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

UNCLAS SECTION 01 OF 03 ISTANBUL 001346 
 
SIPDIS 
 
SENSITIVE 
 
USDOC FOR SAM NEWMAN 
 
E.O. 12958: N/A 
TAGS: EPET EWWT PREL EINV SENV TU
SUBJECT: ISTANBUL'S JULY VOLUNTARY PRINCIPLES MEETING: 
INTEREST BUT NO COMMITMENTS 
 
REF: A. STATE 178586 
 
     ¶B. ANKARA 4623 
     ¶C. ANKARA 4443 
     ¶D. ANKARA 4009 
     ¶E. STATE 73545 
 
Sensitive but Unclassified.  Not for internet distribution. 
 
¶1.  (SBU) Summary: Industry participants in the July 23 
Istanbul voluntary principles meeting tell us that while they 
are "interested in and supportive in principle" of the 
initiative, it is unworkable unless Russian oil companies 
also participate.  They also stressed that while 
consideration of bypass pipeline issues is appropriate, it 
should not be the exclusive focus of the principles; rather, 
shipping regulations must also play a key role, since oil 
will continue to transit the Bosphorus.  All remain in close 
contact with MFA officials.  In our last meeting, with BP on 
August 26, we learned that a planned MFA meeting with Russian 
oil companies in advance of President Putin's state visit 
here early next month has fallen through, so that a planned 
follow-on meeting in Turkey towards the end of September is 
also now in doubt.  End Summary 
 
¶2. (SBU) The Istanbul meeting on the voluntary principles was 
attended by the Foreign Ministry, the UK Consulate, Nilufer 
Oral, head of the Maritime Policy Center at Bilgi University, 
and companies including British Petroleum, ENI, Shell, Total, 
Chevron-Texaco and ExxonMobil.  The UK was represented by 
Consul General Barbara Hay, who attended a luncheon for 
participants, but did not attend the meeting itself.  We 
subsequently canvassed officials from a number of 
participating companies, including BP Turkey President Tahir 
Uysal, Nilufer Comert, Managing Director for Shell, and 
Muammar Ekin, Managing Director of Total. 
 
¶3. (SBU) Uysal, who was accompanied by a senior advisor, 
Michael Bilbo, indicated that the good attendance at the 
meeting highlighted the fact that there is no "disalignment" 
within the industry.  All were impressed by Orel's opening 
presentation about the dangers posed by straits transit, and 
concurred that together with oil industry, Turkey has done 
"all that it can do" to minimize those dangers.  He 
characterized the MFA draft as a "good document," and that 
Ministry officials had made clear they were there to work 
with the industry as they had no "certain view" and were 
instead groping for a solution to problems posed by the 
dramatic increase in oil shipments through the Bosphorus. 
Uysal noted that the proposal cuts across many issues and 
will affect many industry interests, and so will take time to 
absorb: BP itself is now thinking through the implications 
for CPC.  However, Uysal, like his colleagues at Total and 
Shell, said he had two principle initial caveats.  First, the 
initiative would be meaningless without the participation of 
Russian companies, which were not included on July 23, and, 
second, while the principles were directed towards 
encouraging use of pipelines, this could not be the exclusive 
goal, since oil shipments will remain on the straits whether 
or not a pipeline is built.  Shipping regulations must thus 
remain a key element.  BP also questioned the need for the 
principles to focus on assigning a cost to Bosphorus delays. 
Bilbo noted that the industry had already reviewed the 
situation last winter, and come to the conclusion that delays 
could cost the industry anywhere from 300-700 million USD per 
season (or from 50 cents to 3 USD per barrel),depending on 
weather, as a result of increased chartering rates, lost 
production, and lower prices offered on world markets for 
Russian oil. 
 
¶4. (SBU) Regarding next steps, Uysal noted that while the MFA 
hoped to present the principles to Russian industry before 
the Putin visit, that trip had now been put off, so that much 
will depend on the view President Putin takes in his meetings 
with Turkish officials.  As a result of the delay, a planned 
follow-on meeting with the industry here may also be 
postponed.  More generally, Uysal observed that there is a 
serious lack of communication between Turkish and Russian 
interests on the issue and the ways the two countries are 
impacted.  He noted that BP had recently taken a senior 
Russian oil executive to Ankara, and that the individual had 
returned with a whole new perspective both on Turkey's 
concerns about the straits and about what would need to be 
done to construct a pipeline. 
 
¶5. (SBU) Regarding the various pipeline proposals, Uysal 
stressed that a project could make economic sense, but would 
require a leader to push it forward.  BP, which played this 
role for BTC, would not do so for a second pipeline, but 
Transneft could conceivably do so.  Its decision to team up 
with the Anadolu Machinery Group on a possible Thracian bid 
had sparked interest throughout the Russian oil industry.  As 
for the Russian preference for the Thrace route, Uysal 
attributed it to lack of knowledge of Turkey.  While they saw 
it as the shortest route, environmental and right-of-way 
issues could make it much more complicated than the longer 
Samsun-Ceyhan alternative.  Uysal noted that BP's TNK 
affiliate has urged Transneft to back off Thrace.  Not 
surprisingly, Uysal saw BTC, "the first Bosphorus bypass," as 
the easiest alternative for avoiding the straits.  Using a 
Heathrow analogy, he noted that proposals for a third London 
airport have continually been shelved in favor of expanding 
Heathrow.  Similarly, BTC capacity could be increased from 1 
to 1.4 million barrels per day with existing facilities, 
while additional pumping stations could expand capacity up to 
2 million barrels per day.  Beyond BTC, however, Uysal opined 
that the Samsun-Ceyhan route makes more sense, given existing 
right-of-ways (Bluestream to Kirikkale and then an existing 
Kirikkale-Ceyhan pipeline) and terminal facilities at the 
southern terminus. 
 
¶6. (SBU)  In closing, Uysal noted government concern about 
the agitation of the competing five pipeline groups for 
government licenses.  The Finance Ministry, he noted, sees 
the early granting of a license as a danger, in that it could 
do more to block a final decision than to facilitate it. 
Uysal opined that it might be best to give all five groups a 
license, thereby rendering them meaningless.  More critical 
will be creation of a sponsor group that will commit 
production to such a pipeline.  Companies will want 
substantial guarantees from Turkey that there will be no 
interruption in the pipeline before they step forward, in his 
view.  Surprisingly, Uysal opined that pipeline financing 
would "not be a problem."  Rather, ensuring a proper legal 
structure could prove more difficult. 
 
¶7. (SBU)  Shell and Total officials largely echoed Uysal's 
point, but did so second-hand, since neither personally 
attended the session, as both companies were represented from 
the head offices in London and Paris respectively.  Both 
Comert and Ekin indicated that in recent days they had been 
in contact with Hakki Akil, Director of the MFA office 
pursuing the issue, and both had been provided by him with 
minutes of the July meeting.  Comert stressed that the July 
session was informal, and that the companies had only agreed 
in principle with the concerns that were reflected in the 
voluntary principles drafted by the Foreign Ministry.  They 
had not, however, made any explicit commitments to support 
them.  She noted that the issue is relatively less important 
to Shell than to companies like BP, since it has less oil 
flowing through the Bosphorus.  Shell will continue to 
participate in the process, however, and she noted that Hakki 
Akil from the MFA had phoned on August 20 regarding 
outstanding "action items."  She noted that while the MFA 
planned a meeting on the issue with Russian companies before 
Putin's early September visit to Turkey, she expected that 
Russian companies would react negatively to the proposal. 
She added that in her view the principles as they stand are 
too commercially prescriptive, and should focus more on 
environmental and security issues. 
 
¶8. (SBU) Ekin and Altinyay noted that while Total is a 
relatively small player in Bosphorus shipping, its stake will 
increase as its Caspian projects come on line.  He stressed 
that Total feels a strong "social responsibility" to ensure 
safety of oil shipments, and suggested that the voluntary 
principles should be along the lines of things that already 
exist, including limits on ship age and double hull 
requirements.  Pipelines, he concurred, are a separate issue, 
involving commercial rather than security and environmental 
considerations.  He expressed doubt, however, about whether 
they would prove economical, unless Turkey made life "more 
difficult" for those using the Bosphorus, perhaps by raising 
insurance requirements.  Ekin noted that the big oil 
companies already implement most suggested measures for 
environmental and security protection, but concurred with a 
point that he said Chevron had raised on July 23 that such 
measures "make things tougher and tougher for ourselves, and 
leave more room for smaller companies" that may cut corners. 
 
¶9. (SBU) A Leader or a Stick: Ekin concluded that the process 
on the voluntary standards is a difficult one that requires 
either a leader or a stick.  The MFA is "pushing a little," 
he said, but other countries will have to get on board too, a 
task made difficult in his view by the lower level of 
environmental safeguards and awareness in other Black Sea 
states. 
 
¶10. (SBU) Comment: From the vantage point of Istanbul 
industry, the MFA appears to have initiated a valuable 
dialogue, albeit one that they would like to see tweaked in a 
less commercial direction.  Whether the proposal will bear 
fruit, however, will depend on the stance of Russian 
interests, something that should become clearer in coming 
weeks with President Putin's visit to Turkey. 
ARNETT