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DE RUEHAK #6663/01 3491024
ZNR UUUUU ZZH
R 151024Z DEC 06
FM AMEMBASSY ANKARA
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INFO RUCNRAQ/IRAQ COLLECTIVE
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UNCLAS SECTION 01 OF 03 ANKARA 006663 
 
SIPDIS 
 
USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ETRD TU IZ
SUBJECT:  TURKEY'S ELECTRICITY EXPORTS TO IRAQ 
 
REF: A) ANKARA 3716 
B) 05 ANKARA 5310 
 
ANKARA 00006663  001.2 OF 003 
 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1.  (SBU) SUMMARY: Turkey has sought to increase electricity 
linkages with all its neighbors, including Iraq, but is committed to 
joining the EU electricity grid (UCTE), so faces technical 
constraints on connections to non UCTE countries.  The recent 
Turkey-Iraq Joint Economic Commission identified a shared desire to 
increase electricity transfer from Turkey to Iraq and agreed to 
improve the transmission line infrastructure between the two 
countries.  The Turkish transmission company TEIAS has plans to maKe 
investment in increased transmission capacity.  Meanwhile, Turkish 
Kartet Company (Karadeniz Holding) has long sought to increase 
electricity exports from Turkey to northern Iraq from existing 250 
MW to 1200 MW, citing that it is the sole company with generation 
capacity and a contract with the Government of Iraq.  Kartet 
complains that its current activities and expansion plans have been 
blocked by Turkish energy regulator EMRA, which has called for 
competition, but has been unable to stir up competitors or organize 
a tender.  There are growing concerns about electricity shortfall in 
Turkey, so there may be reduced potential for and interest in 
exports.  End Summary. 
 
-------------------------- 
Existing Exporter - Kartet 
-------------------------- 
 
¶2.  (SBU) Presently 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).  Current electricity exports 
are sent to an "island" in northern Iraq and the electricity is 
partially paid for by shipments of heavy fuel oil to fire the power 
plant.  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. 
 
--- 
JEC 
--- 
 
¶3.  The November 15-16 Turkish-Iraqi Joint Economic Committee (JEC) 
for Economic and Technical Cooperation identified electricity as one 
of a number of energy related areas to target increased cooperation. 
 Recognizing the urgent need for the increase of electricity 
transfer from Turkey to Iraq, both sides agreed to improve 
transmission line infrastructure between the two countries.  Both 
sides agreed to activate the bilateral synchronized 400 KW inter 
connection systems, as part of the ELIJLST (Egypt, Libya, Iraq, 
Jordan, Lebanon, Syria, Turkey) project.  High level contacts 
between energy officials over the last year have articulated the 
desire to increase electricity exports to Iraq, mindful of chronic 
 
ANKARA 00006663  002.2 OF 003 
 
 
electricity shortfall there. 
 
-------------------- 
Transmission Company 
-------------------- 
 
¶4.  (SBU) On the margins of a conference on optimizing Turkish 
energy linkages to the EU, Turkish Transmission Company (TEIAS) 
Technical Chief Doruk Ozkuk stated that TEIAS was planning to 
complete 400 KV interconnection with Iraq.  While the short border 
linkage already has 400 KV capacity, he noted that Turkey would have 
to invest in incremental domestic transmission between the border 
and the national grid from existing 154 KV.  At the same time, 
however, Ozkuk emphasized that Turkey is focused on establishing 
synchronized connection to Europe's UCTE grid system in 2007-08.  He 
said that the current amount of exports to Iraq was not problematic, 
but TEIAS was evaluating Kartet's request for additional capacity in 
light of technical requirements and UCTE regulations.  TEIAS' 
overall planning is based on limitations on electricity exchange 
outside of Turkey and the company may allocate more of this capacity 
to existing connections with Georgia and Bulgaria and a prospective 
link with Greece.  Ozkuk noted that there were substantial problems 
with the network on the Iraqi side.  Because of Iraq's problems and 
because of the full commitment to joining the UCTE system, the 
"Med-Ring" or ELIJLST (Egypt, Libya, Iraq, Jordan, Lebanon, Syria, 
Turkey) project's momentum has slowed down. 
 
¶5.  (SBU) Murat Erenel, Advisor at EMRA, confirmed that the 
regulator and TEIAS were determined to foster competition in exports 
to Iraq by using a tender mechanism, noting that other companies 
were interested.  He confirmed that TEIAS has the lead on preparing 
the tender, and EMRA would approve rules, procedures, and licenses. 
Erenel complained that TEIAS had domestic capacity constraints; for 
example, there were limitations on availability for hooking up new 
wind generation.  He noted that TEIAS is focused on investment nd 
testing to gain connection with the EU UCTE grid. 
 
----------------------------- 
The Regulator is the Obstacle 
----------------------------- 
 
¶6.  (SBU) Kartet's immediate problem is gaining renewal of its 
existing license (for export up to 300MW), which will expire on 
January 1, 2007.  EMRA finally acknowledged the application by 
posting it on its web-site on December 5.  According to current 
regulations intended to encourage competitors, the posting will 
remain until December 18.  Kartet's Orhan Karadeniz claims EMRA is 
now concerned about the risk posed if a new application (qualified 
or unqualified) turns up, forcing TEIAS to immediately organize a 
tender.  Karadeniz is hopeful that EMRA will still be able to 
process their license, so continuity of exports is not threatened. 
Karadeniz said that in the short term he was seeking to increase his 
generation capacity at Silopi to reduce reliance on the Turkish 
grid.  He needs to gain assurance from Iraq that it can provide 
additional fuel oil to fire the incremental plant capacity. 
Moreover, the regulator keeping them on a one-year tether made new 
investment difficult.  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. 
 
¶7.  (SBU) Karadeniz was gloomy about prospects for increasing 
exports.  Karadeniz was resigned to go slower on his plans for 
significantly increasing capacity because both GOT and GOI were set 
 
ANKARA 00006663  003.2 OF 003 
 
 
on doing their own investment for increased transmission capacity. 
He claimed that it suited the GOI to increase its import of 
electricity from Iran.  Finally, he noted that looming shortfalls in 
electricity capacity in Turkey reduced the interest of the GOT in 
supporting increasing exports.  Recent floods have hurt voltage 
reliability and reduced grid capacity availability for export. 
 
------------------------------------ 
Iraq has Equal or Greater Challenges 
------------------------------------ 
 
¶8.  (SBU)  Kartet's Karadeniz complained that the company had 
succeeded in putting in place the most difficult pieces of the 
contract on the Iraqi side.  Kartet was fairly regularly receiving 
contractually required fuel oil (in partial payment for the 
electricity) by tankers from Bayji Refinery.  Karadeniz said that 
the company had implemented 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.  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.  Karadeniz said that he 
placed a lot of importance on a scheduled visit (unfortunately 
delayed because his deputy was kidnapped in Baghdad) of the Iraqi 
Minister of Electricity to establish the way forward. 
 
¶9.  (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.  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 deal and persevere at great difficulty in 
delivering some badly needed electricity to northern Iraq. 
 
Wilson