VZCZCXYZ0000
PP RUEHWEB

DE RUEHAK #1100/01 2120445
ZNY CCCCC ZZH
P 310445Z JUL 09
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 0370
INFO RUEHMO/AMEMBASSY MOSCOW 5677
RUEHIT/AMCONSUL ISTANBUL 6083
RHEHAAA/NSC WASHDC

C O N F I D E N T I A L ANKARA 001100 
 
SIPDIS 
 
E.O. 12958: DECL: 07/27/2019 
TAGS: ECON ENRG PREL RS TU
SUBJECT: TURKEY: PUTIN VISIT AND THE ENERGY AGENDA 
 
REF: A. ANKARA 315 
     ¶B. ANKARA 289 
     ¶C. ANKARA 253 
     ¶D. ANKARA 111 
     ¶E. ANKARA 4 
 
Classified By: Econ Counselor Dale Eppler for reasons 1.4 b, d 
 
¶1. (C) Summary: Russian Prime Minister Putin will visit 
Turkey on August 6 with an agenda heavily focused on energy 
issues, including: extension of the Westline gas contract; 
Southstream; Bluestream II; Russian oil for the proposed 
Samsun-Ceyhan Bosporus bypass pipeline; and the long-delayed 
Russian nuclear power plant construction bid.  While GOT 
sources deny these are being negotiated as a package, they 
say there are linkages between them.  For example, the GOR 
proposed a protocol that would allow it to build the 
Southstream pipeline through Turkish Black Sea waters, and 
the Turks have asked for Russian oil throughput for 
Samsun-Ceyhan in exchange.  The Putin visit will force the 
GOT finally to make a decision on the Russian nuclear power 
plant bid, and we think the most likely scenario is an 
acceptance of the Russian bid at a much reduced price.  The 
GOT has stopped mentioning Bluestream II in public and 
private comments, so we do not expect substantive 
announcements about that project during the visit.  The GOT 
sees Russia as key to regional energy policy and wants to 
engage the Russians without appeasing them.  They hope with 
time and patience to convince the Russians to drop their 
zero-sum approach to energy policy and engage in "responsible 
cooperation." End summary. 
 
¶2. (C) Russian prime minister Vladimir Putin will make a 
one-day visit to Turkey on August 6.  His visit will be 
preceded by a meeting August 4-5 of the Turkey-Russia Joint 
Economic Commission, co-chaired by Deputy Prime Minister 
Sechin and Energy Minister Yildiz.  As of July 17, many 
details about Putin's visit, including whether it will be 
held in Istanbul or Ankara, had not been decided, according 
to Aysa Osafoglu at MFA's Russia desk.  MFA understands that 
the GOR is awaiting a decision from Putin's office on his 
venue preference. The working assumption is the visit will be 
in Ankara. 
 
¶3. (C) The agenda for the visit will be heavily 
energy-focused. Osafoglu said MFA does not expect substantive 
discussions on political or security issues.  Vural Altay, 
MFA Deputy Director General for Energy Affairs, said July 17 
that the energy agenda includes: extension of the Westline 
contract expiring in 2011; Russian oil for the Samsun-Ceyhan 
bypass pipeline; Bluestream II gas pipeline; the Southstream 
gas pipeline; and a final decision on the long-delayed 
Russian nuclear power plant bid.  Altay denied that these 
were being negotiated as a package deal, but admitted that 
there are some "linkages" between them (though he declined to 
specify what those linkages were). Concerning the Westline 
contract extension,  Altay said they were receiving "positive 
signs" from the GOR.  Altay said Russia is not interested in 
providing gas to Nabucco "at this time," but may change its 
position once the pipeline becomes more real. 
 
Southstream and Samsun-Ceyhan 
---------------------------- 
 
¶4. (C) MFA Deputy Undersecretary Feridan Sinirlioglu 
explained one of the agenda linkages on July 29.  Sinirlioglu 
said the GOR was taken by surprise when the Nabucco IGA 
signing happened in July.  Immediately afterwards, Deputy PM 
Sechin came to Ankara to ask the GOT to sign a protocol that 
would allow Russia to build the Southstream pipeline through 
Turkish Black Sea territorial waters.  Sinirlioglu said the 
proposed protocol "served only Russian interests," and that 
Sechin was "shocked" when the GOT asked for something in 
return: oil throughput for the Samsun-Ceyhan oil pipeline. 
According to Sinirlioglu, closing this deal depends on the 
Russian response. Sinirlioglu also emphasized the very high 
USD 17 billion cost of Southstream, and indicated real doubts 
about whether the line actually would be built. 
 
 
The Nuclear Bid 
--------------- 
 
¶5. (C) In September 2008, a Russian-led consortium (the 
state-owned AtomStroyExport, InterRAO UES and the Turkish 
firm Park Teknik) were the sole bidders in a tender to build 
Turkey's first nuclear power plant (see refs D and E for more 
details).  The bid was found technically acceptable in 
December 2008.  The sole remaining barrier was the price: the 
Russians offered US 21 cents per kilowatt hour, which was 
deemed far too high by the GOT and Turkish commentators.  The 
consortium subsequently reduced their offer to 15 cents, and 
we understand that the GOR has offered to drop it to 12 
cents.  A Russian embassy contact told us July 4 that they 
will drop the price to 10 cents if that is what it takes to 
close the deal, and that the GOR very much wants the contract 
and expects the deal will be concluded during Putin's visit. 
 
¶6. (C) Energy Minister Yildiz said July 29 that the GOT was 
at the point of making "key decisions" on the nuclear bid, 
but declined to give any specifics.  At this point, a 
rejection of the Russian bid would have to come from the 
Council of Ministers and be based on price.  Comment: We have 
heard from different sources that AK Party deputies are not 
happy with the Russian proposal, in part due to doubts about 
Russian technology.  GOT officials in both MFA and the 
Ministry of Energy have told us they do not like the deal 
because of Turkey's already heavy energy dependence on Russia 
and AtomStroyExport's spotty record on completing projects on 
time.  However, Yildiz has told us that Turkey must have the 
electricity from the nuclear plant by 2017 and that Turkey 
should have moved on nuclear power a decade ago and it is up 
to this government to deliver it.  It would be very difficult 
for the GOT to give Putin an outright "no" on the bid during 
his visit.  Thus, we believe the most likely scenario is GOT 
acceptance of the Russian bid with a price drop to 10 cents 
per kilowatt hour.  Given that the Russians very much want 
the nuclear deal, the GOT also could be linking accepting the 
Russian bid to, e.g., a reduction in the price of gas in the 
Westline contract extension.  A less likely (but still 
possible) scenario is that the GOT continues to negotiate 
with the Russians in hopes they will give up on the bid, 
while moving forward on the second nuclear tender -- which 
they have promised will be in a much more investor-friendly, 
public-private partnership format.  End comment. 
 
Whither Bluestream II? 
--------------------- 
 
¶7. (C) In early July, DDG Altay told us with some enthusiasm 
that Bluestream II discussions were advancing and that the 
project would bring an additional 8 BCM into the Turkish 
market, reducing Turkey's need for gas coming through 
Ukraine.  In discussions on July 17, however, he only 
mentioned Bluestream II in response to a a direct question of 
whether it was on the agenda, and he had no comment at all 
about the status of the talks.  Similarly, Bluestream II has 
dropped out of recent newspaper articles describing wthe 
agenda for Putin's visit, and neither Sinirlioglu nor Yildiz 
mentioned the project in recent meetings.  Comment: We take 
this as an indication that there will be no substantive 
announcements about Bluestream II during the Putin visit. 
End comment. 
 
Turkey's Russia Strategy 
------------------------- 
 
¶8. (C) Sinirlioglu told us that the GOT sees Russia as key to 
regional energy policy.  This is a much stronger, more 
assertive Russia than in the 1990s.  "We need to accomodate 
Russia, but not appease it."  He agreed that the Russian 
"power politics" approach has not changed yet, and that 
Russia needs to understand that not everything is  zero sum 
game. It will take time and patience to convince Russia that 
they stand to gain from "responsible cooperation." 
Sinirlioglu emphasized that Turkey does not want to be 
dependent on Russia, and noted in particular that Turkey buys 
too much of its natural gas -- 65 percent -- from Russia, 
Similarly, DDG Altay said that the GOT invited Russia to the 
Nabucco IGA signing ceremony not because they expected the 
Russians to send a delegation, but because they wanted to 
signal that Nabucco is not intended to isolate Russia. (See 
refs A, B and C for more on Turkish energy policy with 
Russia.) 
 
 
 
Visit Ankara's Classified Web Site at 
http://www.intelink.sgov.gov/wiki/Portal:Turk ey 
 
JEFFREY