US embassy cable - 03ANKARA2997

C O N F I D E N T I A L ANKARA 002997 
 
SIPDIS 
 
 
STATE FOR E, EB/CBED, EB/ESC, EUR/SE 
NSC FOR QUANRUD AND BRYZA 
USDOC FOR 4212/ITA/MAC/OEURA/CPD/DDEFALCO 
USDOE FOR PUMPHREY/ROSSI 
 
 
E.O. 12958: DECL: 05/07/2013 
TAGS: ENRG, ECON, EPET, AJ, GG, KZ, TU 
SUBJECT: BTC CO LIFTS MATERIAL BREACH CLAIM 
 
REF: ANKARA 2459 
 
 
Classified by Econ Couns Scot Marciel, Reason 1.5 (b,d) 
 
 
1. (C) Summary:  BTC Co has formally informed the GOT that 
the government is no longer in material breach of its 
obligations under the BTC agreements (reftel).  BTC Co CEO 
Michael Townshend told us he is satisfied that the GOT has 
resolved all outstanding operational issues, a point he 
reiterated with Energy Minister Guler in a joint press 
conference May 7.  Of course we will need to observe how the 
BOTAS team manages in practice; in a project of this size new 
challenges are sure to emerge.  For today, however, the news 
on BTC from Turkey is nothing but good.  End summary. 
 
 
2. (C) BTC Co Chief Executive Officer Michael Townshend told 
econoff May 7 that he is "as satisfied as he could be" that 
the GOT has resolved the outstanding operational issues 
raised in BTC Co's April 7 "material breach" letter (reftel). 
 Townshend said the GOT had addressed the BOTAS management 
issues by appointing the new BOTAS General Manager, Mehmet 
Bilgic, and the new BTC Directorate Chief, Dogan Sirikci. 
Townshend said he had known Sirikci for 10 years and was 
satisfied that he could do the job.  In addition, Townshend 
said, Energy Minister Guler had confirmed the BOTAS Board had 
given Sirikci increased management authority to allow him to 
implement fully the BTC turnkey contract, including the 
authority to make financial decisions up to USD 10 million in 
value, organizational changes, and certain contracting 
decisions. 
 
 
3. (C) As BTC Co had requested, Minister Guler responded to 
the material breach letter with a formal letter, dated May 7, 
that outlines the above changes.  Guler's letter also 
addresses several other outstanding issues not included in 
the material breach letter, including resolution of a dispute 
over how the fuel tax will be applied to BTC Co and an 
indication that the current "investigations" of the project 
will be terminated (reftel).  The letter also advises that 
the Ministry will implement an action plan to ensure timely 
gas supply to BTC's Pump Station I. 
 
 
4. (C) Townshend delivered a written response to Minister 
Guler's May 7 letter the same day, stating that, "In 
consideration of the actions taken by the Turkish Government, 
we are pleased to advise we now consider the right conditions 
are in place for BOTAS to effectively manage the works to 
completion and as of today are lifting our claim of material 
breach." 
 
 
5. (C) Minister Guler and Townshend held a joint press 
conference May 7, where Townshend emphasized BP's continued 
support for the Caspian region and the BTC project.  He said 
he was very pleased with the progress made on BOTAS 
management issues, and was convinced the project would be 
completed on time.  Townshend also praised BOTAS, saying the 
company should be proud of its success to bringing BTC to its 
current development stage.  (We have emailed the text of the 
press release to E/CBED and EUR/SE). 
 
 
6. (C) Comment:  All in all, a very good day for BTC.  The 
GOT has responded to BTC Co's immediate "material breach" 
concerns and more.  The BOTAS management team is close to 
Minister Guler and has sufficient authority to complete the 
project.  There will be more challenges, and we will need to 
monitor how the team manages in practice.  But, for now at 
least, it seems the AK government has got it right on BTC. 
End comment. 
PEARSON