US embassy cable - 05ANKARA5310

UNCLAS SECTION 01 OF 02 ANKARA 005310 
 
SIPDIS 
 
SENSITIVE 
 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/CRUSNAK 
DOE FOR CHUCK WASHINGTON 
TREASURY FOR INTERNATIONAL AFFAIRS - CPLANTIER 
STATE ALSO FOR DAS BRYZA 
STATE ALSO FOR OPIC 
 
E.O. 12958: N/A 
TAGS: ENRG, EPET, ETRD, TU, IZ, OPIC 
SUBJECT: TURKEY'S ELECTRICITY EXPORTS TO IRAQ - GOOD NEWS; 
BAD NEWS FOR CURRENT EXPORTER 
 
REF: A. ANKARA 4288 
 
     B. ANKARA 5080 
 
 SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE ACCORDINGLY. 
 
1.  (SBU) SUMMARY: Turkey's Kartet Company gained GOT 
regulatory approval for increasing its exports to Iraq to 300 
MW from current 200 MW, but for a limited and indefinite 
period, in favor of aiming for a competitive tender for 
allocation of transmission capacity for the longer term or 
for a larger amount.  Kartet also did not gain approval for a 
proposed increase to 1200 MW, but remains confident, because 
of GOT political support, and despite opposition from the 
energy regulatory authority.  End Summary. 
 
2.  (SBU)  Currently exporting about 200 MW of electricity 
from its Silopi plant in Turkey to northern Iraq, Kartet 
Company has sought to increase its exports to - first - 300 
MW, then later to 1200 MW, using electricity from Turkey's 
transmission grid (Ref A).  Kartet's Orhan Karadeniz told 
EnergyOff September 9 that he had good news and bad news 
(from Kartet's perspective).  Good news: Turkey's Energy 
Market Regulatory Authority (EMRA) extended Kartet's export 
license to January 2007 for up to 300 MW.  Bad news: Kartet's 
special export rights will be terminated at the earlier of 
January 2007 or at the time of a competitive tender for 
allocation of transmission capacity from the Turkish grid 
(State Company TEIAS). 
 
3.  (SBU)  The Kartet rep still expressed optimism that they 
could move forward on their increase to 300 MW and that 
Kartet was the only company in a position to deliver 
electricity to northern Iraq, even in the event of a 
competitive tender, because of its existing contract (with 
the ITG - and before CPA) and technical capacity.  Karadeniz 
said that work had been completed or funding had been 
identified for improvements at the border and rehabilitation 
and improvements on the Iraqi side to achieve 300 MW 
sustained transmission capability in about 3 weeks.  He was 
still optimistic about obtaining an eventual extension from 
EMRA for beyond January 2007, based on the legal basis of its 
contract and license application. 
 
4.  (SBU)  With respect to the larger increase to 1200 MW, 
Karadeniz admitted that the prospect and timing had been made 
more uncertain, but he cited high level support from the PM 
and MFA as potential for an ultimate positive solution. 
Karadeniz asked for help on keeping Turkish and Iraqi 
officials focused on electricity exports from Turkey (he 
lamented ineffectiveness of ITG individuals).  Karadeniz said 
he would travel to the U.S. and be in Washington September 
16-19 to meet with DOD and OPIC (possible source for 
facilitating financing for Iraq improvements related to the 
increased exports project). 
 
5.  (SBU) COMMENT: Embassy has previously noted that Kartet 
may not be the sole company capable of providing increased 
electricity to northern Iraq.  As energy sector regulator 
struggling to secure its independence, EMRA is determined to 
ensure a level playing field among other companies it says 
are also interested in competing for scarce transmission 
capacity to export electricity.  Embassy will keep this issue 
on the table; however, strong political interests back 
Kartet's project.  EUR DAS Bryza raised the issue on August 
26 with MENR U/S Sami Demirbilek, who thought EMRA's plans to 
auction transmission rights to Iraq from Turkey was not 
workable (Ref B). 
MCELDOWNEY