VZCZCXRO2689
OO RUEHIK
DE RUEHTA #2100/01 3341043
ZNR UUUUU ZZH
O 301043Z NOV 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6931
INFO RUCNCIS/CIS COLLECTIVE 2203
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1567
RUEHKO/AMEMBASSY TOKYO 2268
RUEHUL/AMEMBASSY SEOUL 1202
RUEHAK/AMEMBASSY ANKARA 2222
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1762
RUEKJCS/SECDEF WASHDC 1612
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/AMCONSUL ALMATY 2041

UNCLAS SECTION 01 OF 02 ASTANA 002100 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC, S/EEE, S/CIEA 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EINV EPET KZ RS TK AJ IT
SUBJECT:  KAZAKHSTAN TO STUDY PLANS FOR SAMSUN-CEYHAN PIPELINE 
 
REF:  (A) ANKARA 1592 
      (B) ASTANA 2005 
      (C) ASTANA 2007 
 
ASTANA 00002100  001.3 OF 002 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Meeting in Yalta on November 20, Russian Prime 
Minister Vladimir Putin and Kazakhstani Prime Minister Karim Masimov 
witnessed the signing of a protocol to study plans for the 
construction of an oil pipeline between the Turkish cities of Samsun 
and Ceyhan.  The pipeline could ultimately carry crude from 
Kazakhstan's largest oil fields, including Tengiz and Kashagan, from 
the Black Sea to the Mediterranean Sea, where it would effectively 
enter the world market.  The agreement between Russia and Kazakhstan 
comes less than one month after President Nursultan Nazarbayev 
visited Turkey from October 22-24.  During his visit, Nazarbayev 
announced that Kazakhstan and Russia are prepared to participate in 
the construction of the Samsun-Ceyhan pipeline, although questions 
remain concerning the equity structure, volume commitments, and 
transit tariffs of the proposed venture.  END SUMMARY. 
 
NAZARBAYEV'S VISIT TO TURKEY IN OCTOBER 
 
¶3.  (SBU) President Nazarbayev's visit to Turkey on October 22-24 
highlighted the strong and growing cultural and economic ties 
between the two countries (ref A).  An economic officer from the 
Turkish Embassy involved in preparations for Nazarbayev's visit told 
Energy Officer on November 20 that six ministers, dozens of business 
leaders, and local government officials accompanied Nazarbayev. 
According to Turkish Econoff, the delegation included Foreign 
Minister Kanat Saudabayev, Minister of Defense Adilbek Jaksybekov, 
Minister of Education and Science Zhanseit Tuimebayev, Minister of 
Industry and Trade Aset Isekeshev, Minister of Information and 
Culture Mukhtar Kul-Mukhammed, Minister of Tourism and Sport 
Temirkhan Dosmukhanbetov, the Chairman of National Welfare Fund 
Samruk-Kazyna Kairat Kelimbetov, Almaty oblast governor Yesimov 
Akhmetzhan, and Astana oblast governor Imangali Tasmagambetov. 
Turkish Econoff said that Turkey and Kazakhstan signed a number of 
cooperation agreements during the visit, including ones on science 
and technology, environment, tourism, education, and energy. 
 
KAZAKHSTAN WILL SHIP GAS VIA TURKEY 
 
¶4.  (SBU) During his visit to Turkey, Nazarbayev acknowledged 
Turkey's important role as a transit country for Central Asian 
energy resources and underscored that Kazakhstan's oil and gas will 
flow through Turkey.  Turkish Econoff said the Turkish government 
was particularly impressed by Nazarbayev's clear, unequivocal 
statement that both Kazakhstani oil and gas would transit Turkey, 
and reported that Nazarbayev specifically expressed Kazakhstan's 
support for the Nabucco gas pipeline to Europe. 
 
FROM BAKU-CEYHAN TO SAMSUN-CEYHAN 
 
¶5.  (SBU) Addressing the Turkish parliament on October 22, 
Nazarbayev announced that Kazakhstan and Russia are prepared to take 
part in the construction of the Samsun-Ceyhan oil pipeline. 
According to the BBC, Nazarbayev said, "Just as we supported the 
construction of the Baku-Ceyhan oil pipeline at the appropriate 
time, we are also ready, jointly with Russia, to take part in the 
construction of the Samsun-Ceyhan oil pipeline."  Later that day, 
according to Reuters, Russian Prime Minister Vladimir Putin 
announced that Kazakhstan might supply oil to the pipeline.  The 
project aims to provide a Bosporus bypass for Russian and 
Kazakhstani oil to world markets.  Turkish Econoff said Turkey's 
State Minister Faruk Celik stressed during a visit to Astana on 
November 17 the importance of relieving pressure on the Bosporus 
caused by oil-tanker shipments. 
 
A HISTORY OF THE SAMSUN-CEYHAN PIPELINE 
 
 
ASTANA 00002100  002.3 OF 002 
 
 
¶6.  (U) On September 26, 2005, Italy's Eni and Turkey's Calik Enerji 
signed a Memorandum of Understanding to cooperate on the project. 
They completed a pipeline feasibility study in March 2006 and the 
Front-End Engineering Design Phase in 2007.  On October 19 in Milan, 
Russia and Turkey signed an intergovernmental agreement to guarantee 
a stable regulatory framework and consent to the participation of 
Russian oil companies Transneft and Rosneft in the project.  The 
pipeline, which is expected to cost more than $2 billion, will be 
constructed, owned, and operated by the Trans-Anatolian Pipeline 
Company (TAPCO), a 50-50 joint venture of Eni and Calik Enerji 
incorporated in Turkey.  The 550-km (340-mile) pipeline will have a 
maximum capacity of 1.5 million barrels a day.  Eni Chief Executive 
Officer Paolo Scaroni has said oil from the Kashagan and 
Karachaganak fields in Kazakhstan could be used to fill the 
pipeline.  (NOTE:  Eni owns 16.67% of Kashagan and 32.5% of 
Karachaganak.  END NOTE). 
 
THE YALTA PROTOCOL 
 
¶7.  (U) Meeting in Yalta on November 20, Russian Prime Minister 
Vladimir Putin and Kazakhstani Prime Minister Karim Masimov 
witnessed the signing of a protocol to study plans for the 
Samsun-Ceyhan pipeline.  Russian Energy Minister Sergei Shmatko 
announced the protocol, which amends an oil transit agreement of 
June 7, 2002.  "We have amended our plans in the protocol," he said. 
 "We amended the projected oil balance for the next few years, the 
routes of transportation, and it is an essential piece of news that 
the words 'Samsun' and 'Ceyhan' are appearing in our relations for 
the first time." 
 
RUSSIA READY TO DEAL WITH TURKEY 
 
¶8.  (SBU) On November 23, Arman Darbayev, Director of the Oil 
Transportation Department at national oil company KazMunaiGas (KMG) 
told Energy Officer that KMG was not directly involved in preparing 
the Yalta protocol.  He suggested that the decision was political, 
not economic, and was made at the highest levels of government. 
Darbayev speculated that Russia switched its support from the 
Bourgas-Alexandropolis oil pipeline project to Samsun-Ceyhan, 
because "the Turks are easier to deal with than the Bulgarians, and 
they are ready to do business.  They are ready to invest their own 
capital, work with all partners, and move quickly to the 
construction phase."  Darbayev said that Kazakhstani crude from the 
Caspian Pipeline Consortium (CPC) pipeline would likely flow through 
Samsun-Ceyhan instead of Bourgas-Alexandropolis, despite the fact 
that CPC members have a vague commitment to ship through 
Bourgas-Alexandropolis.  He also suggested that Russia will want to 
take an equity stake in the Samsun-Ceyhan project, as would 
Kazakhstan. 
 
¶9.  (SBU) COMMENT:  Although the Samsun-Ceyhan pipeline is well past 
the design phase, many unanswered questions about the project 
remain.  It is unclear whether Russia or Kazakhstan will take an 
equity position in the consortium, what volume of crude they (or 
international oil companies) will commit to the pipeline, and how 
the pace of construction might be affected by other oil pipeline 
projects, such as the planned expansion of the CPC, expansion of 
Baku-Tbilisi-Ceyhan (BTC), and construction of 
Bourgas-Alexandropolis.  However, all parties agree on the need for 
additional transportation capacity to deliver increased volumes of 
crude from Kazakhstan to world markets.  The situation will become 
acute if CPC and BTC are not expanded to accommodate increased 
production from Tengiz and Kashagan in 2013.  Russia's role in the 
Samsun-Ceyhan pipeline project is also well worth watching, 
particularly if state-controlled companies Transneft and Rosneft 
take an equity stake in the consortium.  That could give Russia the 
ability to influence tariffs, volumes, and markets for Kazakhstani 
oil, which would undercut Kazakhstan's efforts to diversify export 
routes.  END COMMENT. 
 
SPRATLEN