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### Viewing cable 04ANKARA5306, SECRETARY ABRAHAM'S SEPTEMBER 21 VISIT TO ISTANBUL

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04ANKARA5306 | 2004-09-17 15:37 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ankara

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 03 ANKARA 005306

    SIPDIS

    SENSITIVE

    VIENNA PASS TO SECRETARY ABRAHAM DELEGATION

    E.O. 12958: N/A
    TAGS: EPET EWWT EMIN ETRD EINV OVIP TU
    SUBJECT: SECRETARY ABRAHAM'S SEPTEMBER 21 VISIT TO ISTANBUL
    - SCENE-SETTER

     Sensitive But Unclassified.  Please Handle Accordingly.

    ¶1. (SBU) Your visit to Turkey comes a few months after the
    President,s June visit to Ankara and Istanbul for bilateral
    meetings and the NATO Summit, at a time when bilateral and
    political relations are generally on track.  Your meeting
    with Energy Minister Hilmi Guler will provide an excellent
    opportunity to enhance bilateral energy cooperation and to
    promote Turkey as a hub in the East-West Energy Corridor.
    The Embassy and Consulate are working with Turkish
    authorities and businesspeople to arrange a tour of the
    Bosphorus to acquaint you with transport, environment, energy
    and political issues surrounding use of that congested
    waterway.

    Notional Program
    ----------------

    ¶2. (SBU) We are working with the GOT to arrange a program for
    you in Istanbul on September 21.  This will start with a
    bilateral meeting at the Istanbul Airport with Energy and
    Natural Resources Minister Hilmi Guler, followed by a joint
    press availability session.  The Consulate will arrange a
    luncheon and tour of the Bosphorus, most likely to be hosted
    by the American Business Forum in Turkey (ABFT) and the
    Turkish-U.S. Business Council of the Foreign Economic
    Relations Board  (TUSBC).  Separately or as a part of this
    event, you will be able to meet with Turkish and American
    energy business people and Turkish government officials.  The
    Consul General plans to participate in your program, but the
    Ambassador has a previous commitment in Ankara.  Our Istanbul
    Consulate control officer Stuart Smith will be in contact
    with your staff as we firm up these arrangements.  Embassy
    Energy Officer David Young will also assist and will be your
    note-taker.

    Overview of Bilateral Relations
    -------------------------------

    ¶3. (SBU) The June NATO Summit highlighted Turkey,s role in
    the alliance, in European institutions and in the Broader
    Middle East and North Africa Initiative.  Bilateral political
    relations have improved in the eighteen months since the
    Turkish Parliament,s March 1 vote on Iraq, with good
    cooperation on a host of issues.  On Iraq reconstruction,
    Turkey has become a major supplier of the Multinational
    Force- Iraq, bilateral trade is booming, and Turkish
    contractors have won a considerable share of reconstruction
    contracts.  Turkey shares our goals of democratization,
    market-based reform and integration with the world economy
    for the Middle East.  The GOT worked hard to reach a
    resolution of the Cyprus issue and it has continued on the
    path of political reforms in the hope of gaining a date for
    the start of the EU accession process this December.  Turkey
    remains very concerned about instability and insecurity in
    Iraq, particularly related to recent Turkish truck driver
    kidnappings, Iraq-based PKK terrorist presence, and recent
    action in the predominately Turkmen-populated northern Iraqi
    city of Talafar.

    ¶4.  (SBU) Political: With a two-thirds majority in
    parliament, control of a majority of municipalities, and no
    viable political opposition, PM Erdogan and his AKP
    government have appeared in control.  AKP,s passage of major
    legal reform packages and constitutional amendments appears
    to have put Turkey more firmly on track to get a
    harmonization start date from the EU in December, although
    chronic problems with implementation continue to plague the
    government.  Moreover, the EU remains concerned at the GOT's
    resistance in trying to criminalize adultery.  In his
    meetings with foreign leaders, Erdogan projects confidence,
    power, and a pragmatism that seem to belie his Islamist
    firebrand past.

    ¶5. (U) Economy: The Turkish economy has recovered from the
    financial and economic crisis of 2000-2001.  However,
    Turkey,s huge debt and structural weaknesses leave it
    vulnerable to external shocks and necessitate continued
    implementation of the IMF program and its accompanying fiscal
    restraint, sectoral liberalization and structural reform.
    The current AKP Government has made laudable progress on
    reducing inflation and interest rates and stabilizing the
    currency.  Nonetheless, the economy remains fragile, and
    continued implementation of reforms is essential to sustain
    growth and stability.

    The Turkish Straits
    -------------------

    ¶5. (SBU) Turkey is concerned that rising maritime traffic,
    especially of large oil tankers, presents a safety and
    environmental risk to this unique waterway, which bisects
    Istanbul and its population of 12 million.  Oil transport has
    increased dramatically in recent years:  from 60 million tons
    in 1997 to 134 million tons in 2003, and companies are using
    larger tankers. Turkish officials emphasize that traffic in
    the Straits is safe and they continue to work on safety
    improvements consistent with Turkey,s obligations under the
    Montreux Convention. However, they warn that they are nearing
    the maximum safe capacity.   For example, tankers over 200
    meters face special difficulty managing the sharp curves and
    currents in the narrowest sections of the Straits, forcing
    them to routinely deviate outside the normal shipping
    channel, according to Turkish authorities.  Turkey restricts
    these tankers to daytime transit and only in one direction at
    a time.  In 2003, Turkey took delivery of the Vehicle Traffic
    System (VTS), constructed by Lockheed Martin, which allows
    Turkish authorities to better monitor traffic and respond
    more quickly to accidents in the Straits.  However, the VTS
    will not necessarily mean an increase in traffic, and may
    actually reduce traffic, because the authorities will be
    better able to enforce vehicle spacing and other safety
    regulations.

    ¶6. (SBU) The congestion, when coupled with bad weather, has
    resulted in expensive delays for oil companies and supply
    shortages for consuming country refineries.  At one point in
    early 2004, 42 ships were waiting to enter the straits, with
    an average delay of 20 days, costing ship operators hundreds
    of thousands of dollars.  These delays have led to a renewed
    interest in pipeline projects to bypass the Straits, which
    Turkey supports.  The U.S. and Turkey have worked closely
    together to promote the development and construction of the
    Baku-Tbilisi-Ceyhan pipeline (oil on schedule to flow by
    mid-2005), which will bring oil from the Caspian to the
    Mediterranean, bypassing the straits.

    East-West Energy Corridor
    -------------------------

    ¶7. (SBU) You may want to take the opportunity to congratulate
    the GOT on approaching realization of the Baku-Tbilisi-Ceyhan
    as the first Bosphorus Bypass project.  This is a huge
    success; but, we must work together to insure that
    construction in Georgia remains on track.  You may want to
    highlight continued support for Turkey as an energy transport
    hub to Europe and world markets, particularly for natural
    gas.  You may want to remind Minister Guler of our mutual
    support for realization of a commercially feasible Bosphorus
    Bypass project.  We continue to call for timely action on
    bypass permits to allow the market to pick a winner.

    ¶8.  (SBU) You may want to remind the Minister of important
    aspects of U.S. policy related to the East-West Energy
    Corridor.  Two key aspects have been: reducing Russian
    dominance in regional oil and gas pipelines and reinforcing
    our Iran sanctions policy by providing an alternative to
    trans-Iranian lines and Iran-sourced hydrocarbons.  You may
    want to remind the Minister of our serious concerns about
    Iran and encourage him to continue to resist pressure to
    import more product from Iran.  With respect to Russia, we
    encourage Turkey to engage with the Russian government and
    companies to address Bosphorus shipping problems and
    potential solutions.  We would also encourage Turkey to use
    its commercial leverage to encourage Russia to be a
    transparent partner pursuing greater energy reform.  (Note:
    President Putin,s visit was postponed.  The Turkish press
    has reported widely on Russian companies, interest in energy
    assets in Turkey (refineries, natural gas distribution, and
    pipelines).

    ¶9.  (SBU) Finally, you may want to encourage the Minister to
    promote energy opportunities with Iraq, in particular
    possible electricity export.  A Turkish energy firm currently
    exports almost 200 MW.  The Turkish pipeline company BOTAS
    has been concerned about infrequent oil flow in the
    Kirkuk-Ceyhan pipeline.  Turkish companies have been awarded
    contracts totaling USD 500 million and Turkish exports to
    Iraq have grown to more than USD 1 billion in the first half
    of 2004.  Turkey remains deeply concerned about the security
    situation in Iraq, especially related to a series of Turkish
    trucker abductions and the subsequent murder of several
    drivers.  Additional papers have been provided separately to
    you on East-West Energy Corridor issues.

    Investment Environment and Commercial Disputes:
    --------------------------------------------- -

    ¶10.  (SBU) Turkey has had difficulty attracting adequate
    foreign investment over the years because of corruption and
    perceptions of lack of transparency and inadequate contract
    sanctity and enforcement.  Efforts to liberalize and
    privatize sectors and state companies are underway, but
    behind schedule.  U.S. companies have been involved with a
    number of investment disputes over the years.  Enron and
    Mission Edison operate Build-Operate-Transfer electric plants
    under GOT pricing guarantees, but have faced difficulties in
    gaining licenses.  Madison/Toreador and TPAO (Turkish Oil
    Company) jointly announced discovery of commercial natural
    gas in the Black Sea, but the U.S. Company is engaged in
    legal disputes over GOT Treasury non-performance under an
    exchange-rate guarantee and over adjacent block exploration
    licenses.  Denver-based Newmont Mining Corporation complains
    of GOT arbitrarily withholding operating approval despite
    timely compliance with environmental permits.  You could
    encourage the Minister to seek to resolve these cases and
    take steps to improve general investment climate.

    Minister Guler
    -----------------

    ¶11. (SBU) Minister of Energy and Natural Resources since
    November 2002, Hilmi Guler is reputed to enjoy good relations
    and access to Prime Minister Erdogan. He is believed to be
    supportive of U.S. concerns about resisting further
    agreements with Iran.  Guler,s academic and professional
    background is in metallurgical engineering, including a
    doctorate.  He speaks English, but prefers to use an
    interpreter.
    EDELMAN

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