TANER YILDIZ: ERDOGAN'S ENERGY TROUBLESHOOTER

C O N F I D E N T I A L ANKARA 000150

SIPDIS

EEB FOR ENERGY COORDINATOR MANN
EUR FOR DAS BRYZA

E.O. 12958: DECL: 01/30/2019
TAGS: ENRG EPET TU
SUBJECT: TANER YILDIZ: ERDOGAN'S ENERGY TROUBLESHOOTER

Classified By: Economic Counselor Dale Eppler for reasons 1.4 (B) and (
D)


1. (C) Summary. Denying persistent and long-standing rumors,
Kayseri Parliamentarian Taner Yildiz began a January 27
meeting with Econoffs by saying he assumed the job of energy
advisor to the AK Party 1.5 years ago, is happy with it, does
not have designs on the Energy Minister's job. He supports
Nabucco and has a broad strategic vision of Turkey as an
important energy corridor but did not appear to have a good
grasp of all the details of projects such as Nabucco. On the
domestic energy front, Yildiz called the price Russia offered
in Turkey's first nuclear tender "too high" but thought a
deal could be possible if the price is lower through
negotiation. He confirmed our suspicions that other deals
with Russia (such as the renewal the Russian-supplied West
Line) are on the negotiating table. He said he had
discussions with SOCAR on gas transit, and described Turkish
and Azeri interests as "closely aligned." In our view, the
Prime Minister is using Yildiz and Energy Minister Guler in
"good cop-bad cop" roles in Azeri transit negotiations.
While Guler follows instructions and sticks to a tough
negotiating position, Yildiz's discussions with SOCAR shield
the Prime Minister from being pinned down when he thinks time
is on Turkey's side. End summary.


2. (C) Yildiz said he had met with SOCAR recently to discuss
Turkey's role in the Nabucco project. Given the Russian gas
cut off to Ukraine and Europe, the GOT has intensified its
focus on alternative gas sources and diversified gas routes.
Turkey is talking to SOCAR about its own gas needs as well as
the Nabucco pipeline. However, SOCAR has made clear to
Yildiz that they are only one partner in a consortium and
that any deal must be negotiated and acceptable to all
partners.


3. (C) Yildiz described Turkey's and Azerbaijan's priorities
as closely aligned. We both want to find a way to balance
gas supply to Turkey with the need to build an economically
viably pipeline project to Europe. Yildiz said he understood
there is 13.5 bcm for export from Shah Deniz Phase II (SD II)
of which the minimum amount for Nabucco is 7 bcm. Yildiz
said Turkey's domestic needs must fit within the greater
context of the Nabucco project. Yildiz characterized both
sides as negotiating in good faith. Responding to a
question, Yildiz said he did not feel pressure from SOCAR to
conclude the deal within a certain time frame but nonetheless
thought a solution that both sides would agree upon could be
found. The most important issue for Turkey is volumes, while
price can be negotiated at a later date. He characterized
price as a technical issue that could be worked out with
formulas but added that the price formula must take into
account the netback principle by which Turkey should pay less
for gas from Azerbaijan than countries that are further away.


4. (C) Talking about the importance of diverse energy
supplies, Yildiz turned to Turkey's first nuclear tender for
which only a Russian consortium bid. Yildiz asked for our
evaluation of why no Western firms offered a bid. We
explained the risks faced by potential investors including
lack of price escalation, lack of clarity on liability,
difficulty finding financing and lack of sovereign
guarantees. In response to our question as to whether
additional issues with Russia are on the table (such as
renewal of the Russian-supplied West Line),Yildiz said such
connections should have been better thought out in advance
and coyly added international relations, politics, economics
etc. do not act independently of each other. The price
Russia has offered in not acceptable but if it can be
negotiated down, a deal may be reached. He told us there is
a Kayseri saying which may apply, "if you don't understand
the deal, only pay one-half up front


5. (U) Born in Yozgat in 1962, Yildiz graduated from Istanbul
Technical University, Electrical and Electronics Engineering
Faculty with a degree in Electrical Engineering. He was
appointed a member of board of Kayseri Electric Generation
Inc and Kayseri and Vicinity Electricity Distribution Inc.
He also worked as the General Manager of the latter company.
He was elected to Parliament as part of the AK Party list in

2002.

6. (C) Comment: Yildiz is an alternate route to the Prime
Minister on energy issues and we will continue to engage with
him. But he is not a master of project details and made
clear that he is not going to negotiate energy deals. In our
view, the Prime Minister is using Yildiz and Energy Minister
Guler in "good cop-bad cop" roles in Azeri gas transit
negotiations. While Guler follows instructions and sticks to
a tough negotiating position, Yildiz's discussions with SOCAR
shield the Prime Minister from being pinned down when he
thinks time is on Turkey's side. As we heard from MFA during
the Energy Working Group meetings on January 16, transit
issues with Azerbaijan will be solved "at the appropriate
time." Only the Prime Minister can decide when that time has
come. Since Turkey's leverage in this negotiation comes from
its transit role, it is not likely to give up that leverage
without a deal to secure more gas for Turkey's domestic
market. End comment.

Visit Ankara's Classified Web Site at
http://www.intelink.sgov.gov/wiki/Portal:Turk ey

Jeffrey