SUBJECT: MINISTER BABACAN SUPPORTS IRAQI GAS FOR

C O N F I D E N T I A L ISTANBUL 000576

SIPDIS

EEB FOR A/S SULLIVAN
SPECIAL ENVOY FOR EURASIAN ENERGY GRAY
EEB FOR ENERGY COORDINATOR MANN
EUR FOR DAS BRYZA

E.O. 12958: DECL: 11/18/2018
TAGS: ENRG EPET IZ TU
SUBJECT: SUBJECT: MINISTER BABACAN SUPPORTS IRAQI GAS FOR
SOUTHERN CORRIDOR

REF: ISTANBUL 553

Classified By: AMBASSADOR WILSON FOR REASONS 1.4 (B) AND (D)


1. (C) Summary. On Oct 30, a high-level, interagency
delegation led by Department of Energy Acting Deputy
Secretary Kupfer discussed Turkey's energy needs and the
Southern Corridor with Foreign Minister Babacan. The
delegation presented the same message to Babacan as the PM
(ref a) namely an offer to send a technical-level team to
Turkey to identify areas for cooperation and the
establishment of a multi-lateral financing mechanism to
support energy investment in Turkey. Babacan welcomed the
delegation's proposals; reiterated Turkey's strong support
for the Southern Corridor; and dwelt on the importance
including Iraqi gas for Nabucco to promote stability of the
region. End summary.


2. (C) Kupfer said the President's letter of early October
and other efforts are aimed at working with producer, transit
and consumer countries to realize the Southern Corridor.
Once the terms of transit between Azerbaijan and Turkey are
clear, the gas resources for the project would be
forthcoming. Special Envoy Gray added that leadership on the
consumer side has been lacking and we are working to get the
EU more engaged.


3. (C) Babacan responded that the President's letter was
timely and reflected many of the issues he had raised with
Energy Secretary Bodman in June. He warmly welcomed the
delegation's proposals on energy. Getting the EU more
involved in Nabucco is important and in particular we need to
focus on EU capitals, he said. Turkey is ready to cooperate
with the EU.


4. (C) Turkey fully supports Nabucco, Babacan said, and is
proactively seeking gas for the project with Azerbaijan and
others. Babacan argued that Iraq could be an important gas
source. Iraqi gas flowing westward would give Iraq more
diverse export portfolio and help bring stability to the
region. To that end, Turkey would prove the best route for
Iraqi gas exports, both from Northern and Southern Iraq. The
absence of a hydrocarbon law in Iraq continues to delay
progress, however. Babacan said Iranian gas should also be
considered for Nabucco but acknowledged that now is not the
time for such an option.


5. (C) Diversity is the key issue for Turkey, not just in
terms of oil and gas but also Turkey's energy mix. Babacan
emphasized the importance of making decisions now because the
results of those decisions are five to seven years down the
road. Babacan said Turkey needs more investment in hydro and
thermal plants as well as renewables. Turkey has begun and
will continue to privatize state distribution and generation
assets in an effort to attract investment into the sector.
Historically, the bulk of Turkey's foreign direct investment
is from the EU. Babacan responded positively to the
delegation's financing proposals aimed to bring more U.S.
investment into the sector. In terms of adding large
generating capacity, Babacan said nuclear power is the way to
go but noted its long development horizon. Kupfer said that
nuclear power requires a strong government role in setting
the regulations, providing sufficient incentives and perhaps
backing the financing. Babacan agreed.


6. (C) Comment: Both the PM and Energy Minister emphasized
the importance of Turkmen gas for the Southern Corridor,
while Babacan stressed Iraqi gas. In effect, this means the
GOT is working both countries for gas which is positive. End
comment.


7. (U) The delegation has cleared this cable.



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