TURKISH ENERGY POLICY UNDER ENERGY MINISTER YILDIZ

C O N F I D E N T I A L ANKARA 001082

SIPDIS

E.O. 12958: DECL: 07/09/2029
TAGS: ENRG TU
SUBJECT: TURKISH ENERGY POLICY UNDER ENERGY MINISTER YILDIZ

Classified By: Economic Counselor Dale Eppler for reasons 1.4 b, d


1. (C) We met July 1 and July 27 with Faruk Demir, a
long-time advisor to former Energy Minister Guler who was
negotiating a new advisory contract with the new Energy
Minister, Taner Yildiz. According to Demir, the change of
minister is likely to bring changes in energy policy. While
some areas, such as continued oil exploration, are likely to
remain unchanged, other areas, such as electricity
distribution and nuclear power, will possibly move in a
different direction.


2. (C/NF) Guler was a close friend of Prime Minister Recep
Tayyip Erdogan, but Yildiz is known to be close to both
President Gul and to Erdogan. Because of this, Demir
expected that ERDOGAN would likely feel the need to place
people in the Energy Ministry to monitor Yildiz's actions and
find new energy advisors (note: Yildiz was the AK Party's
energy advisor for 1.5 years prior to being named Energy
Minister in late May. end note.) Demir assessed that these
people would likely be AK Party Deputy for Rize Ali
Bayramoglu, AK Party Deputy for Diyarbakir Ihsan Aslan, and
the newly appointed Energy Undersecretary, Metin Kilci. In
the July 27 meeting, Demir indicated that Bayramoglu
definitely was moving up in terms of influence with the Prime
Minister on energy issues.


3. (C) The difference in approach between Guler and Yildiz
also reflects their different sect memberships. Guler is from
the Iskenderpasa sect, which Demir said is known to be former
president Ozal's sect and to be focused on commercial and
political issues and policymaking that benefits its members.
Yildiz is from the Menzil sect, which has a more spiritual
orientation, according to Demir.


4. (C) Guler and his circle within the ministry was known to
have a close relationship with the Russians. For this
reason, according to Demir, Guler and his team postponed
several important decisions on some critical projects, such
as the Nabucco pipeline. Guler also had tendency to not make
any decisions prior to a cabinet reshuffle, which also led to
slow decision making in the ministry. Yildiz, who came from
the business world and is not known to have a connection to
the Russians, may make quicker decisions than his
predecessor. In the July 27 meeting, Demir said GOT energy
policy was moving towards a closer relationship with Russia.


5. (C) Demir said that AKP deputies generally do not want the
Russians to win the nuclear power plant tender. This was
more due to technical problems with Russian equipment rather
than wanting to have less dependence on Russia. A decision
on the Russian bid for the tender was delayed for two
reasons: Guler was unable to make a decision so close to a
cabinet reshuffle, and the TETAS board overstepped its
authority by trying to deciding the price for the tender. In
his opinion, the cabinet will bargain with the Russians to
lower the price. Demir said he suggested ten U.S. cents per
kilowatt hour as a fair price.


6. (C) The resignation of the head of the nuclear regulatory
body TAEK, Oktay Cakiroglu, was not due to his acceptance of
the Russian nuclear bid, according to Demir. Cakiroglu was a
schoolmate of Guler, not an AKP member, and was seen as being
unqualified for his position at TAEK. Cakiroglu had
previously submitted his resignation, but it was not accepted
at the time. Once Guler left the Ministry, however,
Cakiroglu's resignation was dusted off and accepted.


7. (C) Regarding oil exploration, Demir said that Turkey does
not have a concrete policy beyond exploration on and
offshore. This is likely to continue. In electricity,
however, Yildiz may be more sympathetic than Guler to the
private sector's concerns because of his background in the
private sector and his experience in managing electricity
companies. Demir thought that Yildiz may have experienced
some of the delays that were caused by the ministry not
implementing regulations that were needed to carry out the
law, which caused some investors in the electricity sector to
pull out.

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JEFFREY