MINISTER SIMSEK WELCOMES US OFFER OF FINANCIAL

C O N F I D E N T I A L ISTANBUL 000578

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: 11/03/2018
TAGS: ENRG EPET TU
SUBJECT: MINISTER SIMSEK WELCOMES US OFFER OF FINANCIAL
SUPPORT TO TURKEY'S ENERGY SECTOR

REF: ISTANBUL 553

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



1. (SBU) Acting Deputy Secretary of Energy Jeffrey Kupfer
led a high-level delegation including Overseas Private
Investment Corporation (OPIC) President Robert Mosbacher,
Trade and Development Agency Director Larry Walther,
Export-Import Bank Chief Operation Officer John McAdams, and
Special Envoy for Eurasian Energy C. Boyden Gray to Istanbul
for discussions October 30-31 with senior Government of
Turkey (GOT) officials as well as U.S. and Turkish companies
and representatives from the IFC and EBRD (septels) on the
margins of the World Economic Forum.


2. (C) Deputy Secretary Kupfer told Treasury Minister
Simsek that October 30 discussions with the Prime Minister,
Foreign Minister and Energy Minister had been productive. He
noted the significance of the high-level interagency
composition of the delegation and assured Simsek of on-going
USG support for Turkey's efforts to diversify energy sources
and help develop the Southern Corridor. Kupfer and OPIC
President Mosbacher described U.S. ideas for a multilateral
financing mechanism that could facilitate investment in
Turkey's energy sector.


3. (C) Simsek welcomed this initiative and USG efforts to
support energy sector investment. He acknowledged the global
financial crisis would result in sub-optimal growth for the
immediate future, but contended demand would rebound in the
medium term. Turkey will need a huge amount of investment,
in the region of $100 to 125 billion just to meet expected
demand, he explained. According to Simsek 70 percent of
Turkey's electricity is generated using imported fuel, making
diversification essential. Simsek explained the GOT is
working on diversification, privatization, efficiency gains
deregulation, including with respect to prices. These pieces
could add up to a good package, but Turkey needs a
coordinated approach and more involvement from the U.S. side,
particularly to raise awareness among potential investors.


4. (C) Simsek noted the GOT has been talking about
electricity distribution privatization since the 1980's but
has failed to deliver a workable program. He argued the
current government is committed to get electricity
distribution out of state hands and also to divest generation
assets. Turkey's biggest problem now is financing, so the
U.S. initiative are especially welcome.


5. (C) Simsek noted a variety of IFI programs focused all or
in part on the Turkish energy sector including both World
Bank and European Investment Bank programs. However, he
remains concerned by the current low appetite for
privatization. He complained about the lack of U.S.
participation in Turkey,s recent nuclear tender. Mosbacher
and McAdams described issues related to financing structures
and Exim COO guidelines. Kupfer said that the firms
involved felt the lack of certain regulatory structures could
potentially expose them to liability and/or licensing
concerns. This uncertainly posed problems for the U.S. as
well as major European companies who declined to bid, Kupfer
argued. The U.S. side suggested there could be U.S.
technical assistance for Turkey,s nuclear tendering effort,
which Simsek (and separately Energy Minister Guler) agreed.


6. (U) The delegation cleared this message.
WIENER