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DE RUEHAK #1421/01 2731451
ZNR UUUUU ZZH
P 301451Z SEP 09
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 0864
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 ANKARA 001421 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/S-EEE MARK PARRIS AND NEA/I-ASSIST MATT 
AMITRANO 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EPET PGOV PREL TU
SUBJECT: TURKEY: SCENESETTER FOR DOE DEPUTY SECRETARY 
PONEMAN 
 
¶1. (SBU) Embassy Ankara warmly welcomes your visit to Turkey 
October 8-10.  Our relations with Turkey are strong.  While 
the euphoria from the President's visit last April have 
faded, the steady stream of senior visitors from Washington 
has helped us convince Turkey's leaders that the 
Administration's press to engage with them and seek their 
input on key issues is genuine.  Your visit will be seen in 
that light. 
 
POINTS TO RAISE: 
 
-- Encourage the GoT to make the Southern Corridor its 
priority. Need to conclude a fair, transparent gas pricing 
and transit agreement with Azerbaijan. (paras 4-7) 
 
-- Encourage efforts to increase the share of power Turkey 
gets from renewable sources. (paras 8-9) 
 
-- Assure the GoT of U.S. interest in being a reliable 
partner for Turkey as it develops peaceful use of nuclear 
energy. (para 10) 
 
-- Stress the importance the USG places on concluding the NSG 
guidelines and our willingness to address Turkish concerns 
about reliable access to nuclear fuel.  Affirm our 
willingness to follow through on assurances of access to 
nuclear fuel in the event of market disruptions, if necessary 
to win support for the NSG guidelines. (para 11) 
 
-- Express appreciation for the TAEK decision to replace the 
HEU fuel in its research reactor in Istanbul with LEU fuel. 
(para 12) 
 
WATCH OUT FOR: 
 
-- Backpedaling on Nabucco and GoT assurances that South 
Stream and Nabucco are not in conflict. (paras 4-5) 
 
-- Requests for follow-up to offers made by State ISN DAS 
Eliot Kang regarding access to nuclear fuel. (para 11) 
 
 
ENERGY AS SEEN THROUGH POLITICS 
------------------------------- 
 
¶2. (SBU) Despite free give-aways ranging from coal to 
household appliances, the ruling AK Party's support declined 
in March 2009 local elections to 38 percent of the vote, down 
from 47 percent in the national parliamentary elections of 
July 2007.  Stung by the election results, AKP is looking to 
strengthen its showing in the 2011 parliamentary elections. 
In that context, AKP will be looking to show voters favorable 
results, including delivery of more energy at lower cost. 
Before the onset of the global economic crisis, Turkey's 
annual economic growth rate averaged 6 percent with an 
accompanying growth rate in energy usage of 8 percent 
annually.  Most analysts expect economic growth will begin to 
revive in 2010 and the energy sector will resume its rapid 
growth.  The country will need a stable and growing source of 
resources to keep that growth going.  Turkey now imports 
about 80 percent of its energy resources.  It is nearly 100 
percent reliant on imported natural gas, over half of which 
is used to produce electricity.  Sixty-five percent of its 
natural gas comes from Russia, another 17 percent from Iran. 
Turkey wants to reduce its reliance on imported energy in 
general (by domestic exploration, development of renewables 
and efficiency), and to reduce its reliance on any one 
supplier to no more than 30 percent. 
 
¶3. (SBU) Aspects of Turkey's international policies also 
intertwine with its energy affairs.  In particular, Turkey's 
movement to normalize relations with Armenia will continue to 
play into energy politics and Turkey's negotiations with 
Azerbaijan.  Looking south, tensions with Cyprus, including 
on energy exploration issues, continue to hinder Turkey's EU 
aspirations and EU-Turkey energy relations.  Cyprus continues 
to block opening of the EU Energy Chapter because of disputes 
with Turkey over offshore exploration for oil and gas 
deposits. 
 
TURKEY'S REGIONAL ENERGY ROLE 
----------------------------- 
 
¶4. (SBU) From the Baku-Tbilisi-Ceyhan oil pipeline (BTC) 
negotiations in the 1990s until today, Turkey and the U.S. 
 
ANKARA 00001421  002 OF 003 
 
 
have shared a strategic vision to bring new oil and gas 
resources to market through new routes.  Opening an east-west 
corridor for gas would strengthen the ties of Central Asia 
and the Caucasus with the West and decrease the dependence of 
eastern and central European countries on a single gas 
source.  Over the past two years, we have also seen Turkey 
articulate another vision that is sometimes at odds with our 
shared one: to secure increased gas supply for Turkey's 
domestic market as its highest priority.  Turkey is pursuing 
all options to ensure its energy security and enhance its 
role in Eurasian energy markets.  Turkey continues its 
negotiations with Russia, both on hydrocarbon and nuclear 
energy projects.  During Russian President Putin's visit in 
August, Turkey signed an agreement for the feasibility study 
for South Stream, which is viewed by many as a competitor to 
Nabucco.  While we recognize that Turkey has an important 
energy relationship with Russia, we hope Turkey will continue 
to make the Southern Corridor its priority. 
 
¶5. (SBU) Your visit is an important opportunity to remind the 
GOT that win-win solutions are possible.  A policy that 
positions Turkey at the heart of an East-West energy corridor 
will pull more resources to Turkey as well as Europe.  With 
the transit of increased gas resources, Turkey can strengthen 
its own relationship with Azerbaijan, Turkmenistan, Iraq and 
the EU. 
 
¶6. (SBU) One important step to opening the East-West gas 
corridor is concluding a Turkey-Azerbaijan gas pricing and 
transit agreement.  In recent meetings, Turkey and Azerbaijan 
appear to have come closer than any time in the last two 
years to reaching agreement on outstanding issues and are 
negotiating on quantities and prices.  They reportedly have 
narrowed their differences on price for both Shah Deniz Phase 
one and two gas. Transit fees remain the most difficult 
issue, with Turkey proposing $38-45 on a sliding scale, and 
Azerbaijan insisting on $32 (this would be for gas 
transported via pipelines other than Nabucco, which has its 
own internal transit regime).  Turkey says it is now waiting 
for a response to a proposal it made in Nakchevan in August. 
We are told they have not discussed volumes yet, but are 
working under an assumption that there would be 8 billion 
cubic meters (bcm), of which 4 bcm would go to Turkey, and 
Azerbaijan would be able to market the other 4 bcm. 
 
¶7. (SBU) The U.S. is not a commercial partner in developing 
Caspian gas or transiting it to world markets.  These are 
decisions that will be made by the consortia developing and 
marketing their gas.  The U.S. does not favor one pipeline 
route or another.  Our interest is strategic.  It was our 
shared strategic view with the Turks that made the BTC oil 
pipeline a reality in the 1990s. 
 
RENEWABLES 
---------- 
 
¶8. (U) In its effort to expand generation capacity and 
diversify away from natural gas for electricity generation, 
the Ministry of Energy has proposed new legislation that 
would raise feed-in tariffs for renewable power generation to 
a range of EUR 0.07/kWh - 0.25/kWh.  The bill was pulled from 
the parliamentary agenda at the last minute in July due to 
concerns about the burden the tariffs would put on the budget 
and a possible WTO objection over a local-supplier incentive 
included in the bill. The Parliament is expected to take up 
the bill again after it returns on October 1.  You are likely 
to hear from industry how necessary this legislation is to 
expand the use of renewables in Turkey. 
 
¶9. (U) On April 4, former Energy Minster Guler and Acting TDA 
Director Leocadia Zak signed a memorandum of understanding on 
cooperation on energy efficiency, renewable energy technology 
and clean coal technology.  Currently, there are four 
projects in various stages of development: USTDA is 
negotiating with Argonne National Lab to carry out training 
on energy planning and modeling software; September 
27-October 7, USTDA will host a visit of Turkish officials to 
the US for meetings with government and private sector 
officials on energy efficiency; USTDA will provide a grant 
for a feasibility study on coal gasification; and USTDA will 
provide technical assistance on solar power. 
 
NUCLEAR 
------- 
 
 
ANKARA 00001421  003 OF 003 
 
 
¶10. (SBU) Turkey signed a 123 Agreement with the U.S. in June 
2008 and put out a tender for its first nuclear project in 
September 2008.  It received only one bid, from a Russian-led 
consortium with a per kilowatt price of 21 cents, which the 
Turks say is too high.  The GoT is considering canceling the 
tender and putting it out for rebid or trying to negotiate a 
lower price if they can find the legal means to do so.  Last 
week, the Ministry of Energy announced it had extended the 
bid for yet further consideration and expects to make a 
decision by the end of November.  Although many--including 
Energy Minister Yildiz and members of parliament--find fault 
with the current tender, canceling it will be difficult and 
likely bring repercussions from the Russians.  If they rebid 
the tender, and for future nuclear projects, the GoT has 
indicated it will offer a substantially different tender, 
with a public-private structure. 
 
NON-PROLIFERATION 
----------------- 
 
¶11. (SBU) Turkey is a key U.S. ally, has generally been 
supportive of our non-pro policy, and has received US support 
in improving its ability to detect and deter the transit of 
WMD (including nuclear) material.  A team lead by Deputy 
Assistant Secretary of State Eliot Kang visited Ankara on 
September 28 and pushed Turkey to agree to the draft NSG 
guidelines to prevent the transfer of enrichment and 
reprocessing (ENR) technology.  In an effort to persuade the 
GoT to support the NSG guidelines, DAS Kang offered that we 
could provide written assurances (exchange of notes) that the 
U.S. would provide Turkey assured access to nuclear fuel in 
the event of market disruptions, consistent with the 123 
Agreement.  The GoT is now undergoing a policy review 
regarding its position on this issue.  It would be useful to 
reiterate to your interlocutors the importance the USG places 
on concluding these guidelines and our willingness to address 
Turkish concerns about reliable access to nuclear fuel. 
¶12. (SBU) The Turkish Atomic Energy Agency (TAEK) agreed in 
September 2008 to replace the HEU fuel in its research 
reactor in Istanbul with LEU fuel and we are in the final 
stages of preparation for this transition.  DOE is scheduled 
to complete the HEU removal by the end of the year.  You 
should applaud the TAEK decision and urge that the process 
remain on schedule. 
 
SILLMAN 
 
           "Visit Ankara's Classified Web Site at http://www.intelink.s 
gov.gov/wiki/Portal:Turkey"