VZCZCXRO3691
PP RUEHBC RUEHDE RUEHFL RUEHIHL RUEHKUK RUEHKW RUEHLA RUEHMOS RUEHROV
RUEHSR
DE RUEHAK #2044/01 1041205
ZNY CCCCC ZZH
P 141205Z APR 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 4816
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNRAQ/IRAQ COLLECTIVE
RUEHBS/USEU BRUSSELS
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NSC WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUEUITH/ODC ANKARA TU

C O N F I D E N T I A L SECTION 01 OF 04 ANKARA 002044 
 
SIPDIS 
 
SIPDIS 
 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
DOE FOR CHARLES WASHINGTON 
EUR ALSO FOR MATT BRYZA 
SCA FOR STEVE MANN 
 
E.O. 12958: DECL: 04/30/2016 
TAGS: EPET ENRG PREL TU AZ GG RU IZ IR
SUBJECT: TURKEY: GAS AND THE GREAT RACE TO EUROPE 
 
REF: A. ANKARA 1527 
 
     ¶B. ANKARA 1010 
 
Classified By: AMBASSADOR ROSS WILSON FOR REASONS 1.4 (B,D) 
 
¶1.  (C)  SUMMARY:  In April 4-6 meetings in Ankara, senior 
Turkish officials agreed 
with EUR DAS Bryza on the need for rapid cooperation to 
facilitate export 
of Azerbaijani gas to Greece and Italy via a "Southern 
Corridor" stretching 
from the Caspian Sea through the South Caucasus and Turkey. 
All interlocutors 
concurred that such an effort would help Europe diversify its 
gas supplies, 
thereby bolstering the strategic importance of Turkey and 
Azerbaijan, and 
helping to channel Gazprom (over time) toward more 
market-based behavior. 
Energy Minister Guler expressed fear of upsetting Gazprom, 
but called for 
a regional meeting of government and company representatives 
to explore 
investment in a "Southern Corridor."  End Summary. 
 
---------------------------------------- 
 
U.S. Message: Brief Window of Opportunity for Azeri Gas - 
Russians at the Door 
------------------------------------------ 
 
¶2.  (C)  In a series of April 4-5 meetings,  GOT 
Officials agreed with EUR DAS Matt Bryza on the need to work 
together to 
facilitate near-term exports of natural gas from Azerbaijan 
into 
the Turkey-Greece-Italy (TGI)inter-connector for the 
following reasons: 
 
     -Diversify European gas supplies; 
 
     -Elevate Turkey's strategic importance as a key energy 
transit country; and 
 
     -Bolster commercial competition for European energy 
markets, thereby 
channeling Gazprom (over time) toward more market-based and 
less monopolistic behavior, 
relying on market forces. 
 
¶3.  (C) Bryza emphasized that the window of opportunity to 
secure throughput for 
the TGI pipeline seemed to be closing.  Based on his recent 
conversations in Athens 
and Rome, Greece and Italy seemed to be under intense 
pressure to 
sign long-term contracts with Gazprom to secure throughput 
for TGI for gas shipped 
from Russia to Turkey via an expanded Blue Stream pipeline 
(under the Black Sea). 
Senior Italian and Greek officials had recounted how Gazprom 
had told them that 
no gas would be available in Azerbaijan for TGI any time in 
the next decade. 
In reality, senior Azerbaijani officials and the private 
companies operating the 
Shah Deniz consortium believed Shah Deniz production could 
double by 2012, providing 
sufficient gas to finance the TGI pipeline.  Securing 
Azerbaijani gas in this way 
would then clear the way for later shipments of gas from 
Kazakhstan and/or Turkmenistan 
via a trans-Caspian gas pipeline.  But, to secure market 
share for Azerbaijani gas 
now would result in Gazprom securing potentially exclusive 
rights to ship gas to Greece 
and Italy via the TGI pipeline, thereby shutting in 
Azerbaijani gas for years to come, 
and denying a key export option for gas from Turkmenistan, 
 
ANKARA 00002044  002 OF 004 
 
 
Kazakhstan, and (eventually) 
Iraq.  Bryza noted that an Italian Deputy Foreign Minister 
suggested convening a conference 
of government and company representatives to explore next 
steps on realizing this proposed 
"Southern Corridor" of gas exports from the Caspian region to 
Southern Europe.   Bryza 
emphasized that U.S. policy was not anti-Russia; rather, it 
was pro-competition and 
pro-diversification.  Bryza said the current gas market was 
broken: Gazprom bought Central Asian gas for $65 per thousand 
cubic meters (tcm) 
and sold it to Turkey and Europe for $230-270 per tcm.  This 
generated enormous rents, which were 
distributed non-transparently, feeding organized crime and 
undercutting energy sector reform. 
Bryza recounted the views of Italian interlocutors, who 
warned that such rents enabled Gazprom 
to pursue a corporate strategy that aimed to stifle 
competition through acquisition of strategic 
energy infrastructure, rather than to maximize profits and 
bolster its competitiveness under market 
conditions.  Bryza stressed that by increasing competition 
for European gas markets through 
development of a "Southern Corridor," Gazprom would lose 
access to cheap Central Asian gas, 
and eventually have to reform itself to attract foreign 
investors required to develop domestic 
Russian gas fields.  This would help Gazprom emerge as a more 
reliable commercial partner, 
which was important to the U.S. as well as Europe, given U.S. 
plans to purchase LNG from 
Gazprom. 
 
¶4.  (C)  Foreign Minister Gul told Bryza that the United 
States and Turkey shared the same strategic vision for 
increasing diversification of energy supply from the 
Caspian region and lessening monopolistic behavior by 
Gazprom.  He said that the GOT had also sought support from 
the President of Turkmenistan to re-launch the Trans-Caspian 
Pipeline (TCP).  (Septel) 
 
¶6.  (C) MFA DDG Energy Mithat Rende agreed that the United 
States and Turkey needed to work with European partners to 
promote alternatives to Russian gas.  He said 
Russia should join the Energy Charter Treaty and provide 
third-party 
access to its pipelines.  Rende said that Turkey seeks to 
be an energy hub, but not just for Russian gas.  He 
asserted that Europe should promote Russia joining these 
objectives at the G-8.   Rende lamented that at the recent 
Turkey Black and Caspian Sea energy conference in Ankara, 
the Russian rep had said: "Not over our dead body. No to 
gas pipelines across the Caspian."  Bryza noted that this 
was an unfortunate attitude, but it was not up to Russia to 
decide whether other 
states could cooperate on a trans-Caspian pipeline.  He said 
the USG and European 
Commission were both considering feasibility studies for 
trans-Caspian gas 
pipelines from Kazakhstan and Turkmenistan. 
 
¶7.  (C)  Officials of BOTAS, Turkey,s state pipeline 
company, also told Bryza they 
supported a "Southern Corridor" for Caspian gas exports to 
Europe.  They noted that 
BOTAS is a founding partner in Nabucco, a proposed gas 
pipeline stretching from 
Turkey through Bulgaria, Romania, Hungary, and Austria.  They 
noted that Shah Deniz 
would not be sufficient to support Nabucco, so work was 
needed to develop other 
gas sources like Egypt, Iraq, Turkmenistan, Kazakhstan, and 
Qatar. 
 
--------------------------------------------- ------------- 
Minister of Energy Fears the Russians and Seeks to Bargain 
--------------------------------------------- ------------- 
 
 
ANKARA 00002044  003.2 OF 004 
 
 
¶8.  (C)  Energy Minister Hilmi Guler's position was less 
clear. 
Guler expressed fear of angering the Russians, given 
Turkey's 65% reliance on Russian gas.  Guler worried about a 
repeat of last 
winter,s gas cut-off during the Russia-Ukraine dispute. 
Still, he expressed strong 
interest in increasing production and export of Azerbaijani 
gas, which he hoped would 
help soften Gazprom,s hardball tactics.  He blamed the U.S. 
for failing to prevent the 
Blue Stream pipeline from being realized in the late 1990,s, 
and (astonishingly) asked 
for the U.S. to take the lead in blunting Gazprom,s pressure 
to double Blue Stream,s 
capacity.  Bryza countered that the decision to build Blue 
Stream was taken by the 
sovereign government of Turkey, not by the U.S.  This 
remained the case today, with 
respect to Blue Stream,s expansion.  Guler nevertheless 
pressed on with his quest for 
U.S. political cover to oppose Gazprom,s pressure, asking 
that the U.S. be in the 
forefront in promoting the "Southern Corridor," but offering 
Turkey's support 
behind the scenes. 
 
¶9.  (C)  Guler then tried to bargain for U.S. support on the 
GOT,s preferred 
Samsum-Ceyhan oil pipeline in exchange for Turkish support 
for the "Southern Corridor." 
Guler asked why the United States was not supporting 
Samsun-Ceyhan, arguing that 
this was the best option to alleviate congestion in the 
Turkish Straits.  Guler said ENI 
and Total were Interested in Samsun-Ceyhan, and suggested the 
U.S. had an obligation 
to help Turkey realize Samsun-Ceyhan before the 
Burgas-Alexandropolis pipeline was 
realized.  Bryza recognized the need to reduce growing 
traffic in the 
Straits, and noted U.S. support for multiple pipelines whose 
commercial viability is 
determined by the market.  But Bryza said the U.S. did not 
favor 
one Bosporus bypass pipeline over another, particularly in 
the case of Samsun-Ceyhan 
(favored by Turkey) and Burgas-Alexandropolis (favored by 
fellow NATO Ally, Greece). 
The U.S. had already offered strong support to 
Baku-Tbilisi-Ceyhan, acceding to Turkey,s 
strong requests, at a time when Burgas-Alexandropolis was 
just emerging.  More 
fundamentally, Bryza rejected the linkage of the "Southern 
Corridor" with Samsun-Ceyhan. 
The U.S. favored a partnership with Turkey to advance our 
shared vision of helping Europe 
diversify its gas supplies via a "Southern Corridor." 
Washington needed to know whether 
Turkey also sought such a partnership, or whether Ankara 
instead wished to bargain 
over support for various energy projects. 
 
¶10.  (C) Guler backed off, stressing Turkey,s desire for a 
genuine partnership 
with the U.S. on energy.  He called for greater U.S.-Turkish 
cooperation to incrase 
gas deliveries to Southern and Central Europe via Turkey, 
including via a resurrected 
trans-Caspian gas pipeline from Turkmenistan, the Nabucco 
Pipeline to Bulgaria, Romania, 
Hungary, and Austria, as well as potential gas shipments to 
Turkey from Egypt and Iraq. 
Guler suggested that the U.S. and Turkey cooperate on a 
possible gas pipeline running 
parallel to the existing oil pipeline from Iraq to Ceyhan. 
Bryza agreed.  Guler asked 
Bryza what the U.S. thought of the proposal to extend the 
Blue Stream pipeline across 
 
ANKARA 00002044  004.2 OF 004 
 
 
Anatolia to Ceyhan, then onward to Israel.  Bryza said that 
the U.S. wished to enhance 
Israel,s energy security, but that extending Blue Stream was 
a decision for the GOT to 
ake.  Bryza advised that in taking such a decision, the GOT 
weigh the relative benefits 
to Turkey and Israel of this project against the impact it 
would have on bolstering 
Gazprom's monopoly power.  But, Bryza repeated, this would 
ultimately be Turkey's 
sovereign decision. 
 
¶11.  (C) Minister Guler pressed for more visible U.S. support 
for these projects. 
Bryza replied that at this stage, the U.S. was exploring the 
viability of these 
projects through quiet diplomacy. 
 
----------------------------- 
Way Forward - Practical Steps 
----------------------------- 
 
¶12. (C) After several exchanges regarding Bryza,s recent 
meetings in Rome and Athens 
on gas supplies (SEPTELS), Guler eventually recognized the 
need for Azerbaijan to move 
quickly to secure market share in Greece and Italy via the 
TGI pipeline.  Guler proposed 
a regional conference among government and company 
representatives operating in Azerbaijan, 
Turkey, Greece, and Italy.  Bryza agreed, noting that an 
Italian Deputy Foreign Minister 
made a similar proposal.  Bryza also suggested a 
U.S.-Turkey-Iraq working group to promote oil and gas 
development and transit.  Guler agreed. 
Guler also expressed interest in a working group to look at 
the issue of 
congestion in the Turkish Straits. 
 
¶13.  (U)  DAS Bryza has cleared this message. 
 
Visit Ankara's Classified Web Site at 
http://www.state.sgov.gov/p/eur/ankara/ 
WILSON