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FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 5517
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0479
RHEHAAA/NSC WASHDC PRIORITY
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C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 000453 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EEB A/S SULLIVAN; EEB AMB. MANN; EUR DAS BRYZA; 
DOE FOR HEGBURG 
 
E.O. 12958: DECL: 03/03/2018 
TAGS: PREL ENRG EPET AJ IQ RU TX TU
SUBJECT: TURKEY/NABUCCO:  DAS BRYZA URGES COMPROMISE ON 
TURKEY-AZERBAIJAN TRANSIT DISPUTE 
 
 
Classified By: Ambassador Ross Wilson, reasons 1.4 b, d 
 
¶1.  (C) SUMMARY.  The Nabucco pipeline is economically 
feasible as Russia can supply the gas for South Stream only 
from Turkmenistan, with Nabucco enjoying a forty percent 
advantage over South Stream in terms of the cost of shipping 
Caspian gas to Austria, DAS Matt Bryza told FM Babacan March 
¶3.  The lack of a Turkey-Azerbaijan transit agreement is 
slowing Nabucco, and Bryza urged that Turkey and Azerbaijan 
compromise.  There is enough gas in Azerbaijan to satisfy 
Nabucco, but the United States is working with the Iraqi and 
Turkmen governments to ensure further supplies.  Turkey can 
help.  Iraq has significant gas reserves which could supply 
Nabucco.  While exploiting northern Iraqi energy resources 
would require passage of the hydrocarbons law, Iraqi 
authorities believe they can proceed with exporting gas from 
Anbar province.  Turkish support can help Turkmen President 
Berdimuhamedov recognize his leverage over Russia, which 
needs Turkmen gas to realize South Stream.  Ensuring energy 
security requires Turkey to pursue diversification while also 
seeking good energy relations with Russia, according to 
Babacan.  Turkey wants Nabucco to work, but Babacan noted 
that the large number of countries involved inevitably 
results in shifting policies and circumstances.  Bryza 
emphasized that, even with Hungary, Bulgaria, and Austria 
hedging their bets with Russia, there is a political 
alignment in support of Nabucco.  The TU-AJ transit dispute 
is holding up progress on gas sales/purchase agreements 
required to secure financing.  Babacan took the points but, 
alluding to Azerbaijan, suggested that in this energy market, 
it is difficult to make suppliers agree to reasonable terms. 
Bryza emphasized the urgent need to elevate Turkey's gas 
transit dispute with Azerbaijan to the political level; 
Babacan agreed to raise it with PM Erdogan.  END SUMMARY. 
 
TURKEY-AZERBAIJAN IMPASSE THREATENS NABUCCO 
------------------------------------------- 
 
¶2.  (C) Bryza stressed to FM Babacan and DG for Economic 
Affairs Kart, as well as, separately, MFA Deputy U/S Cevikoz, 
Nabucco's economic attractiveness compared to South Stream. 
Exporting gas to Central Europe makes much more sense through 
Nabucco.  Russian President Putin has recognized the progress 
made on Nabucco and has launched a counter-offensive against 
it.  South Stream requires Turkmen gas; Russian gas fields on 
the Yamal Peninsula and in the Barents Sea are years behind 
schedule.  There is enough gas in Azerbaijan to satisfy 
Nabucco, though not all of it will be ready in time.  Bryza 
estimated that, comparatively, it would cost forty to fifty 
percent more to ship Caspian gas to Austria via South Stream 
than via Nabucco.  But the TU-AJ transit dispute is blocking 
investors from concluding crucial gas sales/purchase 
agreements with Azerbaijan, holding up Nabucco, and creating 
space for South Stream. 
 
¶3.  (C) Bryza described opposing pricing and transit schemes 
favored by Turkey and Azerbaijan.  Turkey is seeking to buy 
15 percent of the gas transiting Turkey at a netback price 
while Azerbaijan is seeking a straight transit tariff formula 
and gas sales to Turkey at the top dollar price Turkey pays 
Russia.  Compromise is needed and only the top Turkish and 
Azerbaijani political leaders can break this impasse.  Bryza 
noted that Azerbaijani President Aliyev has already suggested 
a compromise based on a contractual price for an additional 
volume of gas for Turkey, less than Turkey is paying Russia. 
 
¶4.  (C) Babacan agreed to engage PM Erdogan in resolving the 
gas transit dispute with Azerbaijan.  (PM Foreign Affairs 
Advisor Davutoglu made the same pledge to Bryza the previous 
day in Istanbul.)  Asked about additional sources of gas to 
supply Nabucco, Bryza pointed to Turkmenistan and Iraq. 
Turkmenistan, he said, is nervous about Moscow, but, in fact, 
has leverage over Russia which needs Turkmen gas to supply 
South Stream.  Turkey can bolster Turkmen President 
Berdimuhamedov's confidence to commit some gas to Nabucco, 
through Azerbaijan.  Babacan noted that Berdimuhamedov would 
be in Turkey for an extended, three-to-four day visit in late 
March and PM Erdogan would work this issue with 
Berdimuhamedov then.  Bryza also pointed to Iraq as a 
potential supplier, noting that experts believe 13-15 bcm of 
gas could be produced by Iraq over the next five to eight 
years.  It will be impossible to proceed with developing 
 
ANKARA 00000453  002 OF 002 
 
 
northern Iraqi resources until passage of the hydrocarbons 
law, but Iraqi officials believe it is possible to start 
exploiting western Iraqi resources now (these resources are 
not subject to the same Iraqi regional ownership disputes). 
Iraq will already begin exporting modest volumes of gas to 
Syria under pre-existing, Saddam-era contracts, and will then 
aim to export perhaps 6 bcm via Syria through the Arab 
pipeline into Turkey.  Bryza described this as a modest 
start; he relayed Iraq experts' analysis at the 
U.S.-Turkey-Iraq Trilateral Gas Meeting on March 1 that the 
Iraqi government  currently lacks the strategic vision at the 
political level to plan to expand production further and 
supply Nabucco.  Bryza called for the U.S. and Turkish 
embassies in Baghdad to work together to help the GOI develop 
such a vision.  Babacan agreed. Bryza also emphasized 
Azerbaijan's strong desire to export its energy resources 
westward, even as Russia seeks to buy into Azerbaijani Shah 
Deniz production. 
 
¶5.  (C) Turkey wants to help India achieve energy diversity 
and meet its extraordinary energy needs.  Babacan told Bryza 
that Turkey, India and Israel have discussed building a new 
oil pipeline from Ceyhan to Israel, which would connect to 
existing Red Sea pipelines, allowing India to purchase oil at 
a savings compared to the price it currently pays for Middle 
East oil.  Bryza replied that developing Turkey-India-Israel 
relations is a good idea, and the United States would support 
the project so long as it is commercially viable. 
 
¶6.  (C) Returning to Nabucco, Bryza stressed the importance 
of achieving diversity of supply before deepening energy 
dependence upon Russia, and asked if Turkey could support 
Nabucco first.  Babacan noted the supply disruptions Turkey 
faced again this winter from Iran after Turkmenistan cut off 
Iran.  The disruptions led Turkey to request additional 
volumes of gas from Russia, albeit at a very expensive price. 
 Turkey wants energy diversity, but needs a continuous supply 
from Russia.  Turkey is strongly supportive of Nabucco and 
the Arab gas pipeline.  Turkey is also exploring new 
opportunities with Iran, but only on a purely commercial 
basis.  The security of Turkey's energy supply is paramount. 
Babacan described what he saw as an inherent problem with 
Nabucco:  there are too many countries involved.  Changing 
governments and circumstances lead to shifting policies. 
Bryza underscored the need to maintain political alignment in 
support of Nabucco, even as Hungary, Bulgaria, and Austria 
hedge their bets with Russia.  The key obstacle right now is 
the TU-AJ transit dispute, and he urged, once again, a 
compromise agreement.  Babacan empathized with Turkish Energy 
Minister Guler, noting Turkey will be hosting the largest 
stretch of Nabucco pipeline and pointing out that Turkey is 
in the market for gas in its own right.  It is sometimes hard 
to make suppliers agree to reasonable terms, he said. 
 
¶7.  (U) DAS Bryza cleared this cable. 
 
Visit Ankara's Classified Web Site at 
http://www.intelink.sgov.gov/wiki/Portal:Turk ey 
 
WILSON