US embassy cable - 05ANKARA1003

UNCLAS SECTION 01 OF 02 ANKARA 001003 
 
SIPDIS 
 
SENSITIVE 
 
DOE FOR CHUCK WASHINGTON 
 
E.O. 12958: N/A 
TAGS: ENRG, IZ, TU 
SUBJECT: KARADENIZ OPTIMISTIC FOR INCREASED EXPORT OF 
ELECTRICITY TO IRAQ, BUT... 
 
REF: A. ANKARA 246 
 
     B. 04 ANKARA 6195 
 
 1.  (SBU) Summary: Currently exporting close to 200 MW of 
electricity from its Silopi, Turkey plant to northern Iraq, 
Karadeniz told us they have reached agreement with GOT to 
expand capacity to 1000 MW, potentially providing electricity 
all the way to Mosul.  It is unclear whether or when 
Karadeniz will gain approval from the Turkish energy 
regulatory authority (EMRA) to actually provide this quantity 
of electricity.  End Summary. 
 
Agreeement With Iraqis to Increase Exports 
------------------------------------------ 
 
2.  (SBU) Reftels describe the challenges of Turkish firm 
Karadeniz/Kartet Energy Company's quest to increase export of 
electricity from its Silopi plant in Turkey to northern Iraq. 
 The company is exporting close to 200 MW of electricity 
across the border, but Iraq has been unable to provide fuel 
oil as provided for by the partial barter arrangement in the 
original deal.  Karadeniz has scrambled to provision its 
"mobile" plants with replacement Turkish fuel oil and has 
purchased electricity off the Turkish grid to seek to 
maintain its high visibility effort.  Karadeniz says it has 
already increased its transmission capacity to 300 MW and 
worked with the Iraqi authorities to seek alternative sources 
or mechanisms for provision of fuel oil or for the Iraqi side 
to pay compensating damages.  Orhan Karadeniz called Energy 
Officer on February 16 to say that the company had reached 
agreement with the GOT Ministry of Energy (MENR) and Iraqi 
authorities to increase capacity to 1000 MW.  According to 
Karadeniz, the Government of Iraq would take care of 
increasing transmission capacity in Iraq and Karadeniz would 
make needed investment in Turkey. 
 
Turkish Regulatory Approval Not Yet Secured 
------------------------------------------- 
 
3.  (SBU) Approval of the new deal by Turkey's energy 
regulator (EMRA) is not however secured.  In the past, EMRA 
has asserted that Karadeniz illegally purchased and exported 
electricity from the Turkish grid and TETAS (Turkish 
electricity trading company) to meet its contractual 
obligations.  TETAS and EMRA claim that Karadeniz owes 
significant back-payments for some of this electricity.  Even 
the provision of replacement fuel oil in Turkey has been 
difficult or overly expensive- and also subject to EMRA 
approval.  The MENR has generally supported the project, but 
notes that there are regulatory shortcomings that need to be 
resolved. 
 
If Pigs Could Fly 
----------------- 
 
4.  (SBU)  Noting no desire to work with TETAS, Karadeniz 
said they plan to import the large amount of incremental 
electricity from Bulgaria and Georgia, handily adding that 
they would effect the necessary investment.  Energy Officer 
pointed out the clear challenges in doing this without 
support of TETAS, EMRA, or TEIAS (the state-owned 
transmission company).  (Note: This plan and required 
investment strikes post as unrealistic.  End Note.) 
 
Comment 
------- 
 
5.  (SBU)  This project offers "good news" potential 
(increased provision of badly needed electricity to Iraq), 
but it faces significant obstacles and challenges to make it 
happen.  In particular, Karadeniz will need to sort out its 
problems with EMRA, which views the initial scheme as 
irregular.  Although there is no evidence of impropriety in 
this situation, EMRA may also be leery of the Karadeniz 
family's implication in the 2001 "White Energy" corruption 
scandal, although Karadeniz officials were acquitted of 
bribery charges in the case.  End Comment. 
 
6.  (U) Baghdad Minimize Considered 
EDELMAN