VZCZCXRO0605
RR RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHAK #0155/01 0330947
ZNY CCCCC ZZH
R 020947Z FEB 09
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 8640
INFO RUCNCIS/CIS COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHIT/AMCONSUL ISTANBUL 5318
RUEUITH/ODC ANKARA TU
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 000155 
 
SIPDIS 
 
EEB FOR ENERGY COORDINATOR MANN 
EUR FOR DAS BRYZA 
 
E.O. 12958: DECL: 02/02/2019 
TAGS: ENRG EPET TU
SUBJECT: TURKEY UPBEAT ON NABUCCO POST-BUDAPEST SUMMIT 
 
REF: ANKARA 138 
 
Classified By: Ambassador Jim Jeffrey for reasons 1.4 (B) and (D) 
 
¶1.  (C) Summary.  Fresh from the January 26-27 Budapest 
Nabucco Summit, an upbeat and confident Energy Minister Guler 
told the Ambassador Turkey supports this project 100% and is 
ready to take concrete steps to realize it.  Guler  offered 
to host the signing of an Intergovernmental Agreement (IGA) 
for Nabucco in Istanbul within the next six months.  Turkey 
continues to seek some nod to its own energy needs as part of 
the greater project and has circulated among Nabucco partner 
countries a "project support agreement," formerly called a 
host country agreement.  Guler said he realizes that he is 
being critized by the international community for lack of 
progress in gas transit talks with Azerbaijan.  He described 
Azerbaijan's price demands as impossible and hypothesized 
that profit maximization, rather than geo-stratic aims to 
link to Europe, is the real driver of Azerbaijan's strategy. 
As an example, he cited Azerbaijan's willingness to sell 
Turkey 8 bcm coupled with its insistence that it alone obtain 
marketing rights for gas sales in Turkey's domestic market. 
Regarding gas sources for Nabucco, Ambassador said Iraq could 
play a role but the hydrocarbon law is a prerequist.  Guler 
said his information was different.  GOI Oil Minister 
Shahristani told him the hydrocarbon law is not needed. 
Guler said he feared early gas from Iraq would be exported 
through Syria rather than Turkey.  Ambassador outlined U.S. 
steps to follow up on the Oct 2008 visit of DOE Deputy 
Secretary Kupfer.  Guler welcomed this intiative but 
questioned whether it would actually lead to more U.S. 
investment in Turkey.  On the nuclear tender, Guler said the 
GOT would negotiate with the Russian consortium to get a 
better deal and said the GOT would go ahead with a second 
tender soon.  He expressed frustration with the Czech 
Republic's (EU President) disinterest in helping Turkey open 
the Energy Chapter of the EU Acquis despite the fact all 
opening benchmarks have been met.  Guler confirmed Turkey 
requested the World Bank to conduct a study of the Caspian 
Development Corporation (CDC) concept and thanked the 
Ambassodor for U.S. support.  End summary. 
 
 
Budapest Nabucco Summitt January 26-27 
-------------------------------------- 
¶2.  (C) Guler told the Ambassador the timing of the summit 
couldn't have been better with the world focused on the need 
to move forward developing new gas resources and bringing 
them to market through diversified routes in the wake of the 
Russia-Ukraine gas cut off.  Guler was at pains to remove any 
doubts the PM's statements in Brussels about linking Turkey's 
support for Nabucco with the opening of the energy chapter 
saying Turkey is 100% supportive of Nabucco and wants to make 
progress without delay.  Guler reported a successful trip to 
Budapest.  He confirmed that the intergovernmental agreement 
(IGA) for Nabucco was agreed between the partner companies 
(BOTAS, Bulgargas, Transgas, MOL, OMV and RWE) and had now 
been passed to the partner countries for consideration. 
Guler was hopeful the agreement would be ready for signature 
within 6 months and proposed holding the signing ceremony in 
Istanbul. 
 
¶3.  (C) In addition to the IGA, the political support 
agreement (PSA), formerly called the host country agreement 
(ref A) was also transmitted to partner countries for 
consideration.  Guler emphasized the importance of the PSA in 
securing gas at a "market price" for Turkey's domestic gas 
market.  He emphasized the principal of netback pricing was 
of primary concern to Turkey and that "market price" cannot 
mean the same price for all consumers regardless of their 
proximity to the gas source.  The PSA is still being 
negotiated with Nabucco partner companies. 
 
¶4.  (C) He said he made a surprise proposal at the Summit, 
offering the use of BOTAS' internal pipeline network for the 
initial flows of Nabucco until a dedicated pipeline could be 
built.  He said some compressor stations and other additions 
might need to be added but that Turkey is ready to transmit 
3-5 bcm/a in a short time period.  If this idea goes forward, 
Turkey could consider a building a loop line to Bulgaria to 
send gas in the near term to lessen Bulgaria's dependence on 
Russian gas. 
 
ANKARA 00000155  002 OF 003 
 
 
 
¶5.  (C) Ambassador said we are optimistic about Nabucco.  We 
are now getting some support from the Europeans on financing 
and he urged Turkey to take concrete steps now to move this 
project forward. 
 
Turkey-Azerbaijan negotiations 
------------------------------ 
 
¶6.  (C) Guler said Turkey has engaged in good faith in 
several negotiating sessions with Azerbaijan.  We have wanted 
to reach agreement but couldn't.  Azeris are critizing us for 
seeking a lower price for gas but raising the price to the 
extent that the Azeris are asking is not possible.  We have 
offered to pay a "market price" based on a formula.  Such a 
formula would be profitable for the Azeris.  Because we are 
one of the closest markets to Shah Deniz II gas, Azerbaijan 
would pay low transit fees for gas sold to Turkey and would 
be able to earn a high return. 
 
¶7. (C) At one point in the negotiations, Azerbaijan offered 
to sell 8 bcm/a to Turkey but conditioned it on marketing the 
gas directly into the Turkish market without a Turkish 
partner, Guler said.  This is not acceptable so the 
negotiations collapsed.  Turkey believes there is enough gas 
to send to Europe even if they sell Turkey 8 bcm.  Azerbaijan 
can boost production to make a pipeline to Europe economical. 
 
¶8.  (C) Guler said he knows that Turkey and he himself are 
being criticized and blamed for the lack of agreement between 
Azerbaijan and Turkey.  He said he wished the negotiations 
were trilateral so we could see for ourselves just how 
difficult it is to negotiate with the Azeris. 
 
 
Iraq gas 
-------- 
 
¶9.  (C) Ambassador said Iraq can potentially be a source of 
gas for Nabucco and could flow through Turkey.  We have good 
cooperation with Turkey on PKK and we want to the same on 
energy issues.  However, we need to work together for the 
passage of a new hydrocarbon law in Iraq.  This a political 
issue and we urge Turkey to work with central government in 
Baghdad.  Guler said GOI Oil Minister Shahrastani had told 
him that the hydrocarbon law was not needed to move forward 
with gas projects.  Ambassador and Guler agreed the politics 
in Iraq are complex and the messages coming from the KRG and 
central Baghdad are sometimes contradictory.  Guler said he 
feared early gas from Iraq was destined for Syria and then 
Egypt for LNG.  Guler suggested that Turkey could meet 
Syria's gas needs if Iraqi gas were to flow north.  Within 
its gas distribution network, Turkey has three pipeline spurs 
that almost reach the Syrian border and could be extended 
thereby helping Iraq make good on its promise to sell gas to 
Syria while at the same time providing Iraq with a strategic 
link to Europe. 
 
Energy cooperation with the U.S. 
------------------------------- 
 
¶10.  (C) Ambassador explained the January 5-9 visit of a U.S. 
Trade and Development Mission to Istanbul and Ankara.  This 
team is assembling a list of suggestions for follow-on 
studies, technical assistance or orientation visits to the 
U.S. that we will share with the Ministry soon.  Ambassador 
also explained the U.S. Treasury's idea for one-stop 
financing for multilateral credit agencies and national 
export credit agencies.  We passed Guler a translated version 
of the interagency cleared paper.  Ambassador explained that 
Turkey must ask the World Bank or IFC to convene a discussion 
on this topic if the idea is to move forward.  Guler promised 
to study our concept paper.  Despite the economic crisis, 
energy contines and will continue to grow in Turkey.  The 
Turkish energy sector will need USD 120 billion in 
investments by 2020.  Guler welcomed U.S. investment in 
energy efficiency, renewables and all sectors of Turkey's 
economy and gently complained that even though the doors for 
foreign investment are open, U.S. investors are not coming. 
 
Nuclear tender 
-------------- 
 
ANKARA 00000155  003 OF 003 
 
 
¶11. (C) Ambassador told Guler he had recently met with 
General Electric CEO Jeff Immelt and that GE remains 
interested in the development of nuclear power in Turkey. 
Guler said there will be future tenders including the next 
one in Sinop and urged GE to participate.  Guler defended the 
process for the first nuclear tender and said Turkey will 
work with the Russians to negotiate a lower electricity 
price.  He expressed dismay at having had only one consortium 
(Russian-Turkish) offer a bid.  Ambassador said the tender 
conditions were too risky and hoped that the conditions would 
be improved for the second round. 
 
Energy Chapter 
-------------- 
 
¶12.  (C) Guler expressed frustration with the Czech EU 
presidency's unwillingness to help Turkey open the Energy 
Chapter of the EU Accession Acquis.  He said Turkey has met 
all the benchmarks for opening the negotiations and that the 
EU shouldn't allow Cyprus to block this issue. 
 
Caspian Developnent Corporation (CDC) Study Goes Forward 
--------------------------------------------- ----------- 
 
¶13.  (C) Guler confirmed that Turkey has requested the World 
Bank to conduct the EU-proposed study the Caspian Development 
Corporation.  This concept plays an important role in 
attracting more gas to Turkey and Europe and he thanked the 
Ambassador for U.S. support of this initiative. 
 
 
 
 
 
 
 
 
 
Visit Ankara's Classified Web Site at 
http://www.intelink.sgov.gov/wiki/Portal:Turk ey 
 
Jeffrey