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Cablegate: Turkey: Pushing Eu On Southern Gas Corridor

VZCZCXRO1366
RR RUEHAG RUEHDBU RUEHDF RUEHIK RUEHLN RUEHLZ RUEHVK RUEHYG
DE RUEHAK #5611 2691151
ZNR UUUUU ZZH
R 261151Z SEP 06 ZDS
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 8980
INFO RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHGB/AMEMBASSY BAGHDAD 0759
RUCNCIS/CIS COLLECTIVE
RUEHIT/AMCONSUL ISTANBUL 1342
RUEHDA/AMCONSUL ADANA 1140
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS ANKARA 005611

SIPDIS

C O R R E C T E D C O P Y -- REV ADDRESSEE AND PASS

USDOE FOR CHARLES WASHINGTON
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET EINV TU RU IR
SUBJECT: TURKEY: PUSHING EU ON SOUTHERN GAS CORRIDOR

REF: A: ANKARA 5332

B: ANKARA 5000
C: ANKARA 4379

Sensitive But Unclassified. Please handle accordingly.

1. (SBU) Summary: An Embassy-organized luncheon on September 22
brought together local EU diplomats and Turkish Foreign Ministry
officials to highlight Turkey's key role in European and global
energy security. MFA Energy DDG Mithat Rende called for greater
engagement and visible support from the EU and its members to
support the development of Azerbaijan and other Caspian natural gas
sources to catalyze a "Southern Gas Corridor" to Europe as a way to
gain alternatives to Russian supply and withstand "divide and
conquer" pressure from Gazprom to lock up routes and buyers. End
Summary.

2. (SBU) Rende expanded on Turkey's commitment to establishing gas
transit to Europe. He cited the importance of the new
Baku-Tbilisi-Erzurum gas pipeline (which he said will be complete in
November), Azerbaijan's Shah Deniz phase II, a potential
trns-Caspian pipeline from Kazakhstan and/or Turkmenistan,
development of northern Iraq hydrocarbon resources, and gas from
Egypt via Syria and Jordan. Rende said time was running out before
Gazprom succeeded in locking-in long-term supply contracts with
European end-users that would effectively lock-out these new transit
opportunities. He lamented Gazprom's divide-and-conquer strategy,
citing the recent gas storage deal with Hungary. Rende argued,
however, that Turkmen President Niyazov, in signing a three-year -
rather than a long-term supply contract with Russia, had clearly
intended to create an opening for supplying other customers,
including via a trans-Caspian pipeline.

3. (SBU) Rende said Gazprom was pressing on Turkey for a Blue
Stream expansion to fill Turkey's pipelines to Europe and to supply
new customers such as Israel. He noted that Iran needed to solve
its problems with the west and establish itself as a reliable
supplier before it could be a viable source, but he said Iran
targetS 35 BCM to Europe via Turkey. In response to questions about
how Turkey would behave as a transit company, Rende argued that
Turkey wanted a "fair share" of any transit arrangement crossing its
territory, but that it had no intention of becoming a "new Gazprom."
He pointed to Turkish participation in a joint gas marketing
company as one way of ensuring Turkey's fair share.

4. (SBU) The local European embassy and Commission officers
pointed out that the recent "Green Paper" identified energy supply
and route diversification as a key objective for the EU, but
admitted that Europe lacked a common energy policy. The Polish and
Finnish representatives saw their countries as beneficiaries of a
southern corridor to the extent that it injected more market-based
competition into Europe's dealings with Russia. They expressed a
strong opinion that the Commission should be more vocal in support
of a southern route.

5. (SBU) The Commission representative raised questions about
Turkey's domestic demand and contractual position with respect
natural gas, the amount of gas available in Azerbaijan, and the
status of a trans-Caspian pipeline (TCP). Rende noted that Turkey
aimed to diversify its energy mix from the current 45% reliance on
expensive imported natural gas for electricity generation by
developing nuclear, coal, hydroelectricity, and renewable energy and
that the gas available for transit well exceeded Turkey's projected
domestic needs. He pointed out that Russia had shown flexibility on
take-or-pay contracts so Turkey had been able to bring its natural
gas contracts situation into equilibrium.

6. (SBU) Comment: Embassy Economic Officers echoed Rende's call
for more visible support from the EU as customer for Caspian gas,
noting that senior USG officials had visited southern corridor and
European capitals and the U.S. was funding a pre-feasibility study
for a TCP from Kazakhstan. The European diplomats seemed to get the
points. Similar representations in capitals would reinforce their
reporting.
Wilson

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