US embassy cable - 04ANKARA2914

UNCLAS SECTION 01 OF 02 ANKARA 002914 
 
SIPDIS 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ECIN, ENRG, EPET, ETTC, IR, TU 
SUBJECT: CASPIAN BASIN ENERGY AMBASSADOR MANN DISCUSSES 
EAST-WEST ENERGY CORRIDOR NEXT STEPS WITH TURKISH ENERGY 
OFFICIALS 
 
 
REF: ANKARA 2721 
 
 
Sensitive but unclassified -- not for internet posting. 
 
 
1.  (SBU) SUMMARY:  On the margins of the IEA's Seminar 
"Natural Gas in South East Europe," May 5-6, in Istanbul, 
Ambassador Mann met with Energy U/S Sami Demirbilek and MFA 
DDG for Energy Hakki Akil to discuss U.S.-Turkish 
coordination in support of the East-West Energy Corridor. 
Turkish officials agreed to continue our strong cooperation 
on the East-West Energy Corridor, including urging Kazakh 
officials to link to the BTC pipeline, and working together 
to promote the Nabucco gas pipeline to Europe.  Mann urged 
the Turkish officials to approve the license request of 
Thrace Development Corporation to proceed with plans for a 
Bosphorus bypass pipeline, and assured them there was not 
conflict with BTC.  Although Akil was skeptical that the 
Thrace proposal could be built, Demirbilek told Mann that he 
had recommended that the Council of Ministers approve the 
license.  End Summary. 
 
 
BTC Problems 
 
 
2.  (SBU) Demirbilek said BOTAS subcontractor Tepe is having 
the most difficulty.  Tepe officials claim they are losing 
money because of exchange rate changes and they think BP 
should compensate them.  Mann responded that these issues 
should be in the contract, and should be settled on that 
basis.  This issue cannot be allowed to cause further delays 
because that will cost the entire BTC consortium.  Demirbilek 
assured Mann that Tepe will face significant fines if it 
causes a delay in the completion of BTC. 
 
 
Caspian Producers 
 
 
3.  (SBU) Ambassador Mann emphasized that big policy issues 
remain to be solved on Caspian oil and gas.  He urged Turkey 
to keep Caspian issues at the top of its priorities, adding 
that Turkey and the U.S. need to work together to solve the 
remaining problems.  Demirbilek agreed, saying the U.S. and 
Turkey, as NATO allies, can sit side by side to complete the 
tasks, including bringing Kazakhstan's Aktau oil to BTC.  (At 
an earlier meeting, Mann agreed with MFA Deputy U/S Alev 
Kilic that the two would meet together with Kazakh officials 
in Almaty to urge Kazakhstan to link its oil production to 
the BTC pipeline.)  Mann noted that Kazakhstan's insistence 
on maintaining monopoly control of shipping oil across the 
Caspian was a problem.  Demirbilek added that Kazakh gas 
fields should also be considered -- we could build a gas 
pipeline next to an Aktau-BTC connector, he suggested. 
Demirbilek said the Georgian Government is interested in a 
oil pipeline from the Russian port of Novorosyissk through 
Georgia to link to Turkey's Mediterranean port of Ceyhan.  He 
added that the Russian have agreed to set up a working group 
on the project, but he doubted they were truly interested. 
 
 
Natural Gas to Europe 
 
 
4.  (SBU) Mann stressed that the U.S. sees Turkey as an 
energy hub for natural gas to Europe.  Demirbilek said that 
Nabucco gas pipeline through southeast Europe was being 
established by the national gas companies.  Mann agreed that 
this was the best way to proceed and pledged to work together 
to support the effort.  Mann raised the issue of Iranian gas 
being shipped via pipelines through Turkey to Europe.  He 
re-affirmed U.S. opposition and warned that such 
Iranian-Turkish cooperation could end U.S.-Turkish 
cooperation on gas exports to Europe.  Demirbilek suggested 
that gas that Turkmenistan is sending to Iran could be used 
to fill the demand in Europe and reduce European demand for 
Iranian gas.  Mann was skeptical that any agreement could be 
struck with Turkmenistan's President Niyazov. 
 
 
Bosphorus Bypass Pipelines 
 
 
5.  (SBU) Mann urged Demirbilek and Akil to approve the 
application by Thrace Development Corporation for a license 
to build a bypass pipeline in Turkish Thrace.  Demirbilek 
said that Energy Ministry forwarded its proposal to approve 
the license to the Council of Ministers, which must review 
the proposal and determine if it would conflict with BTC. 
(Turkey agreed with BTC not to support pipelines that would 
conflict with BTC.)  Mann assured the Turks that BTC does not 
consider the bypass proposal to be in conflict with BTC. 
However, Akil voiced several other concerns.  He said the 
Thrace project was unrealistic, because environmental groups 
would not permit a project to feed oil into the 
environmentally sensitive Saros Bay in the north Aegean, and 
Greek authorities would view the Thrace Bypass as competing 
with the Burgas-Alexandropolis option.  He also was skeptical 
that Thrace could win enough commitments from oil shippers to 
go ahead.  In his opinion, a proposed bypass midway along 
Turkey's Black Sea coast connecting to the Mediterranean port 
of Ceyhan was more likely. 
 
 
6.  (SBU) Mann responded that Thrace is ready to move forward 
-- unlike the promoters of the Ceyhan option -- and that the 
license would merely allow Thrace to move to the next stage 
of project development.  He urged the Turks not to delay 
approval.  Demirbilek said he recommended that the Council of 
Ministers approve the license, with the condition that after 
six months Thrace must demonstrate that it has adequate 
financing and throughput guarantees, so there was no risk to 
Turkey. 
 
 
7.  (U) This cable was cleared by Ambassador Mann. 
EDELMAN