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C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 004935 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR EUR MATT BRYZA AND STEVE HELLMAN 
 
E.O. 12958: DECL: 08/23/2016 
TAGS: ENRG EPET PREL TU GR AZ IR RU
SUBJECT: TURKEY AND SOUTHERN GAS CORRIDOR - NUDGING JELLO 
ACROSS THE TABLE 
 
REF: A. ANKARA 4728 
 
     ¶B. ATHENS 2078 
     ¶C. BAKU 1193 
     ¶D. ASHGABAT 884 
 
Classified By: AMBASSADOR ROSS WILSON FOR REASONS 1.5 (B AND D) 
 
¶1.  (C) Summary: Turkey's Energy Minister Hilmi Guler told 
Ambassador August 23 that he would welcome U.S. help in 
facilitating meetings aimed at gaining a common, clear, 
commercially viable way forward on the southern gas corridor 
to Europe.  He obsessed about the undesirability of a simple, 
open transit regime that would assist mainly Iran; repeated 
longstanding skepticism about how much Caspian gas there is; 
and waffled on whether Turkey will be a pure transit country 
or whether it seeks a buyer/seller role to manage gas trade 
across its territory.  He also sees a more immediate northern 
Iraq gas option than may be realistic.  While Guler is aware 
of the need to act quickly in securing viable southern 
corridor arrangements, we still have some work to do in 
nudging Turkey towards a workable gas transit regime.  End 
Summary. 
 
--------------------------------------------- -- 
Moving from Pipe-Dream to Southern Gas Corridor 
--------------------------------------------- -- 
 
¶2.  (C)  Ambassador told Guler that we had a small window in 
which to build a framework that would facilitate long-term 
European and Caspian purchase and delivery commitments and 
help lead to investments to support them.  This would assure 
diversity, security, and affordability of supply for Turkey 
and Europe.  The task was to translate this "pipe dream" into 
reality.  In terms of process, Ambassador looked toward a 
series of working group meetings that we were prepared to 
help facilitate: Turkey-Azerbaijan, 
Turkey-Azerbaijan-Greece-Italy-(Georgia?), and a larger group 
to include Nabucco partners. 
 
¶3.  (C)  Ambassador said he understood there were different 
models under consideration in Turkey about how to structure 
Turkey's role -- a transit country/transit fee role versus a 
buyer/seller of gas.  The U.S. needed to have a clear 
understanding of Turkey's views, as will also potential 
buyers, sellers, and investors.  In our view, clear and 
simple transit fee arrangements would help facilitate the 
investment and purchase decisions necessary to bring a 
southern gas corridor into reality. 
 
--------------------------------------------- ------- 
Where will the Gas Come from? - Iran is the Obstacle 
--------------------------------------------- ------- 
 
¶4.  (C)  Guler identified a number of key obstacles: unclear 
intent and exaggeration of gas supplies by all countries, 
Russian pressure, and some countries "acting without good 
principles".   But, the real issue was Iran.  Guler insisted 
his main goal was to avoid filling Turkey's pipelines with 
Iranian gas destined for Europe.  He wanted to leave Iran 
with "no hope."  The Minister vigorously objected to direct 
talks between some European countries and Iran, without 
including Turkey.  Iran was an unreliable supplier, evidenced 
by arbitrary cuts to Turkey in the winter when gas was most 
needed. 
 
¶5.  (C)  Guler lamented that his objections to Nabucco 
partners' direct "flirtation" with Iran was feeding the false 
impression that Turkey was an obstacle to realizing the 
southern gas corridor.  Guler feared that Iranian gas would 
be the greatest beneficiary of an open and favorable transit 
regime.  But, there would be no reciprocal open and favorable 
transit regime for Turkmen gas across Iranian territory.  As 
a non-signatory to the Energy Charter, Iran need not offer 
any similar transit arrangement for Turkmen gas.  Europeans 
 
ANKARA 00004935  002 OF 003 
 
 
should pressure Iran to provide the same favorable transit of 
Turkmen gas across its territory that Iran sought across 
Turkey's. 
 
¶6.  (C)  The only way to prevent Iranian domination that 
Guler could see is for Turkey to be a trader in gas.  Without 
excluding the option of negotiating case-by-case transit fees 
depending on volumes and sources of gas, he espoused the view 
that Turkey needed to have some role in and knowledge of gas 
transit deals across its territory.  Turkey would do this as 
a trading partner. 
 
--------------- 
What about TCP? 
--------------- 
 
¶7.  (C)  Guler saw the trans-Caspian pipeline (TCP) as an 
effective tool to deal with an Iran and a Russia that are 
advantageously buying and reselling Turkmen gas.  He asked 
why the U.S. was not more supportive of TCP.   Ambassador 
said that Ambassador Mann, who recently saw President 
Niyazov, found no real change in Turkmenistan's attitude. 
Any effort to develop a route for east Caspian gas will 
depend first on a serious route for west Caspian gas, hence 
our interest in arrangements to get Azeri gas to Europe. 
Even with a Baku-to-Europe gas connection in place, Kazakh 
gas would likely be the catalyst for TCP.  When it is really 
on the horizon, Niyazov would be more likely to join. 
 
--------------------------- 
Near-term Operational Steps 
--------------------------- 
 
¶8.  (C)  Guler expressed recognition of the need to move 
quickly, recognizing that delays would benefit Russian 
interests.  Noting the need to get European consumers 
committed and investors started on second and third phases of 
Shah Deniz in Azerbaijan, Ambassador called again for Turkey 
to identify clear and not overly onerous transit arrangements 
and to facilitate a timely direct and symbolic contract 
between Azerbaijan and Greece through the 
Turkey-Greece-Interconnector (TGI) to show that the southern 
gas corridor is for real and that these countries can indeed 
cooperate to make it happen. 
 
------------------------------ 
Is Azerbaijan a Viable Source? 
------------------------------ 
 
¶9.  (C)  Guler was supportive of facilitating trans-shipment 
of Azeri gas, but noted that Azerbaijan was undecided about 
its development and its quantities were still not certain and 
not sufficient to feed European needs.  Georgia's needs were 
exaggerated.  (He did not mention the arrangement whereby 
Turkey proposed to release to Georgia its 20% discretionary 
portion of its take-or-pay contract with Azerbaijan.)  Guler 
also noted that Russia was placing immense pressure on 
Azerbaijan, Georgia, and Turkey to not move Caspian gas on to 
Europe to compete with Gazprom's monopoly. 
 
--------------------------------------- 
Turkey-Greece Interconnector is a Model 
--------------------------------------- 
 
¶10.  (C) Guler asserted that the token arrangement between 
the Turkish and Greek pipeline companies seeding the TGI was 
a model.  When pressed, he admitted that this still 
constituted buying and reselling gas from Azerbaijan 
delivered on to Greece.  Guler stated that he understood the 
Ambassador's point, but he insisted that transit fees would 
still have to be negotiated with commercial partners, and 
might vary based on volumes and sources, perhaps on a step 
basis. 
 
 
ANKARA 00004935  003 OF 003 
 
 
------------------------ 
We Support Gas from Iraq 
------------------------ 
 
¶11.  (C) Guler expressed enthusiasm for developing northern 
Iraq natural gas with egress via the oil pipeline right of 
way to Ceyhan.  He also waxed about Turkey's resolve to 
develop an LNG terminal at Ceyhan.  Ambassador noted that 
political questions made Iraq a questionable near-term gas 
source.  While we would welcome work with Turkey to bring 
Iraqi gas to market, Ambassador urged that Guler focus first 
on Azerbaijan. 
 
---------------------- 
Comment and Next Steps 
---------------------- 
 
¶12.  (C)  The Energy Minister is not lacking in grand vision. 
 He is working on giant coal-fired power plants 
(Afsin-Elbistan), the controversial Ilisu Dam on the Tigris, 
multiple refineries (septel), and many lines on the map which 
are aimed at the southern gas corridor to Europe.  While he 
has a sense of urgency and willingness to work out 
arrangements that will help facilitate sales, purchases, and 
investments for the southern corridor, he wants to control at 
least Iran's European sales through Turkey and to win a 
substantial share of the gas transit revenue stream for 
Turkey. 
 
¶13.  (C)  Working on this with Turkey will take time.  An 
iterative process makes sense: continued U.S.-Turkey 
discussions -- perhaps when EUR DAS Bryza and/or Senior 
Energy Advisor Hellman can next visit; U.S.-Turkey-Azeri 
talks, which need to come together soon -- perhaps not at the 
highest level until there is a clearer common understanding; 
and the southern corridor working group that would include 
Turkey, Azerbaijan, Georgia, Greece, and Italy, and at some 
stage adding the Nabucco partners (Austria, Hungary, Romania, 
and Bulgaria). 
 
Visit Ankara's Classified Web Site at 
http://www.state.sgov.gov/p/eur/ankara/ 
 
WILSON