PRIME MINISTER WELCOMES U.S. HELP ON ENERGY

1. (C) Summary. On October 30, Department of Energy Acting
Deputy Secretary Jeffrey Kupfer led a U.S. delegation to
discuss Turkey's energy needs and its strategic role as a
transit country with Prime Minister Erdogan. Following-up on
the President's October 8 letter to the PM (reftel), Kupfer
offered to send a technical-level delegation to Turkey in
December to identify areas for cooperation in the energy
sector. He also discussed the idea of a multi-lateral
financing mechanism to support energy investment in Turkey
and help diversify its energy mix away from natural gas. The
PM assured the delegation that the development of the
Southern Corridor is a strategic priority for Turkey but
questioned whether Azeri gas would be sufficient. He
indicated Turkmenistan should be a complimentary source gas
for Turkey and Europe and was positive about its development.
He warmly welcomed all U.S. offers of cooperation. End
summary.



2. (C) October 30-31, a high level USG delegation discussed
Turkish and European energy needs with Prime Minister
Erdogan, Foreign Minister Babacan, Energy Minister Guler,
Treasury Minister Simsek and U.S. and Turkish companies
(other meetings are reported separately.) Besides Deputy
Secretary Kupfer the U.S. delegation included Overseas
Private Investment Corporation (OPIC) President Robert
Mosbacher, Trade and Development Agency Director Larry
Walther, Export-Import Bank Chief Operating Officer John
McAdams, Special Envoy for Eurasian Energy C. Boyden Gray,
and Ambassador.



3. (C) Deputy Secretary Kupfer said his team's visit follows
up the President's letter of early October, and its
interagency composition reflects the priority we attach to
the issues the letter raised. The U.S. wants now to activate
the Southern Corridor, and the President has been in touch
with producer, transit and consumer country leaders. We want
to move the ball forward with as many concrete steps as
possible in the next several months. Beyond that, though the
U.S. players will change, our interests will not, and Turkey
could expect our work to continue.



4. (C) Kupfer recognized Turkey's need to strike a balance
between domestic energy demand, the needs of downstream
purchasers and the economics of pipeline financing and
construction. The U.S. delegation's visit and other
efforts are designed to help Turkey achieve that balance. To
that end, the U.S. proposes to send a technical
delegation to Turkey in mid-December to evaluate Turkey's
priorities for energy sector investment. Kupfer noted the
fastest gains could be made in energy efficiency and cited a
rough estimate that a 10% increase in efficiency could
yield a saving of 6 billion cubic meters of gas annually.



5. (C) Kupfer and OPIC President Mosbacher described our
interest in working with the international financial
institutions to establish a financing mechanism to accelerate
investment in Turkey's energy sector. Mosbacher said that
OPIC and EXIM are prepared to step in and fill the current
private sector financing gap for energy sector projects.
OPIC can offer up to USD 500 million as part of the
multi-lateral lending facility, and EXIM COO McAdams said
EXIM can do likewise. Mosbacher recognized the urgent need
for investment to avoid energy shortages in the near future,
but noted that accelerated financing would depend on the
GOT's ability quickly to identify, tender and award energy
sector projects.



6. (C) PM Erdogan noted the long history of energy
cooperation between the U.S. and Turkey. Referring to the
upcoming U.S. elections, he said that governments come and go
but our strong partnership on energy would remain unchanged.
He appreciated President Bush's letter, which he described as
justifying Turkey's concerns about its own energy supply, and
said he will reply positively soon. Diversifying Turkey's
gas sources is a matter of urgency because gas contracts with
Russia (6 bcm) and Algeria (4 bcm) will expire in 2011. He
asked for U.S. support in Turkey's discussions with Qatar and

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Saudi Arabia to get more gas and welcomed U.S. assistance in
reducing Turkey's dependence on natural gas. Erdogan
stressed the importance of moving quickly to develop
alternative energy options including renewables, hydro and
nuclear. Given the global economic crisis, U.S. assistance
to help attract financing to Turkey's energy sector was
especially important. He welcomed the idea of the assessment
team and said Turkey is willing to cooperate in all areas.



7. (C) Erdogan said that opening up the Southern Corridor is
important to Turkey because it ensures secure energy supplies
for Turkey and Europe. The crisis in Georgia has elevated
the importance of energy diversification and gave the
Southern Corridor new momentum which we shouldn't lose.
Erdogan stressed that Turkey fully supports the Nabucco
project and welcomed the visit of EU Energy Commissioner
Piebalgs to Turkey Nov 6 as a sign of progress on this
project. However, Erdogan was skeptical about gas
availability for Nabucco. The focus for gas supply has been
Azerbaijan but Azeri gas will not be sufficient for Turkey's
needs and for Europe's. Perhaps, in the longer-term Azeri
gas could be sufficient but in the short term, it is not, he
argued.



8. (C) Erdogan indicated that Turkey is looking toward
Turkmenistan to complement Azeri gas for the Southern
Corridor. He had positive talks with Turkmen President
Berdimuhamedov who reportedly promised 10 bcm for Turkey on
the condition that Turkey made the transit arrangements from
the Turkmen border. Trans-Caspian or trans-Iranian routes
are available. Erdogan said the recently released
Gaffney-Cline study shows that Turkmen gas reserves are "well
beyond" previous expectations, and this is good news for the
Southern Corridor.



9. (C) Comment: This meeting with Erdogan was positive and
upbeat. The seniority and interagency diversity of the U.S.
team sent a welcome signal of seriousness, and Erdogan
responded in that vein. He clearly welcomed our ideas to
help on energy alternatives and their financing, especially
in the current global climate, and he was strongly supportive
of the Southern Corridor. Key now will be follow up. End
Comment.



10. (U) The delegation cleared this text prior to departure.
WIENER