Identifier
Created
Classification
Origin
09ANKARA138
2009-01-28 09:08:00
CONFIDENTIAL
Embassy Ankara
Cable title:  

US-TURKEY ENERGY WORKING GROUP REAFFIRMS ENERGY

Tags:  ENRG EPET IZ TU 
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R 280908Z JAN 09
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 8599
INFO RUCNCIS/CIS COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHGB/AMEMBASSY BAGHDAD 1381
RUEHIT/AMCONSUL ISTANBUL 5295
RUEUITH/ODC ANKARA TU
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 05 ANKARA 000138 

SIPDIS

EEB FOR ENERGY COORDINATOR MANN
EUR FOR DAS BRYZA

E.O. 12958: DECL: 01/28/2019
TAGS: ENRG EPET IZ TU
SUBJECT: US-TURKEY ENERGY WORKING GROUP REAFFIRMS ENERGY
COOPERATION

REF: A. ANKARA 0014

B. ANKARA 100

Classified By: Ambassador James Jeffrey for reasons 1.4 (B) and (D)
C O N F I D E N T I A L SECTION 01 OF 05 ANKARA 000138

SIPDIS

EEB FOR ENERGY COORDINATOR MANN
EUR FOR DAS BRYZA

E.O. 12958: DECL: 01/28/2019
TAGS: ENRG EPET IZ TU
SUBJECT: US-TURKEY ENERGY WORKING GROUP REAFFIRMS ENERGY
COOPERATION

REF: A. ANKARA 0014

B. ANKARA 100

Classified By: Ambassador James Jeffrey for reasons 1.4 (B) and (D)

1.(C) Summary. The second U.S.-Turkey Energy Working Group
on January 15 began on a positive note with both sides
agreeing to develop a common strategy on Caspian energy,
identify concrete steps and carry them out. EUR DAS Bryza
stressed that the Russian gas cut off had focused Europe's
attention anew on diversifying natural gas supplies, and we
should take this opportunity to make real progress on the
Southern Corridor. In some areas, U.S. and Turkish strategic
vision was closely aligned. We agreed to coordinate our
messages to Turkmen President Berdymukhamedov about allowing
access for international oil companies for upstream field
development and to support an interconnector between Turkmen
and Azeri offshore platforms as an early route for gas
westward. The Turks stressed the need to help the Turkmen
build sufficient confidence to allow western companies
upstream access by first providing Ashgabat some breathing
space from Moscow through establishment of a link between
Turkmenistan's offshore gas fields and the West via
Azerbaijan. On Iraq, we agreed to urge the GOI to pass the
hydrocarbon law and the MFA suggested its desire to convince
Turkish firms they should refrain from signing contracts with
the KRG until passed. (Ref B reports a slightly different
take on this issue.) MFA Deputy Undersecretary Kuneralp said
he expected to see progress following what he termed "Nabucco
week" (Brussels conference on January 21-22 and Hungarian
conference January 26-27). GOT welcomed our support for a
World Bank study on CDC as a way to demonstrate to Central
Asian gas producers that serious European partners are
willing to move quickly to develop export pipelines should
the producers take the risky step of committing to export
some of their gas via non-Russian routes. On other issues,
such as negotiations with Azerbaijan, Turkey did not feel our
sense of urgency. MFA Energy Deputy Director General for
Energy Altay said negotiations with Azerbaijan would be
solved "when the time comes" but declined to say when that
time would be. GOT working group members would not divulge

the details of the negotiations. The Working Group agreed to
produce a new action plan. Embassy Ankara will draft the
first iteration. End summary.


2. (SBU) The second U.S.-Turkey Energy Working Group took
place on Friday, January 16. The Turkish side was led by
Ministry of Foreign Affairs Deputy Undersecretary Selim
Kuneralp, Ministry of Energy and Natural Resources Deputy
Undersecretary Yusuf Yazar, and Turkish Petroleum TPAO)
Director General Mr. Mehmet Uysal. Additional
representatives from those organizations and BOTAS also
attended. The U.S. side was led by Deputy Assistant
Secretary for Europe Matt Bryza and also included Ambassador
Jeffrey, TDA Europe/Eurasia Director Dan Stein and other
representatives from EUR, NEA and EEB bureaus, Department of
Commerce and Department of Energy.

Russian gas cut off
--------------


3. (C) Kuneralp said Turkey has suffered from Russia's gas
cuts since January 1. Turkey lost approximately 30% of its
total gas supply from the cut of the Russian-supplied Western
Line via Bulgaria. As a result, BOTAS has cut gas to 20% of
its customers (e.g., power plants with interruptible
contracts and who can use alternative fuels) and is using gas
from storage and LNG tankers to make up the difference (ref
A). Despite these difficulties, Turkey has kept the gas on
to Greece (albeit, in decreased volumes) and was considering
a deal to reverse the flow of the Western Line to send
re-gasified liquid natural gas to Bulgaria. (Note: this
initiative was overtaken by the resumption of Russian supply
on January 21. End note.) Kuneralp went on to say that
previously, Russia has been a reliable supplier and has never
used gas as a political weapon. Bryza noted Gazprom,s
geo-economic approach that aims to maximize its control over
gas import routes into Europe, and is instrumentalizing
European gas consumers in their commercial dispute with
Ukraine. The way to energy security is through

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diversification, especially of sources of gas supply. Only
competition from alternative suppliers can change Gazprom's
behavior, though this will take time, focus, and
political-level effort. We have Europe's attention. The way
to be helpful now, is to make real progress to advance the
Southern Corridor. A concrete step like resolving the
Turkey-Azerbaijan gas transit dispute, or signing the
Intergovernmental Agreement (IGA) for Nabucco is needed.

Azerbaijan
--------------


4. (C) Bryza stressed that we have a golden opportunity with
all of Europe, including Germany, focused on the need for
diversification of natural gas supplies. We should seize the
moment to make progress on the Southern Corridor. Kuneralp
said Azerbaijan is committed to export gas to Europe, not
Russia. There is no conflict with trying to accommodate
Turkey and Europe's gas demands, as long as sufficient gas
could be produced at Shah Deniz Phase II (SD II),as well as
in Iraq and Turkmenistan. Bryza said we will continue to
work with political leaders to help put in place the
commercial and legal frameworks required to attract upstream
investment. Only economically viable projects can attract
investors. SD II will not be big enough to meet Turkey's gas
needs, and also fill both the Turkey-Greece-Italy (TGI)
pipeline and Nabucco. The developers of both pipeline
projects had indicated in recent months to Bryza they each
sought to fold the other project into their own initiative in
the hope of securing sufficient gas volumes for one
consolidated project. TGI hoped to move gas from Greece to
Italy via the Poseidon sub-sea pipeline, then northeast
through Italy and Slovenia to Baumgarten, Austria; Nabucco
developers hoped to move gas from Turkey through Bulgaria,
Romania, and Hungary to Baumgarten, then southwest to Italy
via Slovenia. TPAO Managing Director for International
Projects Memet Ali Kaya responded the development of SD II
gas will open the door to further development of natural gas
fields in Azerbaijan, Turkmenistan, and Kazakhstan, as had
happened for oil in the case of the Baku-Tbilisi-Ceyhan
pipeline. Kaya estimated that SD further phases, ACG deep
gas, Absheron and Celikin in Turkmenistan could add up to 1
trillion cubic meters of gas.


5. (C) EUR/ERA Energy Officer McConaha argued that Turkey's
lack of progress on Shah Deniz I (SD I) price negotiations
and BTC arbitration were irritants in the negotiations with
Azerbaijan for SD II gas and were impeding progress on the
Southern Corridor. MFA Environment and Energy Deputy
Director General Vural Altay responded with pique "when the
time comes, these problems will be solved." Technical
negotiations are continuing and they are not ripe yet. The
final decision will be made at the political level but "we
are not there yet." Kuneralp added that after next week,
which includes a PM visit to Brussels, Nabucco IGA conference
and Hungarian Nabucco conference (to which Energy Minister
Guler will lead the Turkish delegation),things could move
forward.

CDC and Nabucco
--------------


6. (C) Kuneralp said the Caspian Development Corporation
(CDC) concept was designed jointly by the EU and Turkey to
address Turkey's energy needs and Turkmenistan's reluctance
to risk Russia's enmity by selling gas to the West. Turkey
is favorably considering the EU's proposal for the World Bank
to do a study of the CDC concept. The lawyers are doing the
final review of the legal implications for Turkey of the CDC
study and Turkey will soon make the request to the Bank.
Ambassador Jeffrey said the U.S. supports an expedited World
Bank study and expressed his hope that the CDC would be
composed of private companies and would not discriminate
against U.S. firms. The CDC study represents an important
concrete step we can take to shore up the Nabucco project.
The more steps we take to realize the Southern Corridor, the
more private companies and international financiers will
support it.


7. (C) Kuneralp responded he was expecting some concrete

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steps January 20-23 in what he termed as "Nabucco Week." The
EU will host a meeting on the Intergovernmental Agreement
(IGA) for Nabucco on January 21-22. The IGA has been agreed
between partner companies of Nabucco and will now be
presented to governments (i.e. Turkey, Bulgaria, Romania,
Hungary, Austria and Germany) and may be ready for signature
soon. In addition to the IGA, Turkey is seeking a "project
support agreement" (PSA) that would include language on
Turkey's energy security needs. (Note: the PSA would be the
equivalent of the Host Government Agreements concluded for
Baku-Tbilisi Ceyhan and the South Caucasus Gas Pipeline.)
The PSA would be an agreement between the Nabucco
International company and Nabucco partner companies (BOTAS,
Bulgargaz, Transgaz, MOL, OMV and RWE) and host governments,
and would give BOTAS the right or option
to buy some gas transiting Turkey via Nabucco. Kuneralp
noted Turkey could not watch 31 bcm of gas to Europe go by
and not get anything. Turkey would like the IGA and PSA to
be signed at the same time.

Turkmenistan
--------------


8. (C) Bryza and Kuneralp agreed the U.S. and Turkey should
coordinate their messages to convince Turkmen President
Berdymukhamedov to allow international companies to develop
new oil and gas fields and send it West. Our message should
explain the benefits of allowing foreign oil company access
to onshore and offshore fields. In particular, Bryza said we
should work together to calculate the potential revenues from
gas sales to Russia versus gas sales to the West and present
the results to the Turkmen. We also should work to improve
the relationship and confidence between President Aliyev and
President Berdymukhamedov. More concretely, the U.S. and
Turkey need to work quietly and behind the scenes to help
improve Azerbaijan-Turkmenistan relations, which in turn
would help create the climate to link up Turkmenistan's
Livanov field to Azerbaijan's gas export infrastructure.
TPAO Chairman Mehmet Uysal urged opening this early route for
gas to the West because such an opening will itself help
convince Turkmenistan to allow investment in Turkmenistan's
onshore fields. Kuneralp elaborated over lunch that without
such an opening toward the West, Berdymukhamedov will remain
convinced he has no real alternative to buckling under
Russian pressure.


9. (C) Dan Stein said TDA is ready to do a technical
feasibility study of linking the two off-shore platforms in
Turkmenistan and Azerbaijan, but the Turkmen president had
declined the study. Political will is needed to move this
project further. Kuneralp said our job is to make the
decision to send gas westward easier for President
Berdymukhamedov. The idea driving CDC is just that. CDC
will pick up the gas at the border as Turkmenistan has
required and it will limit Russia's reaction to Turkmen gas
going West. Waiting for the Turkmen to assert political will
is a losing strategy.


10. (C) Kuneralp said the meeting between Presidents
Berdymukhamedov Aliyev and Gul on November 29 was successful
in warming relations between Azerbaijan and Turkmenistan. An
outcome of the meeting is the establishment of a tripartite
commission chaired by the respective Energy Ministers to seek
resolution of Caspian Sea delimitation between Turkmenistan
and Azerbaijan. It is not yet clear what role Turkey will
play in the negotiations and Kuneralp said Turkey should now
move to organize the first meeting of the commission. He
welcomed U.S. help on the difficult issue of delimitation and
asked Bryza to inform the Azeris of Turkey's willingness to
host the first meeting soon. Bryza said State lawyers have
determined that a connection between Turkmen and Azeri
offshore platforms does not require a formal decision on
demarcation. Kuneralp agreed but added that this was an
important issue to the Turkmen.

Iraq
--------------

11.(C) Bryza and MFA Iraq desk representative Aydin Acikel
presented a similar strategic vision for Iraq.

ANKARA 00000138 004 OF 005


-- Iraq must pass the Hydrocarbon Law before developing
Northern Iraq fields. (Note: In a separate conversation, MFA
Iraq Envoy Murat Ozcelik indicated his long-standing position
that Turkey should wait for the new law may be softening (ref
B).

-- The U.S. and Turkey should continue to press the GOI to
pass this law.

-- The U.S. and Turkey support the so-called "Grand Bargain"
proposed by UK Special Envoy Frank Baker, according to which
Iraqi politicians would agree on both the key economic issue
of the hydrocarbon law and the key political issue of the
status Kirkuk.


12. (C) Kuneralp asked for U.S. support for a northern gas
export route from Iraq to Turkey to markets beyond. He
referenced Iraq's support for such a pipeline as stated in
the July 2008 joint political declaration creating a
strategic cooperation council signed by the PM and PM Maliki.
Uyusal also mentioned TPAO's desire to partner with U.S.
firms to do business in Iraq. He said they had formed a
consortium with Shell to bid on upcoming tenders and are in
negotiations with another oil company (which we later heard
is BP) to form another consortium. Uyusal also said TPAO
would like to encourage the expansion of oil exports through
the existing Kerkuk-Yumurtalik oil pipeline.


13. (C) NEA/I Iraq Officer Matt Amitrano pointed out that
Iraq still lacks a national gas strategy and therefore, it is
not clear how much gas will be used for internal consumption,
how much for export and in what time frame. Ambassador said
that Iraqi must first determine its own needs and how to meet
them. To the extent they wish to export gas, we should
support an Iraq-Turkey gas corridor.

Energy Chapter and Energy Community
--------------


14. (C) Bryza said he had just come from Cyprus where he
urged the GOC to lift its objections to the EU opening
negotiations with Turkey on the Energy Chapter of the EU
Acquis, and reached agreement with the Cypriot MFA to launch
a working group in Brussels to explore this move in
conjunction with potential progress on information sharing in
the contexts of NATO and ESDP, though the Cypriot MFA
political director warned there would be no chance for
progress until the dispute over drilling rights in Cyprus,
exclusive economic zone died down. Kuneralp thanked Bryza for
his efforts and said this was important to Turkey.
Furthermore, there are no technical barriers to opening the
negotiations. Kuneralp added Turkey will soon begin
negotiations with the EU on acceding to the Energy Community.


Pipeline security
--------------


15. (C) Kuneralp said there are adequate measures in place to
provide security for the Baku-Tbilisi-Ceyhan pipeline and
other pipelines. He described two security commissions, one
with the three partner countries and one internal with the
gendarmes, that meet regularly to assess the security
situation. BOTAS Deputy Director General Sakir Arikan said
security upgrades are already being discussed, including
hardening of the block stations. He expected that some
improvements would be in place in about a year. EEB
described in general terms the Critical Energy Infrastructure
Protection (CEIP) initiative and suggested Turkey may want to
consider joining this program. Kuneralp was non-committal.


16. (C) On security, Kuneralp said Turkey is concerned about
Romania's plans to import LNG through the Bosphorus Straits.
Bryza asked Turkey to do a careful study of the possible
effects of an LNG tanker crash, adding that the effects might
be less catastrophic than they think.

Visit Ankara's Classified Web Site at
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ANKARA 00000138 005 OF 005


Jeffrey