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RUEHPB RUEHPOD RUEHROV RUEHSR RUEHTM RUEHTRO
DE RUEHBS #0775 1551125
ZNR UUUUU ZZH
R 041125Z JUN 09
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA
RUEHAH/AMEMBASSY ASHGABAT
RUEHKB/AMEMBASSY BAKU
RUEHSI/AMEMBASSY TBILISI

UNCLAS BRUSSELS 000775 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EUN TU AJ
SUBJECT: ON AGAIN, OFF AGAIN -- THE NABUCCO IGA 
 
Sensitive but Unclassified - not for Internet distribution. 
 
¶1. (SBU) Summary.  Press reports yesterday quoted Turkey's 
Energy Minister Taner Yildiz as saying "We haven't given up 
on the demand to take 15 percent of the gas that will be 
carried by the Nabucco pipeline; it's still being discussed." 
 This announcement came just a week after Nabucco Chief 
Reinhard Mitschek told reporters that the 15 percent demand 
was no longer on the negotiating table.  An EU Commission 
official explained, however, that the Commission does not 
interpret this statement as Turkish backpedaling on the 
Nabucco intergovernmental agreement (IGA).  It is a subtle 
point, the official explained, but both the Mitschek and 
Yildiz could be correct.  The private sector offers of 
security of supply gas to Turkey are, as it happens, 
equivalent to 15 percent in volume of the Nabucco first 
phase.  What Turkey has given up is that the 15 percent is a 
condition of transit.  The official pointed out that Turkey 
is still in negotiations on the price for Shah-Deniz Phase 1 
gas from Azerbaijan and Turkey continues to use the 15 
percent issue to pressure Azerbaijan.  Separately, Azerbaijan 
knows that, at least within the Nabucco IGA, this is not the 
case.  End Summary. 
 
¶2. (SBU)  An EU Commission official told Econ Officer on June 
4 that the Commission does not interpret Yildiz's statement 
as Turkish backpedaling on the Nabucco intergovernmental 
agreement (IGA).  It is a subtle point, the official 
explained, but both the Mitschek and Yildiz could be correct. 
 The private sector offers of security of supply gas to 
Turkey (from ECONGAS and RWE Trading) are, as it happens, 
equivalent to 15 percent in volume of the Nabucco first 
phase. What Turkey has given up is that the 15 percent is a 
condition of transit (which in the Commission's view would be 
illegal under GATT, Energy Charter, etc.), rather than a 
separate commercial deal.  This is reflected in the Nabucco 
IGA, where the State Parties are obliged to respect 
commercial deals that satisfy Turkey's security of supply. 
 
¶3. (SBU) The official indicated that the Commission 
recognizes that Turkey has essential obligations to meet its 
supply needs for gas.  To meet these needs, the Commission 
has encouraged commercial parties to look at commercial deals 
concluded on an equitable basis that will cover Turkey's 
supply needs.  This is commercial, between the companies 
involved, and, the official stressed, is separate to the 
negotiation of the Nabucco IGA.  The companies making the 
commercial deals are not the same companies (this is strictly 
speaking true) that are building Nabucco.  The Commission's 
understanding is that these commercial discussions are 
continuing and it is to this that Minister Yildiz is 
referring.  The Commission supports these negotiations.  The 
essential point, according to the official, is that the 
commercial discussions on supply and the commercial 
discussions on building infrastructure have been delinked. 
 
¶4.  (SBU) The Official added that the Nabucco infrastructure 
talks have facilitated the security of supply/commercial 
talks by adding the requirement for reverse flow capacity on 
the Nabucco pipeline.  By having secured reverse flow 
technology, the official argued, Turkey has achieved the 
physical prerequisite to allow the commercial deals to go 
ahead.  In the mind of the Commission, this is a big win for 
Turkey.  The official pointed out that Turkey is still in 
negotiations on the price for Shah-Deniz Phase 1 gas from 
Azerbaijan and Turkey continues to use the 15 percent issue 
to pressure Azerbaijan.  Separately, Azerbaijan knows that, 
at least within the Nabucco IGA, this is not the case. 
 
¶5.  (SBU) Comment.  Despite the sometimes contradictory 
statements from Nabucco, EU, and Turkish officials, the 
overall mood among negotiators is upbeat.  Commission and 
industry officials are confident that they are close to 
clenching the deal for the IGA.  The timing may slip from the 
June deadline set in Prague, but our interlocutors are 
confident an agreement can be reached by the first half of 
July.  End Comment. 
 
Davis 
.