VZCZCXRO8886
RR RUEHAST
DE RUEHAK #3712/01 1741226
ZNR UUUUU ZZH
R 231226Z JUN 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 6813
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNRAQ/IRAQ COLLECTIVE
RUEUITH/ODC ANKARA TU//TCH//
RHMFISS/HQ USEUCOM VAIHINGEN GE
RHMFISS/HQ USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ANKARA 003712 
 
SIPDIS 
 
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///// C O R R E C T E D  C O P Y - SUBJECT LINE  //// 
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USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
EXIM FOR PAMELA ROSS AND MARGARET KOSTIC 
OPIC FOR R CORR AND C CHIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ETRD OPIC TU IZ
SUBJECT:  TURKEY'S KARTET PERSEVERES IN ELECTRICITY EXPORTS 
          TO IRAQ 
 
REF: A) 05 ANKARA 5310 
 
B) 05 ANKARA 5080 
C) 05 ANKARA 4288 
 
ANKARA 00003712  001.6 OF 002 
 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1.  (SBU) SUMMARY: Turkish Kartet Company seeks U.S. support in its 
quest to increase electricity exports from Turkey to northern Iraq 
from 250 MW to 1200 MW.  Kartet says this has been blocked by 
Turkish energy regulator EMRA, which has called for competition, but 
has been unable to stir up competitors or organize a tender.  It 
appears that Kartet's contract with Iraq is the sole short term 
solution for increasing Turkey's contribution to meeting Iraq's 
electricity needs.  End Summary. 
 
¶2.  (SBU) BACKGROUND: Currently exporting 200-250 MW of electricity 
from its Silopi plant in Turkey to northern Iraq, Kartet Company has 
sought to increase its exports to 1200 MW to provide badly needed 
additional electricity in Iraq (refs).  Both Kartet's existing and 
incremental licenses have been held up by the Turkish energy 
regulator EMRA for over one year on the grounds that there should be 
a competitive tender for allocation of transmission capacity from 
the Turkish grid (State company TEIAS).  Kartet has won a court 
order to force EMRA to process its licenses (under then-existing, 
more favorable law), but EMRA has refused to implement the decision. 
 The Turkish MFA and Ministry of Energy (MENR) are supportive of 
Kartet's project, but have recognized the value of competition. 
Kartet argues that there are no realistic competitors and Kartet is 
the only company with an exclusive contract with the Government of 
Iraq for provision of electricity from Turkey. 
 
--------------------- 
Iraq is the Easy Part 
--------------------- 
 
¶3.  (SBU)  Kartet's Orhan Karadeniz complained on June 21 that the 
company had succeeded in putting in place the most difficult pieces 
of the contract on the Iraqi side.  Kartet was now fairly regularly 
receiving contractually required fuel oil (in partial payment for 
the electricity) by tankers from Bayji Refinery.  Karadeniz said 
that the company had worked out an arrangement at Habur Gate whereby 
Kartet received a preferential allocation of 50-100 tankers per day 
each way to service the Silopi Plant (just across the border).  He 
also said that Iraq had reallocated some of its budget for 
purchasing electricity from Iran to Kartet.  In the longer term, the 
Iraqi Government had arranged a letter of credit to secure payment 
for new transmission lines.  The Kartet rep said that he had held 
discussions with the Government of Iraq on considering partial 
payment in the form of oil/gas or oil/gas rights in exchange for the 
larger potential 1200 MW delivery.  He said the Iraqi side had made 
demarches to Turkey to move forward on implementation of the Kartet 
contract. 
 
----------------------------- 
The Regulator is the Obstacle 
----------------------------- 
 
¶4.  (SBU) Karadeniz complained that EMRA had held up the provision 
of increased electricity for over one year in pursuing a "trial and 
error" approach to seeking competition.  The Kartet rep said EMRA's 
President Yusuf Gunay had given him positive signals recently that 
he intended to expedite the process, but he felt that EMRA would 
have difficulty in backing down.  Karadeniz said that he intended to 
keep up the pressure of their legal claim against EMRA, asserting 
that they would have a right to liquidated damages.  Noting that 
Gunay claimed that Turkish groups Park and Sabanci had expressed 
interest to EMRA, the Kartet rep stated they have no investments in 
place and no contracts in hand.  Karadeniz said that the GOT and 
EMRA honoring their contract would be entirely consistent with EU 
legislation.  Noting that Kartet's current contract would expire in 
January 2007, he said if their Silopi plant were shut down, there 
would be less than 50 MW available locally on the Turkish grid to 
provision northern Iraq. 
 
¶5.  (SBU) Karadeniz asked for the U.S. Government to be active in 
keeping both governments focused on the project as a way to meet 
Iraq's needs.  He said that Foreign Minister Gul and Prime Minister 
Advisor Egemen Bagis were supportive of the project, but it would be 
useful to hear this from the U.S. representatives. 
 
 
ANKARA 00003712  002.6 OF 002 
 
 
¶6.  (SBU) COMMENT: EMRA's insistence on a competitive tender process 
has some legitimacy in theory.  However, EMRA and TEIAS have been 
unable to turn up serious competitors and/or fashion a competitive 
tender process.  We will continue to press Turkish Government 
officials for implementation of increased exports to Iraq.  Per Ref 
C we noted previously that some members of the Karadeniz family had 
been implicated but not convicted in the 2001 "White Energy 
Scandal".  We are not in a position to be able to assess all aspects 
of what Karadeniz admits is a "special deal", but Kartet is the only 
firm which was willing to execute this contract and deal and 
persevere at great difficulty in its implementation. 
 
Wilson