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DE RUEHAK #2894/01 3381623
ZNR UUUUU ZZH
R 041623Z DEC 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 4545
INFO RUEHIT/AMCONSUL ISTANBUL 3592
RUCPDOC/USDOC WASHDC
RHEBAAA/DEPARTMENT OF ENERGY WASHDC
RUCNCIS/CIS COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHUNV/USMISSION UNVIE VIENNA 0170
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHDC
RUEUITH/ODC ANKARA TU

UNCLAS SECTION 01 OF 02 ANKARA 002894 
 
SIPDIS 
 
USDOE FOR CHARLES WASHINGTON 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
STATE ALSO FOR EB/CBA FRANK MERMOUD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV BEXP TU IR
SUBJECT:  TURKEY SIGNS ELECTRICITY AGREEMENT WITH IRAN 
 
REF: Ankara 2720 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE ACCORDINGLY. 
 
¶1.  (SBU) Summary: Turkey and Iran signed an electricity agreement 
on November 21 and pledged to continue cooperation on energy issues 
despite U.S. objections.  The agreement calls for private sector 
construction of two thermal power plants and one hydropower plant 
and investment in trans-border transmission lines.  Turkish Energy 
Minister Hilmi Guler said the GOT had considered and was prepared 
for possible U.S. sanctions.  Iranian Electricity Minister Perviz 
Fettah said the two sides would meet again in Tehran in January. 
The GOT continues to develop its energy ties with Iran under the 
rubric of energy security, but this agreement depends on as-yet 
unidentified private investors to build the plants and transmission 
lines the two sides envision.  Even if these projects eventually are 
realized, they are unlikely to come in time to forestall Turkey's 
near-term energy shortages.  End summary. 
 
¶2.  (U) After several mutual visits, Turkey and Iran concluded a 
long-debated electricity agreement.  Details include: 
 
-- Establishment of three 2,000 megawatt (MW) gas-fired electricity 
power plants (two in Iran; one in Turkey) by the private sector. 
Ownership structure: 51 percent (host country) 49 percent (other 
country). 
 
-- Establishment of a 10,000MW hydropower plant in Iran by the 
private sector which will operate the plant for a specified period 
of time and then transfer it to the government. 
 
-- Purchase of one billion kilowatt hours (kWh) of electricity from 
Iran with a provision to increase to four billion kWh in the 
future. 
 
-- Investment in transmission grid and infrastructure between the 
two countries. 
 
¶3. (SBU) At a press conference following the signing ceremony, 
Iranian Energy Minister Fettah highlighted President Ahmedinejad's 
recent statement "there is no limit to development of the 
relationship between Turkey and Iran."   Fettah noted the intense 
pace of work on energy cooperation between Turkey and Iran had 
brought the two countries together three times in eight months and 
the next meeting in Tehran was scheduled for two months hence. 
Responding to questions on USG reaction to the agreement, Fettah 
said: "Some parties may be disturbed by this agreement, but we took 
into account certain risks while signing it."  Fettah added that 
Turkey and Iran were both independent and strong countries.  Turkish 
Energy Minister Guler said: "We are aware of the embargo and we are 
prepared."  Guler said the two sides would bring their private 
sectors to the next meeting to discuss detailed investment models. 
Guler added that work on a gas deal was in progress and other 
agreements would follow. 
 
¶4. (SBU) Ministry of Energy Foreign Relations Department Head Cigdem 
Hatunoglu and MFA Energy Affairs Officer told us the electricity 
agreement between Turkey and Iran would help meet Turkey's growing 
energy demand (six to eight percent annually) and increase energy 
security.  Hatunoglu characterized the agreement as one among 
neighbors and added that it might allow Turkey to export electricity 
to its neighbors thereby furthering Turkey's vision for establishing 
itself as an energy hub.  Commenting on the gas deal with Iran, 
Hatunoglu said Iranian gas is an important component of Turkey's 
diversification strategy and could only be replaced with Iraqi gas. 
She noted GOT and USG interest in bringing Iraqi gas to market but 
noted progress is slow. 
 
¶5. (SBU) Faruk Demir, an advisor to the Energy Minister, told us the 
agreement between Turkey and Iraq is important because it would (1) 
prepare the electricity infrastructure between the two countries for 
larger volumes of electricity, which could be used to meet Europe's 
increasing electricity demand in the future; (2) establish a 
partnership in electricity generation and trading; and (3) blaze a 
trail into Iranian markets for Turkish private companies in 
non-energy related sectors.  Demir said the agreement contained a 
provision allowing Turkey to import electricity from third countries 
through Iran.  (Note: Earlier press articles stated that the GOT 
 
ANKARA 00002894  002 OF 002 
 
 
wanted to partner with Iran and Turkmenistan, to build power plants 
in Turkmenistan and bring the electricity to Turkey.  End Note.) 
 
¶6. (SBU) Comment: Turkey is facing a near-term electricity crisis 
and uses just over half of its natural gas for electricity 
production.  If we have a tough winter and Iran decreases it's gas 
supply (as it has done in previous winters), peak loads could 
surpass available power generation and we could see some rolling 
black outs and brown outs in Turkey.  The GOT's public relations 
campaign claims the agreements with Iran are necessary to improve 
Turkey's energy security.  We believe the timeline for development 
is much longer than press estimates and will not address electricity 
shortages in the near term.  Both Iran and Turkey are depending on 
the private sector to develop these energy projects.  We are aware 
of only one Turkish company interested in exporting Iranian 
electricity and they claim to have no GOT affliation (reftel).  We 
have not heard of any firms interested in investing in Iran's 
electricity sector and we continue to hear about the difficult 
Iranian business climate. 
 
Wilson