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R 080517Z MAY 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 5360
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHAH/AMEMBASSY ASHGABAT 1868

UNCLAS SECTION 01 OF 03 ANKARA 002510 
 
SIPDIS 
 
USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EWWT SENV EINV TU
SUBJECT: TURKEY PICKS CALIK TO BUILD SAMSUN-CEYHAN OIL 
PIPELINE 
 
REF: ANKARA 544 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1.  (SBU) SUMMARY: The GOT has chosen local firm Calik 
Enerji to build the Samsun-Ceyhan Turkish Straits oil 
bypass, awarding it a six-month conditional license, still 
subject to approval by the President.  Many of our contacts 
question whether Calik, whose Chairman Ahmet Calik is close 
to AKP politicians, has the capacity to bring shippers and 
financers to the project.  The GOT remains greatly concerned 
about the status quo of shippers using the Bosphorus as a 
"pipeline".  End Summary. 
 
-------------------- 
And the Winner is... 
-------------------- 
 
¶2.  (SBU) Turkey's government has chosen local firm Calik 
Enerji to build a 349 mile Samsun-Ceyhan pipeline to 
transport crude oil from the Black Sea to the Mediterranean, 
bypassing the Turkish Straits.  All ministers signed the 
decree granting Calik Eneriji, which has been cooperating 
with Italian ENI on project feasibility, six months to 
complete engineering and design studies and gain shipper 
throughput guarantees and financing.  The President's 
approval is required for final authorization for the choice 
of the company for the pipeline, which targets shipment of 
50-70 million tons p.a. (1.0-1.4 million bpd) with a 
construction cost of $1.5 billion.  Some of our contacts 
have questioned the non-competitive process which granted 
Calik the license.  Energy Minister Guler has defended the 
process as consistent with the way other major projects, 
like BTC, have been handled, but Tthe President, courts, or 
others may yet voice objections. 
 
------------------- 
Who is Ahmet Calik? 
------------------- 
 
¶3.  (SBU) The Calik Group is a mid-sized holding company in 
Turkey with whichthat has expanded from itsa core textile 
business core into energy, telecom, construction, and 
banking.  In a spanking new office in Ankara, Calik's CFO 
Semih Ergur told us recently that the company is 
diversifying its interests, specifically targeting energy 
and telecom sectors.  Calik won the privatization tender for 
the Bursa municipal natural gas distribution network and the 
coal mine/power facility in Cankiri.  Allying itself with 
India Oil Co. - and also laying plans for a refinery at 
Ceyhan - it was unsuccessful in gainingwinning the tender 
for the TUPRAS state refinery.  Teaming with Etilsat (UAE) 
Telecom, it also was an unsuccessful bidder in the Turk 
Telekom privatization.  Calik is now partnered with Italian 
Banca IMI Sanpaolo competing for the Turkish Sekerbank 
privatization. 
 
¶4.  (SBU) Founder Ahmet Calik established his wealth in 
Turkmenistan, reputedly having arrivinged penniless in the 
early 1990's with an introduction from former President 
Turgut Ozal, who was pressing Turkey's links to "the Turkic 
republics", then newly liberated from the USSR.  Calik 
quickly struck up a close and fruitful relationship with 
Turkmen President Niyazov, even gaining a Ministerial 
position and a Turkmen passport, and establishing himself as 
the key "go-to" conduit for foreign business in 
Turkmenistan.  Calik built up a highly successful textile 
business, including EBRD financed facilities serving western 
companies.  Later, he expanded into construction and 
energy/natural gas.  Calik has built several natural gas- 
fired power plants and is operating some of them.  Calik 
purchased 16 GE turbines for these power plants as one of 
the best clients of GE Power in the region. 
. 
 
¶5.  (SBU) However, in recent years, As Calik's star is 
reportedly waninges with Niyazov, the Calikand his group 
appears to have consciously decided to diversify back to 
Turkey.  Ahmet Calik is thought to be very close to the AKP 
party in power in Turkey, although he also has close ties to 
Fetullah Gulen, an alternative Islamistc figure currently 
living in the U.S.  Many of our contacts believe his 
closeness to the AKP has helped him secure lucrative 
government contracts like the Bursa gas distribution 
network, .  However,although he did not win the closely 
 
ANKARA 00002510  002 OF 003 
 
 
scrutinized privatizations managed by the Privatization 
Authority.  Indeed, there had initially been conflict 
between ministers on awarding the exclusive pipeline deal to 
Calik, without an open and competitive tender process. 
(Note: Calik DG Erdal Celik told FCS that they follow the 
normal business practice of maintaining good relations with 
the party in power.  End Note.) 
 
¶6.  (SBU) The GOT has long favored Samsun-Ceyhan as its 
Bosphorus bypass of choice, partly because it helps fuel 
theirits vision of Ceyhan as an energy hub.  But, the GOT 
has long been unsure of how to move forward on Samsun- 
Ceyhan, other thanbeyond criticizing competing projects like 
Burgos-Alexandropolous and trans-Thrace for environmental 
reasons.  The GOT began talking the Calik group up as a 
project champion over the last year.  One local rep of a 
major U.S. engineering firm said Calik lacked the capacity 
and experience to build a major pipeline project.  When 
Calik gained an agreement with ENI (builder of Blue Stream 
gas pipeline), the GOT decided to anoint the route and 
project, rather thanThe GOT did not choose to granting 
multiple conditional licenses and letting them compete for 
support form the marketplace. that would have let the 
commercial market choose the most viable project(s).  Now, 
the GOT has chosen to anoint their route and champion. 
 
--------------------------------------------- ---------- 
Skeptics Abound - It ain't over `til the Fat Lady Sings 
--------------------------------------------- ---------- 
 
¶7.  (SBU) At an April 28 Istanbul energy conference, Calik's 
Fatih Orcal (a former BOTAS official) touted their project's 
choice by the GOT Council of Ministers, claiming that Calik 
had been awarded an exclusive six-month right to promote the 
project and route.  He echoed the GOT's criticism of the 
competing Burgos-Alexandropolous project as being 
inappropriate for environmental reasons.  Noting 
theirCalik's proposal for a petrochemical facility at 
Ceyhan, the Calik repOrcal stated that the combination of 
BTC, Iraq, and new Samsun-Ceyhan pipelines would bring over 
4 million bpd to Ceyhan, transform it into a new Rotterdam 
energy hub and Platts would introduce "Ceyhan" based 
pricing. 
 
--------------------------------------------- ---------- 
Skeptics Abound - It ain't over `til the Fat Lady Sings 
--------------------------------------------- ---------- 
 
¶8.  (SBU) TOTAL: At the same conference, French oil company 
Total reps presented their competing vision for Samsun- 
Ceyhan.  Initially reported as collaborating with Calik-ENI, 
French oil company Total threw its hat into the ring with 
its own rival project for Samsun-Ceyhan and separate 
application for a license.  The Calik rep told EnergyOff 
that their license gave them a six-month exclusive right to 
make the project work.  At the same energy conference, 
Total's Turkey Director Antoine Elzir extolled the merits of 
their vision for Samsun-Ceyhan, claimeding they had done 
athat Total's more more comprehensive feasibility study for 
route and economics had been presented .  He said that Total 
had presented its findings to the GOT and washe said Total 
is open to sharing its views and study with other companies 
and investors.  A Total rep told us that it was unclear 
whether Calik had gained an exclusive right to the route, so 
it is moving ahead and believes its license request is being 
processed.  Many observers believe the two companies may 
eventually join forces. 
 
¶9.  (SBU) CHEVRON: Meanwhile, Oon the margins of the 
conference, Chevron reps told EnergyOff that Chevron was 
facing pressure from Russia, linking approval of CPC 
expansion to participation in the Russian favored Bulgaria- 
Greece project.  Tthey were skeptical that Calik would be 
able to secure throughput guarantees and financing for 
Samsun-Ceyhan.  Chevron continues to support a Bosphorus 
bypass, but stresses the importance of assuring the safety 
of tanker trade that remains in the Straits and says it is 
under pressure from Russia to support the competing Burgas- 
Alexandropolous route (linked to CPC pipeline expansion 
apprval).  The Chevron reps told EnergyOff that the Russian 
far east oil pipeline to Japan and China's burgeoning 
markets posed a long-term threat to the world's long haul 
tanker fleet (and would create greater Russian monopoly 
power if the fleet was moth-balled). 
 
 
ANKARA 00002510  003 OF 003 
 
 
¶10.  (SBU) BOTAS: A senior BOTAS official privately 
criticized the GOT's choice of Calik rather than state-owned 
BOTAS, Although which is embroiled in a conflict with the 
BTC consortium on wrapping up the pipeline and aassigning 
responsibility for cost overruns and delays on BTC 
construction. , BOTAS is very interested in building a 
potential Samsun-Ceyhan pipeline.   Observers feel that 
GivenBOTAS' weak leadership and vision is weak, the state 
and the company lacks the capacity and is not in a position 
to play an entrepreneurial role to develop the Samsun-Ceyhan 
project.  The GOT is loathe to commit funds or guarantees to 
make its preferred project come to pass.  Turkey has long 
sought to convince the Russians to participate in Samsun- 
Ceyhan, but the Russians have picked Burgos-Alexandropolous 
as a lower cost option. 
 
-------------------------- 
Trans-Thrace Still Hopeful 
-------------------------- 
 
¶11.  (SBU) Also long in the bypass game, Tthe local rep of 
U.S. citizen Howard Lowe's Thrace Development Company told 
EnergyOff that their project for a trans-Thrace project was 
still in the running, and their application for a license 
had not been formally rejected.  While their project would 
be the shortest and likely cheapest, the GOT has rejected it 
for environmental and strategic reasons, citing the fragile 
environment of Saros Bay and the inappropriateness of more 
tankers among the islands of the Aegean.  The GOT applies 
the same argument against the Bulgaria-Greece route. 
 
------- 
COMMENT 
------- 
 
¶12.  (SBU) COMMENT:  The USG has long urged the GOT to grant 
conditional licenses to let the market pick the winner(s) 
for bypass project(s), but in the end the GOT fell back toon 
its state planning reflex and anointed the route and 
champion.  It is not clear if this will be successful 
approach (nor if it will stand up to criticism as another 
special energy deal, not subject to competitive tender). 
Given steady emotional comments from GOT officials that the 
status quo of the Sstraits as the main route for shipping 
oil from the Black Sea to the Mediterranean (i.e., treating 
the Straits as a pipeline) pipeline is unacceptable, the GOT 
will be apt to become increasingly frustrated and rancorous 
towards oil companies if their preferred Samsun-Ceyhan 
project does not get the through-put guarantees needed to 
make it viable. 
 
Wilson