AMBASSADOR JEFFREY'S MEETING WITH ENERGY MINISTER

C O N F I D E N T I A L ANKARA 000986

SIPDIS

EEB FOR AMBASSADOR MORNINGSTAR

E.O. 12958: DECL: 07/07/2019
TAGS: ENRG TU
SUBJECT: AMBASSADOR JEFFREY'S MEETING WITH ENERGY MINISTER
YILDIZ

Classified By: Ambassador James Jeffrey for reasons 1.4 b, d


1. (C) Summary: Ambassador Jeffrey met with Energy Minister
Yildiz July 7 to get a readout of Yildiz's Moscow trip and an
update on Turkey - Azeri negotiations. Yildiz confirmed that
the Nabucco IGA signing ceremony would take place as planned
in Ankara on July 13. He said negotiations with the Azeris
are continuing and Turkey expects a response to its most
recent offer when an Azeri delegation comes to the IGA
ceremony. He was confident Turkey would eventually reach a
deal with the Azeris, and said the recent Gazprom-Socar gas
purchase agreement would not affect negotiations because the
gas sold to Russia in that deal would not come from Shah
Deniz phase 2. In Russia, Yildiz discussed extension of the
expiring Westline supply contract, a preliminary study for a
revised Bluestream 2 project (which he thought could possibly
provide gas to the Nabucco project in addition to supplying
Israel and India),and the long-delayed nuclear tender, about
which Yildiz said the GOT needs to make a final decision by
the end of July (i.e., before PM Putin's planned August 6
visit). Yildiz indicated strong GOT interest in adding
nuclear power to Turkey's energy mix and said the second
nuclear tender would offer a more attractive public-private
ownership structure that should get multiple bids. End
summary.


2. (C) Yildiz has been in almost constant motion since he was
appointed Minister of Energy on May 30, traveling Azerbaijan,
Turkmenistan, Italy, Iraq and twice to Russia (Sochi and,
most recently, to Moscow on July 2nd). He appeared much more
confident in his role as minister than he was in early June.


3. (C) Yildiz confirmed that the Nabucco IGA signing ceremony
would go forward as planned on July 13 in Ankara. He said
the agreement had been delayed due to differences of opinion
between governments and EU companies, and by "hesitations" on
the part of Turkey (which he did not describe). There were
some shortcomings that needed to be resolved (apparently
referring to the sharing of tax revenues),and Turkey
undeservedly was tarred as the party creating obstacles. But
the final document is better for it. Turkey is not a source
country for Nabucco, it is only a transit state. Nabucco
should have five or six sources, including Azerbaijan, Iraq,
Turkmenistan, and Iran.


4. (C) Ideally, said Yildiz, Turkey would have finalized its
gas purchase negotiations with Azerbaijan before the IGA
signing. Turkey made an offer to Azerbaijan and is waiting
for a response. The Azeris say that the offer is still under
consideration. Turkey has invited the Azeris to the Nabucco
IGA signing ceremony and will continue discussions then.
Transparency and a strategic perspective are very important
in these negotiations, said Yildiz. He was confident that
Turkey will eventually buy gas from Azerbaijan. The deal,
however, will have to be for both SD phase 1 and phase 2
together and cover both price and quantities. He hopes to
get a response from the Azeris next week.


5. (C) Concerning the recent Gazprom - Socar gas agreement,
Yildiz said the gas sold to Russia will not affect the
Nabucco project or Turkey's negotiations with Azerbaijan.
The gas sold to Russia will not come from Shah Deniz phase 2
and in fact it cannot, Yildiz said, since the agreement calls
for gas to be delivered in 2010 while SD 2 will not go online
until 2015. So he was not worried by the agreement.


6. (C) Yildiz visited Moscow on July 2 and met with Energy
Minister Shamtov and Deputy Prime Minister Sechin. Yildiz
said he discussed four issues with the Russians: Extending
the Westline gas supply contract that expires in 2011;
Bluestream 2; the Turkey-Russia trade balance (Note: Turkey
runs a large trade deficit with Russia, $31 billion in
imports in 2008 versus only $6.5 billion in exports. End
note.); and the nuclear power tender. On Bluestream 2,
Yildiz said they discussed a preliminary study for a
north-south line that would cross Turkey and continue on to
Israel and India, and said the marketing, finance and Israeli
sides of this proposal were discussed. Sechin's
participation in the discussions were unexpected and helpful.
Asked if Russian gas from this version of Bluestream 2 could
also feed into the Nabucco pipeline, Yildiz said it was
possible, and noted that the Russian side is focused on the
project's commercial feasibility. There was no substantive
discussion of the Southstream project.


7. (C) On the long-delayed nuclear tender, Yildiz said Turkey
should have moved towards nuclear power decades earlier and
the GOT needs to complete this project because Turkey needs

the energy. The GOT will have to make a clear decision by
the end of July whether to say yes or no on the Russian
nuclear bid (Comment: this is likely because of the planned
visit of Russian PM Putin on August 6, although Yildiz did
not link the decision to that visit. End comment.)
Ambassador Jeffrey noted that the US Trade and Development
Agency was interested in providing technical assistance in
making the next nuclear power tender more attractive to
international atomic energy companies. Yildiz said the next
tender will be for a plant in Sinop (on Black Sea coast).
Yildiz asked if US companies would participate in the tender,
and Ambassador Jeffrey replied that the US companies he has
spoken with indicated they are interested if the terms are
attractive. Yildiz said the terms will be attractive enough
to get seven or eight bidders. The initial model, based on a
private company owning the plant, has received a lot of
criticism, and Yildiz believes the next tender will be a
public-private partnership with 20-25% state ownership.


8. (C) Ambassador Jeffrey noted the growing interest of
Turkish energy companies in Iraq. Although Shell and Turkish
state petroleum company TPAO did not win the recent oil
tender, it was still early days for energy development in
Iraq. Yildiz agreed and said that Turkey has been and will
continue to be patient in developing its relations with Iraq,
including on energy.

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JEFFREY