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