US embassy cable - 03ANKARA1724

C O N F I D E N T I A L SECTION 01 OF 03 ANKARA 001724 
 
SIPDIS 
 
 
STATE FOR E, EB/CBED, EB/ESC, EUR/SE 
STATE PASS NSC FOR QUANRUD AND BRYZA 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO 
USDOE FOR PUMPHREY/ROSSI 
 
 
E.O. 12958: DECL: 03/17/2013 
TAGS: ENRG, ECON, EPET, AJ, GG, KZ, TU 
SUBJECT: CBED AMBASSADOR MANN'S MARCH 12 VISIT TO ANKARA 
 
REF: ANKARA 1448 
 
 
Classified by Econ Couns Scot Marciel, Reason 1.5 (b,d) 
 
 
1. (C) Summary:  During CBED Ambassador Mann,s March 12 
visit to Ankara, MFA and Ministry of Energy officials 
requested his intervention with the World Bank on the 
negative pledge clause issue (reftel) and with Greece on the 
Interconnector Turkey-Greece (ITG).  MFA Deputy U/S Kilic 
also pressed for Ambassador Mann,s assistance in making 
progress on the Balkan export route for Caspian gas to 
Europe, suggesting a Turkey-Greece-U.S. meeting on this issue 
on the margins of an April 3-4 conference in Istanbul.  In 
meetings with MFA and Ministry of Energy Officials, as well 
as with the President and Prime Minister,s advisors, 
Ambassador Mann emphasized that BOTAS needed sufficient 
authority to meet its obligations under the BTC turnkey 
contract.  Ambassador Mann,s interlocutors uniformly 
responded that they were aware of this issue and were working 
to resolve it.  End summary. 
 
 
GOT Request for Help:  TPAO, Greece Connection 
--------------------------------------------- - 
 
 
2. (C) In a cordial, one-hour meeting on March 12, Ministry 
of Energy Deputy U/S Nermin Berki and MFA Deputy Director 
General Hakki Akil thanked Ambassador Mann for his continued 
work toward the realization of the East West Energy Corridor. 
 Berki noted that February 2003 had been an important month 
-- BTC had reached the "point of no return," the Shah Deniz 
project had been sanctioned, and, on February 23, Turkey and 
Greece had signed the Intergovernmental Agreement for the 
Interconnector Turkey-Greece (ITG).  Berki and Akil asked for 
Ambassador Mann,s assistance on two issues:  with the World 
Bank on applicability of the negative pledge clause to TPAO 
(reftel) and with Greece on the ITG. 
 
 
3. (C) Berki said the World Bank,s negative pledge clause, 
which prohibits TPAO from pledging its potential future 
revenues in order to secure financing, presented a real 
problem for the GOT.  She said the World Bank had not yet 
responded to the GOT,s request for a waiver of the clause, 
but indications were that the waiver would be denied.  Berki 
said the GOT would appreciate Amb. Mann's support with the 
World Bank on this issue.  Amb. Mann responded that he could 
not provide the formal USG position on a TPAO waiver without 
further discussing the issue in Washington; however, he would 
look into all the available options for TPAO with an eye 
toward finding a positive way forward.  Mann also encouraged 
the Ministry of Energy to send an expert team to Washington 
to discuss TPAO,s alternatives directly with the World Bank. 
 
 
Caspian Gas to Europe and the ITG 
--------------------------------- 
 
 
4. (C) On the Interconnector Turkey-Greece, Berki and Akil 
requested that Ambassador Mann intervene directly with the 
Greeks (DEPA) to 1) urge them to conclude the sales purchase 
agreement with BOTAS as soon as possible; and 2) urge more 
flexibility on price.  Akil noted that BOTAS was willing to 
make concessions by not charging a transit tariff, but BOTAS 
could not charge less than what it was paying for Shah Deniz 
-- its cheapest -- gas.  He added that what Gazprom was 
currently charging DEPA was not a "real price," and was 
designed by Russia to undercut the East-West Energy Corridor. 
 Russia,s recent attempt to increase the volumes in its 
Western lines into Europe was another concrete sign of its 
policy to undercut Caspian gas.  Akil said the GOT was trying 
to urge Greece to "think strategically" about its gas policy. 
 
 
5. (C) Ambassador Mann responded that he understood both the 
Greek and Turkish positions on this issue -- Greece,s 
Gazprom contracts were indeed cheaper than what BOTAS was 
offering, but it was difficult for BOTAS to charge less than 
the Shah Deniz price.  He emphasized that there must be a 
sharing of incentives and risks.  Amb. Mann added that he 
could be more effective on this issue if he were better 
informed about gas pricing policies in Turkey.  Berki agreed 
to try to send a BOTAS representative to Washington to 
discuss these policies with Mann as soon as possible. 
 
 
6. (C) BOTAS General Manager Bildaci, who was unable to meet 
with Ambassador Mann, told econoff March 17 that, in his 
view, the most important ITG issue on which Amb. Mann could 
help was getting DEPA to commit to taking 2-3 bcm of gas 
annually through the ITG, ramping up over several years from 
the 1/2 bcm to which DEPA was currently committed to taking 
(reftel).  Bildaci emphasized to econoff that the volume 
issue was more important than price.  Bildaci added that the 
Russians, latest plan was to transfer the gas Gazprom was 
currently exporting to Turkey through the two Russia West 
pipelines to the Blue Stream pipeline; that way, he said, 
Russia could use the West pipelines to increase its exports 
to Europe. 
 
 
7. (C) In a separate meeting, MFA Deputy U/S for Economic 
Affairs Alev Kilic asked for Ambassador Mann,s thoughts on 
"next steps" for exporting Caspian gas through Turkey to 
Europe via the Balkans route.  Kilic emphasized the GOT 
desire that the U.S., working together with Turkey and 
Greece, engage to bring the Balkan countries rapidly and 
concretely into their gas transportation network.  Akil noted 
that the Greek Development Minister Aksi Tsohatzopoulos, who 
could be helpful on this issue, would be attending the 
TURKIOG Oil and Gas Congress in Istanbul April 3-4.  He said 
the MFA had also formally invited Ambassador Mann to speak at 
this conference, and thought this might be a good opportunity 
for a U.S.-Turkey-Greece discussion of next steps. 
 
 
BTC:  Financing and BOTAS 
------------------------- 
 
 
8. (C) In all of his meetings, including with Chief Advisor 
to the Prime Minister Ahmet Davutoglu, Presidential Energy 
Advisor Volkan Ediger, MFA Deputy U/S Alev Kilic, and MENR 
Deputy U/S Nermin Berki, Ambassador Mann emphasized the need 
for successful implementation of the BTC contract in Turkey. 
Mann asked each of his interlocutors for their help in 
ensuring that BOTAS had sufficient authority to meet its 
obligations under the BTC turnkey contract.  Davutoglu told 
Amb. Mann that he had discussed the "BOTAS problem" with 
Energy Minister Guler, who was an old fried.  He said he 
would raise the issue again with the Minister, and would do 
his best to fix the problem. 
 
 
9. (C) Berki and Akil told Mann that Bildaci had presented a 
comprehensive explanation of the problem at a recent lunch 
with Foreign Minister Yakis and Energy Minister Guler.  Berki 
said Guler is committed to resolving this issue as soon as 
possible.  Ambassador Kilic also gave his reassurances that 
the GOT was working on a resolution of this issue. 
 
 
10. (C) Kilic and Akil both thanked Amb. Mann for his 
assistance in facilitating the recent 
Turkish-Azeri-Georgian-BP visit to Washington to discuss 
financing.  Both said there were still concerns about the 
delay in finalizing the financing deal.  Ambassador Mann said 
he felt confident that the financing arrangements were in 
good shape.  The IFC had told President Aliyev it would make 
a final decision on financing by September, and Mann believed 
that date would stick. 
 
 
Meetings with Advisors and Parliamentarians 
------------------------------------------- 
 
 
11. (C) In a meeting with Chief Advisor to the Prime Minister 
Ahmet Davutoglu, and lunch with Presidential Energy Advisor 
Volkan Ediger and AK party parliamentarians,  Ambassador Mann 
reviewed U.S. energy policy in the Caspian, noting that 
U.S.-Turkish cooperation had been and would continue to be 
key to the success of this policy.  Davutoglu began a 
spirited discussion of Iraq.  Ambassador Mann strongly 
reaffirmed the need to work positively within the U.N. to 
deal with the threat proposed by the Iraqi regime. 
 
 
Comment 
------- 
 
 
12. (C) Ambassador Mann,s visit was extremely valuable in 
getting the GOT to focus on BOTAS implementation of the BTC 
contract in Turkey.  Mann,s interlocutors seemingly had 
anticipated his raising the issue, and uniformly responded 
that they were aware of the problem and were working to fix 
it.  We note the MFA pressed hard to make progress on the 
Balkan export route, directly requesting USG assistance on 
next steps.  End comment. 
PEARSON