This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 008018 
 
SIPDIS 
 
 
STATE FOR E, EB/CBED, EB/ESC, EUR/SE 
STATE PASS NSC FOR QUANRUD AND BRYZA 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO 
USDOE FOR PUMPHREY/ROSSI 
 
 
E.O. 12958: DECL: 11/04/2012 
TAGS: ENRG ECON EPET AJ GG KZ TU
SUBJECT: TURKEY-GREECE GAS INTERCONNECT ADVANCES, BUT KEY 
STICKING POINT REMAINS 
 
 
REF: OWENS (ATHENS)-DUNNIGAN (ANKARA) 11/6 TELCON 
 
 
Classified by DCM Robert Deutsch, Reason 1.5 (b,d) 
 
 
¶1. (C) Summary and comment:  Turkey and Greece have reached 
agreement on the text of an Intergovernmental Agreement for 
the Turkey-Greece gas interconnect, which they hope to sign 
by the end of November.  BOTAS and DEPA have not, however, 
been able to agree on the price at which DEPA would purchase 
gas under a Gas Sales Purchase Agreement (SPA).  The 
underlying problem is that Turkey is currently paying 
significantly more for its imported gas than is Greece.  It 
appears it will not be economically viable for Turkey to 
export gas to Greece until Shah Deniz gas (by far the 
cheapest Turkey will import) comes on line in 2006.  BOTAS 
General Manager Bildaci requested EB/CBED Ambassador Mann's 
assistance in encouraging the Greeks to accept paying a 
higher price for gas from Turkey in the short-term for the 
long-term strategic benefits this deal would bring.  Post 
believes it would be useful for Ambassador Mann to raise this 
issue with Greek officials during his visit to Athens later 
this month (refcon).  End summary and comment. 
 
 
¶2. (C) BOTAS General Manager Bildaci called econoff in 
November 4 to request USG assistance on the Turkey-Greece 
interconnect.  Bildaci said officials from the Greek 
government and DEPA had visited Ankara October 30-November 1 
to discuss the Intergovernmental Agreement (IGA) and Gas 
Sales Purchase Agreement (SPA) for the interconnect.  He 
noted that the government-to-government IGA discussions were 
successful, with the two sides reaching agreement on a final 
text.  MFA and Ministry of Energy officials later confirmed 
to econoff that they had agreed with the Greek delegation on 
an IGA text, which they hope to sign by the end of November. 
 
 
¶3. (C) Bildaci noted, however, that the SPA negotiations had 
ended in a stalemate over the price at which DEPA would 
purchase gas from BOTAS.  The two sides discussed only the 
first one half billion cubic meter (bcm) that Greece would 
purchase in 2005-2006, before Shah Deniz gas comes on line 
and the contracted volumes ramp up.  The root of the problem 
appears to be the discrepancy between what BOTAS and DEPA are 
paying for their imported gas -- since BOTAS is currently 
paying more, it will be forced to sell to DEPA at a loss (or 
DEPA will have to pay a higher price) until Shah Deniz comes 
on line.  According to Bildaci, BOTAS is currently paying or 
will pay the following amounts for its imported gas: 
 
 
Gas Contract      USD per thousand cubic meters 
--------------------------------------------- --- 
Russia West 1       130 
Russia West 2       134 
Blue Stream         132 
Iran                123 
Shah Deniz           95.5 
 
 
Note that the Russian gas figures reflect the discount 
Bildaci successfully negotiated with Gazprom in July.  The 
figures for Iranian gas do not reflect the discount Bildaci 
negotiated, since that price is only good through 2005 
(Bildaci did not reveal what the discounted price was). 
 
 
¶4. (C) Bildaci said that DEPA officials told him they are 
currently paying USD 119 per thousand cubic meters for 
Russian gas.  Therefore, even if Bildaci sold gas to DEPA at 
USD 123 per thousand cubic meters (the lowest price BOTAS is 
currently paying), and charged no transit fees, DEPA would 
still have to pay more than it is currently paying for its 
imported gas.  Under BOTAS and DEPA's current price 
structures, exporting gas to Greece does not become 
economically viable until Shah Deniz comes on line.  Bildaci 
told econoff he sees two options:  1) a DEPA-BOTAS 
compromise, whereby both accept some minor losses for 
strategic reasons; or 2) postponing the SPA negotiations (and 
eventual delivery of gas to Greece) until June 2003, at which 
point Shah Deniz will be far enough along to allow BOTAS to 
negotiate based on Shah Deniz gas prices. 
¶5. (C) Bildaci said he preferred the first option, which 
would allow work on the Greece-Turkey interconnect to begin 
immediately.  (Note:  BOTAS has already selected the French 
firm Sofregaz to conduct the detailed engineering study for 
the Turkish portion of the Shah Deniz pipeline).  He said 
thought he could offer DEPA the price of USD 123 per thousand 
meters with no transit fees.  Bildaci suggested that EB/CBED 
Ambassador Mann could help significantly if he were to 
encourage the Greeks to accept paying a higher price for a 
small amount of gas for a few years (i.e. one half bcm until 
2006/2007) in order to advance a strategic project that would 
increase its diversity of supply. 
 
 
¶6. (C) Bildaci noted wryly that, before he negotiated a 
discount with Gazprom, BOTAS was paying USD 133 per thousand 
cubic meters for Russia West 1 gas, and USD 145 per thousand 
cubic meters for Russia West II gas, significantly more than 
what DEPA was paying for the same gas.  He commented that, 
when he reported this situation to the new Minister of 
Energy, there was sure to be -- and there should be -- 
another investigation, which he dubbed "White Energy Scandal 
II."  Bildaci said that, although he had had no role in 
negotiating any of the high-priced Russian contracts, he 
still feared the repercussions of this for BOTAS. 
 
 
¶7. (C) Comment:  Post believes it would be useful for 
Ambassador Mann to raise this issue with Greek officials 
during his visit to Athens later this month (refcon).  One 
complicating factor, of course, is BOTAS's Iran gas contract. 
 Although BOTAS likely will not be exporting Iranian gas to 
Greece, it is the Iranian contract that allows Bildaci to 
justify the USD 123 price he plans to offer DEPA.  End 
comment. 
PEARSON