EU ENERGY COMMISSIONER TO SEEK &POLITICAL ACCORD8

C O N F I D E N T I A L BRUSSELS 001697 SIPDIS E.O. 12958: DECL: 11/04/2016 TAGS: ECON EPET EU SUBJECT: EU ENERGY COMMISSIONER TO SEEK &POLITICAL ACCORD8 WITH TURKEY Classified By: EEST Counselor Louis L. Bono, reasons 1.4 (b) and (d). ¶1. (C) Andris Kesteris, Chef de Cabinet to the Energy Commissioner said Andris Piebalgs would be visiting Ankara and Baku November 6 and 7 to promote the opening of the Southern Corridor. Piebalgs does not seek to sign any deals but rather to reach an informal political agreement with Erdogan. Piebalgs expects the Turks will be flexible on their 15% liftoff demand, but Kesteris could not say what Piebalgs is prepared to offer beyond possible EIB concessions and added that the opening of the energy chapter does not appear to be forthcoming. Independently, we have heard that Piebalgs may support a commercial agreement that would provide Turkey with similar volumes, provided that any discounted costs would be born by the commercial venture and not Azerbaijan. Piebalgs was supposed to visit Tbilisi and Ashgabat as well, but the prospect of anti-government riots in Tbilisi this weekend caused his staff to cancel the trip. As for Ashgabat, Turkmen officials advised that the President Berdimuhamedov would be returning from the Republic of Korea on Friday evening and would thus be unavailable to meet the next day. Nevertheless Kesteris said the two maintain a good relationship, stemming from their ability to communicate in Russian and common experiences under Soviet rule. ¶2. (C) When asked about the Turkey-Greece-Italy interconnector, Kesteris laughed: &Why do you want to know about this project8 he asked. He opined that TGI is not the answer to Europe,s security of supply situation due to its limited capacity (about 10 bcm),most of which will end up in Italy. In contrast, he pointed out that Nabucco has much greater capacity (31 bcm) which is destined for Central Europe. He sardonically added that TGI,s agreement to provide the Turks with 15% lift-off rights has been a major headache for the Commission, since the Turks are seeking the same percentage from Nabucco. Kesteris was not aware that Turkey,s supply contract with Algeria (4 bcm ) see Istanbul 553) is due to expire in 2011, along with its Russian contract (6 bcm). He said this underscores Turkey,s security of supply concerns. ¶3. (C) On Russia, Kesteris said it is &desperate now for the European market.8 He is not concerned about Russia,s ability to fulfill its export contracts. He said that when Russia liberalizes its market in 2010, there will be less domestic demand, leaving more available for export. He did not comment on the prospect of or need for Russian contributions to Nabucco. Rather, Kesteris he said Egypt is considered a viable secondary supply source. ¶4. (C) In a separate meeting, Jeremy Ellis of RWE was less optimistic about Egypt. He said Egypt has prohibited exports until 2011, and thus it is not clear what, if any supplies will be available, and how to transit the gas. Ellis said the Nabucco shareholders are instead looking at Iraq, Iran, and Turkmenistan as secondary source options, and is interested in USG perspective on these options. He said that they are close to securing commercial agreements with Turkey, and would not be surprised if these were executed during the January 2009 Nabucco Summit in Budapest. Ellis was not enthused about Piebalgs, trip, and indicated that the Commission has not been particularly helpful, in contrast to member state governments. He added that German Foreign Minister Steinmeier has agreed to carry the &Nabucco mantle8 and that Turkmen President Berdimuhamedov would be visiting Germany later this month. ¶5. (C) Subsequently, Brendan Devlin, assistant to EU Southern Corridor Coordinator Jozias Van Aartsen, said Piebalgs plans to pitch the Caspian Development Corporation (CDC) idea to Turkey as a carrot to encourage flexibility on their 15% liftoff demand. The CDC was conceived by the Commission as a way to aggregate demand from Europe and Turkey for Turkmen gas. Convincing Turkmenistan to ship large gas volumes west would also alleviate Turkey,s security of supply concerns and convince them to let enough gas flow through to Europe to make the Southern Corridor a reality. Devlin said the Commission has requested the World Bank to commence a feasibility study on CDC and asked for our support. .