US embassy cable - 03ANKARA2459

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 002459 
 
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: 04/15/2013 
TAGS: ENRG, ECON, EPET, AJ, GG, KZ, TU 
SUBJECT: BTC OPERATIONAL ISSUES:  PROGRESS, BUT CHALLENGES 
REMAIN 
 
 
REF: A) ANKARA 2165 B) ANKARA 1724 C) ANKARA 1448 
 
 
Classified by EconCouns Scot Marciel, Reason 1.5 (b,d) 
 
 
1. (C) Summary:  The GOT has made progress on outstanding BTC 
operational issues since BTC Co sent a "material breach" 
letter to Energy Minister Guler on April 7.  Guler has named 
a new manager for the BTC Directorate, and has committed to 
increasing the project manager's authority.  These 
developments are promising, but we will continue to monitor 
the situation closely to ensure that these initial steps lead 
to resolution of the outstanding problems, which could 
seriously jeopardize BTC if left unchecked.  We will meet 
with GOT officials over the next several days to reiterate 
our concerns, and ascertain the GOT's action plan for 
resolving all remaining issues.  End summary. 
 
 
Progress on BTC Co's Key Concerns 
--------------------------------- 
 
 
2. (C) BP's Turkey BTC Co General Manager, Yashar Latifov, 
told econoff April 15 that important progress has been made 
since BTC Co sent a "material breach" letter to Energy 
Minister Guler on April 7.  The letter, signed by BTC Co CEO 
Michael Townshend, advises the Minister that the GOT is in 
"material breach of its obligations under the Host Government 
Agreement, and, therefore, under the Intergovernmental 
Agreement," due to improper management of the Turkish segment 
of BTC.  Townshend requests that the Minister 1) give BOTAS 
the necessary authority to manage the project; and 2) appoint 
a qualified director of the BTC Directorate, BOTAS' BTC 
subsidiary. 
 
 
3. (C) Energy Minister Guler confirmed to Latifov on April 15 
that progress had been made on both of these requests. 
First, the Minister said, he had designated Fatih Ocali to 
replace the current general manager of the BTC Directorate. 
Latifov told econoff that Ocali was acceptable to BTC Co -- 
he had the right credentials (10 years as BOTAS Deputy 
General Manager, from 1985-1995) and was close to Minister 
Guler.  Minister Guler also said he was working to ensure 
that Ocali would have sufficient authority to implement the 
BTC turnkey contract, but was still figuring out the 
legal/administrative means of achieving this.  Guler told 
Latifov not to worry, "this is a one-party government and we 
will get done what we need to get done."  The BOTAS Board is 
scheduled to approve the appointment of Ocali at its next 
meeting on April 17. 
 
 
4. (C) MFA officials told econoff that they shared many of 
the concerns relayed in the "material breach" letter, and 
they had briefed FM Gul to that effect.  They noted that the 
project already had experienced some delays due to BOTAS' 
limited authority, but the situation had been exacerbated 
with the dismissals of BOTAS GM Bildaci and Energy U/S 
Yigitguden.  MFA officials said U.S. concern about this issue 
had definitely been registered -- the MFA had reported the 
contents of E/CBED Ambassador Mann's letter to Minister Guler 
to the Prime Ministry and to the Presidency.  On the positive 
side, these officials said, the BTC Co and Mann letters had 
caused senior officials to focus on the problem and how to 
resolve it. 
 
 
5. (C) In addition to the steps mentioned above, other recent 
developments may also contribute to resolution of the 
outstanding BTC operational problems.  Over the last week: 
 
 
-- The GOT named Sami Demirbilek as the new Energy 
Undersecretary, replacing Yurdakul Yigitguden; 
 
 
-- Minister Guler appointed one of his personal advisors, 
Mehmet Calil, to act as "BTC Coordinator;" 
 
 
-- The Foreign Minister reportedly convened a meeting to 
discuss an action plan for addressing the outstanding 
problems. 
 
 
Meet the Press 
-------------- 
 
 
6. (C) The Turkish daily Radikal reported April 13 that BTC 
Co had sent Minister Guler a letter, but got most of the 
other facts wrong.  For example, the article claims that BTC 
Co notified the GOT that the project was three months behind 
schedule, and had instructed the Minister to stop making 
political appointments to BOTAS.  Latifov spent most of April 
14 doing press interviews to respond to the inaccuracies of 
the Radikal article, with positive results:  many of the 
Turkish dailies on April 15 quoted an unnamed BTC Co official 
as stating that BTC construction was not significantly 
delayed in Turkey, and none of the existing problems were 
insurmountable. 
 
 
7. (C) In connection with the BTC Co letter story, at least 
two Turkish dailies have reported that the U.S. no longer 
supports the BTC project since it will soon have access to 
cheap Iraqi oil.  We are responding to these articles, 
reiterating U.S. support for Caspian energy development and 
successful completion of the BTC pipeline. 
 
 
Comment 
------- 
 
 
8. (C) BTC Co's "material breach" letter, followed by E/CBED 
Amb. Mann's letter, seems to have spurred the Turks into 
action.  Guler's commitments to BTC Co are promising, but he 
must now translate his words into results.  We will continue 
to monitor the situation closely to ensure that these initial 
steps lead to resolution of the outstanding problems, which 
could seriously jeopardize BTC if left unchecked.  The GOT is 
clearly aware of U.S. interest on this issue, but we will 
meet with the new Energy U/S and the Prime Minister's Chief 
Advisor over the next several days to reiterate our concerns, 
and ascertain the GOT's action plan for resolving the 
outstanding issues. 
PEARSON