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C O N F I D E N T I A L ANKARA 005332 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR EUR MATT BRYZA AND STEVE HELLMAN 
 
E.O. 12958: DECL: 09/12/2016 
TAGS: ENRG EPET PREL TU GR AZ IR RU
SUBJECT: TURKISH ENERGY MINISTER PROMISES ACTION ON 
SOUTHERN GAS CORRIDOR 
 
REF: ANKARA 4935 
 
Classified By: ECONOMIC COUNSELOR THOMAS GOLDBERGER FOR REASONS 1.5 (B 
AND D) 
 
¶1.  (C) Summary: In a September 10 meeting, DAS Matt Bryza 
and Energy Minister Hilmi Guler agreed to the following 
action steps to advance the southern gas corridor across 
Turkey to Europe: 
 
- Guler committed to quickly seek a bilateral meeting with 
Azeri Minister of Finance Samir Sharifov to dispel 
uncertainty on Shah Deniz I, build confidence on Shah Deniz 
II, and start the process of concluding a transit agreement 
for Azeri gas volumes across Turkey to Greece. 
 
- Bryza will press IEA Deputy Director William Ramsay to 
accelerate plans to convene multilateral meetings including 
companies and customer countries for the southern 
Mediterranean corridor and Nabucco for parties to lay out 
their plans.  Guler said he was eager to participate in 
multilateral meetings. 
 
- Bryza committed to supporting Turkey in getting its fair 
share in commercially viable transit arrangements which 
address Turkey's specific concerns on Iran and assure that 
Turkey would not pay a higher price than "downstream" 
customers' less transit. 
 
- Bryza will reiterate his recommendation to Azerbaijan that 
they form an internal GOA working group to implement 
President Aliyev's commitment to accelerate development and 
export of Shah Deniz II throughout the hesitant bureaucracy. 
 
- Bryza agreed to continue working on a Trans-Caspian 
Pipeline from Kazakhstan and Turkmenistan. 
 
- Bryza committed to recommend formation of a 
U.S.-Turkey-Iraq working group to develop natural gas in 
northern Iraq for egress to Turkey at Ceyhan for processing. 
 
Bryza and Guler also agreed that when President Bush and 
Prime Minister Erdogan meet in Washington on October 2, they 
should touch on agreement to work together on gas from 
Azerbaijan, Iraq, and elsewhere in support of the southern 
gas corridor to Europe.  End Summary. 
 
-------------------------------------- 
Investors need assurances on Azeri Gas 
-------------------------------------- 
 
¶2.  (C) Underscoring the centrality of Turkey to a viable 
southern gas corridor, Bryza stressed that he wanted to 
insure that Turkey would obtain satisfactory commercial 
benefits in a transit regime.  Focusing on the importance of 
Azerbaijan as a gas supplier to Europe, he emphasized that 
the huge upstream investments needed to develop Shah Deniz 
future phases would require firm agreements between consumers 
and producers.  This meant that Turkey had to be "open for 
business" in a transparent and not overly onerous or 
obstructive way.  Bryza noted that BP/Statoil's newest 
projections show Shah Deniz Phase II yielding 15 BCM p.a. in 
2012 and 40-50 BCM p.a. in 2016-2020, more than enough to 
fuel the southern Mediterranean route to Italy and a serious 
start for Nabucco.  Despite assurances to him from President 
Aliyev, Bryza said the Azeri "bureaucracy" was still 
resisting designation of Shah Deniz Phase II gas for export 
and waiting for clearer signals from Turkey on a commercially 
viable gas transit regime.  Moreover, Bryza stressed that 
there were preliminary Azerbaijan-Turkey issues that needed 
to be cleared up before a broader multi-party gathering that 
would include end users as well as companies.  Bryza said he 
would go in two days to Paris where he would discuss the IEA 
as a convener of such a gathering.  He also said that Alieyev 
agreed to set up a working group within the Azeri bureaucracy 
to move forward on development of Shah Deniz II for export to 
Europe. 
 
------------------- 
 
Obsession with Iran 
------------------- 
 
¶3.  (C) As he has in past meetings, Minister Guler responded 
with a tour d'horizon of other actors and possible sources of 
gas.  He asserted that Azerbaijan was not the problem, and 
that Turkey - as "big brother" - and Azerbaijan would support 
each others' interests.  Guler stressed that the problems lay 
with Russia -- which is pressing Turkey on Blue Stream and 
seeking to tie up more low-priced Central Asian gas to sell 
at a huge margin to Turkey and Europe -- and Iran.  He 
complained that Iran is openly flirting with Europe, and that 
Austrian OMV was going too far in negotiating directly with 
Iran.  Guler asserted that Iran was not reliable with respect 
to quantity or quality.  He said Nabucco partners must get 
together to make a decision on source of gas for the project. 
 Guler stressed that in no way could Turkey condone paying a 
higher price for gas from Iran than European customers at the 
other end of the pipeline through Turkey.  Therefore, Turkey 
advocated establishing a joint stock company for developing 
the project or marketing the product so Turkey would have 
both a share in the revenues and information on contract 
prices and conditions.  Noting that recent negotiations with 
Iran were unsuccessful, Guler said that Turkey sought 
"reciprocity" with Iran: Turkey would be prepared to consider 
offering transit of Iranian gas if Iran offered transit of 
Turkmen gas.  Iran refused. 
 
¶4.  (C) Bryza said the U.S. position on energy investments in 
and agreements with Iran was very clear.  We cannot support 
Iranian gas to Europe and we cannot support Turkmen gas via 
Iran, which the Turks have been pushing for in meetings with 
Iran.  We remain firmly opposed to doing energy business with 
Iran while we accelerate our efforts to isolate Iran on its 
nuclear enrichment program.  Guler responded that the U.S. 
and Turkey would "agree to disagree" on Iran and Turkey would 
seek help from the Europeans to push Turkey's quest for 
Turkmen gas via Iran. 
 
---------------------------------------- 
Please do more on Trans-Caspian and Iraq 
---------------------------------------- 
 
¶5.  (C) Guler asked for more support from the U.S. on a 
Trans-Caspian Pipeline (TCP) and in working together to 
develop natural gas in northern Iraq.  Asserting that the 
U.S. was overly fixated on Azerbaijan, he asked to hear more 
from the U.S. on TCP.  Guler also called for U.S. support on 
using the Kirkuk-Ceyhan right of way for egress of natural 
gas from northern Iraq.  He said he had great interest in 
developing LNG processing at Ceyhan to reach a variety of 
world markets, including the U.S.  Guler said that he and 
Erdogan had just visited Ceyhan the week before to inspect 
potential sites for an LNG facility and a refinery.  He 
asserted that development of Iraqi gas would "solve our 
problems" with Iran and Russia and give us a "reshuffled hand 
of cards". 
 
¶6.  (C) In response, Bryza agreed to recommend forming a 
U.S.-Turkey-Iraq working group to move forward on development 
of gas in northern Iraq for egress to Turkey, either for LNG 
processing or for pipeline transit to Europe.  He suggested 
that the U.S. could support Blue Stream volumes going south 
to Ceyhan for processing as a solution meeting everyone's 
needs, but not shutting in Caspian production, which would in 
turn travel west to Europe across Turkey. 
 
¶7.  (C) On TCP, Bryza said that Vice President Cheney and 
other officials had been publicly and privately pressing 
Kazakhstan on both gas and oil links to Baku.  He said that 
one reason for focusing on Azerbaijan first was to get 
critical infrastructure in place first to help Kazakhstan vis 
a vis the Russians by providing a commercially viable option 
for Kazakh gas to reach European markets.  Bryza also 
mentioned the USTDA pre-feasibility study on TCP from 
Kazakhstan.  With respect to Turkmenistan, Bryza asked Turkey 
to put pressure on President Niyazov, noting that our efforts 
had not been highly successful. 
 
------------------- 
"Billiard" Approach 
------------------- 
 
¶8.  (C) Guler offered a "billiard" approach.  He said he 
would have no expectations for U.S. support on Iran, but 
would press the Europeans on a joint approach to Iran and 
support for Turkey's "reciprocity" of transit access.  He 
promised to meet quickly with Azerbaijan.  He welcomed U.S. 
help with Nabucco partners and would welcome an IEA convened 
multilateral meeting.  Guler repeated that progress on Iraq 
gas development and TCP would catalyze gas transit to Europe. 
 When Bryza reiterated the importance of Azerbaijan as a key, 
attainable first step to seed transit to Europe, Guler said 
that Bryza could tell the Azeri President and other high 
officials that Minister Guler was ready to meet Finance 
Minister Samir Sharifov and that he sought the most 
advantageous commercial terms possible for Turkey's "brothers 
in Azerbaijan."  Guler insisted that Turkey sought only a 
"fair" deal on transit and sales of Azeri gas, and understood 
that it should not overplay its commercial hand.  Bryza said 
he understood Guler's concern ("I do not want Iran to follow 
the same path") that a special Azeri transit arrangement 
would not be available to Iran.  They agreed that a southern 
gas corridor from Azerbaijan, Iraq, and elsewhere should be 
briefed as a topic for discussion when President Bush and PM 
Erdogan meet on October 2, but Guler insisted that this 
should be put in the context of a long-standing discussion 
rather than a new initiative. 
 
------- 
Comment 
------- 
 
¶9.  (C) Guler stressed his candor to Bryza, often asking his 
note-taker to stop writing.  He expressed a particular 
personal commitment to the vision of development of Ceyhan as 
an energy hub with Azerbaijan playing a key role.  Because 
this Sunday afternoon encounter in casual dress had followed 
a series of meetings over time, the discussions were warm and 
friendly.  Guler acted more decisive than in previous 
meetings and stressed that he was not "horse-trading" 
(although he does horse-trade with Russia and Iran).  Guler 
believes that he has struck a strategic bargain on an action 
plan with his key partner and ally the U.S.  Only progress on 
agreed action steps will indicate if the jello has really 
started moving across the table.  Bryza separately briefed 
Turkish MFA officials who promised to support the action 
steps. 
 
Visit Ankara's Classified Web Site at 
http://www.state.sgov.gov/p/eur/ankara/ 
 
WILSON