership, and how to conduct balanced relations with
Russia. He thought Berdimuhamedov was isolated, so that a
strong relationship with Aliyev would be"disproportionately
powerful" in providing Berdimuhamedov an example to emulate.
The only way genuine cross-Caspian transit of GOTX energy
would occur would be from this strong personal relationship
between Presidents Aliyev and Berdimuhamedov. Mammadyarov
said that the GOTX needed to be more decisive, pointing out
that still there was no GOTX Ambassador in Baku.


6. (C) Mammadyarov said the decision for enhanced GOAJ-GOTX
bilateral cooperation to include energy cooperation was in
Berdimuhamedov's hands. The GOAJ and USG needed to do more
to educate and orient Berdimuhamedov geopolitically, as
Berdimuhamedov was focusing on the short-term, noting, "We
need to re-orient him towards the long term. As Churchill
said, 'Politicians think about the next election, statesmen
(think about) the next generation.'" Berdimuhamedov has
historical ambitions and we are ready to help him, but "we
will not be used by Turkmenistan." As such, Turkmenistan
should not portray itself as being dragged along in the

relationship - "if they want to join us, do it." He said
that GOTX FM Meredov told him last month that delimitation
was going to take a long time, and in the interim they should
jointly pursue commercial development, to which Mammadyarov
responded that since neither side could independently develop
Serdar-Kapaz (S-K),they should do it together. Meredov was
a "good man, but scared of his past." Mammadyarov said he
still regularly received official letters from the GOTX
relating to its ACG claims, although he no longer responds to
these notes. GOTX ACG claims were not acceptable - "that
train has left the station" - and the GOTX needs to look
ahead strategically. Mann said that the two should "agree to
disagree" on ACG, and work together on other issues.

KAZAKHSTAN
--------------


7. (C) Mammadyarov asked Mann about the possibility of Kazakh
gas coming west. Mann said there were not a lot of available
volumes, since the Kazakhs would be using a lot of gas for
re-injection in both Kashagan and Tengiz. All told, there
was the possibility of only about 4 billion cubic meters
annually (bcm/a) export for several years, although the issue
deserved to be revisited in two years or so. On a January
visit to Astana, Kazakh officials told Mann they preferred
gas re-injection since there was no export route for their
gas and they didn't want to pioneer it. However, Mann said
if there was a cross-Caspian export potential from
Turkmenistan, this would "change the equation." Mammadyarov
agreed that South Caucasus Pipeline(SCP) is the model, and
that the Kazakhs could use the SCP for their gas export.
(Comment: SCP has no spare gas capacity once 2013 SD2
volumes are factored in).


8. (C) On Kazakh oil coming west, Mann said Azerbaijan and
Kazakhstan needed to work together on tanker transit capacity
across the Caspian, and that the USG was strongly encouraging
both sides to avoid monopolist tendencies. He was encouraged
hearing from SOCAR President Abdullayev that progress was
being made on BTC expansion. Azerbaijan shouldn't insist on
filling the Northern (Baku Novorossiysk) and Western
(Baku-Supsa) oil pipelines
before BTC. Mammadyarov countered that commercial
considerations should dictate these oil export options, with
Mann replaying that political and strategic considerations
are also important.


9. (C) Mann said that the Kazakh government handled its
Kashagan negotiations very well, negotiating "hard and
smart." They threatened with the Subsurface Resource Law
once, then knew enough to back off this threat. They also
knew that the decision could only be made by the IOCs at the
CEO level, so insisted they be brought into the negotiations.


EUROPE
--------------


10. (C) Mammadyarov said that even if Turkmenistan and
Kazakhstan were eager to ship products to Europe, he had "no
feeling that Europe was ready" to actively work in the region
to promote its energy security. Any summit at the
ministerial level or lower would be pointless, since neither
the Kazakh nor Turkmen Energy Ministers are empowered to make
any decisions. Mann and Mammadyarov agreed that unless there
was careful and extensive preparation beforehand, "summits
were just photo ops." Mammadyarov added that the idea of a
summit should be "in the air" so that companies seeking
Caspian energy are buoyed. Ambassador Derse recalled
Mammadyarov's comments that that any joint statement coming
from such a summit supporting general principles such as
energy diversity could help give welcome political cover to
Turkmenistan in seeking to move some of its hydrocarbons
west. Referring to a possible Heads of State summit, Mann
said that Berdimuhamedov didn't have a positive experience in
his previous visit to Brussels, when he was introduced at one
point as the President of Tajikistan.


11. (C) COMMENT: Mammadyarov, like President Aliyev,
reflects the prevalent GOAJ viewpoint that now it is time for
Ashgabat to begin to move beyond its rhetoric and commit to
practical steps towards enhanced bilateral cooperation.
(Septel reports on Ambassador Mann's meetings with President
Aliyev and Socar President Abdullayev). END COMMENT.


12. (U) Ambassador Mann has cleared on this cable
DERSE