Cablegate: Deals with Iran Benefit Pm Erdogan's Friends

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SIPDIS

E.O. 12958: DECL: 02/27/2019
TAGS: PREL ENRG EPET TU IR
SUBJECT: DEALS WITH IRAN BENEFIT PM ERDOGAN'S FRIENDS

REF: 08 ANKARA 2028

Classified By: Economic Counselor Dale Eppler for reasons 1.4 (B) and (
D)

1. (C) On February 22, local press reported that Turkey and Iran had established a joint venture company to develop gas in Iran and build a pipeline to bring this gas to Turkey and Europe. This JV was established to further the agreements reached in November 2008 and July 2007 MOUs between Turkey and Iran (reftel). In trying to undercover more about this deal, we spoke with several people. BOTAS Chairman Saltuk Duzyol said BOTAS was not included in the deal and that the agreement was made with a private company but declined to specify it. One of Energy Minister Guler's advisors, Musa Gunaydin, who is widely believed to be behind the Minister's push to do business with Iran refused to discuss the topic with us. xxxxx was more open. The Turkish company SOM Petrol has entered into a joint venture with Iran, Demir said. The owner of SOM Petrol is Sitki Ayan, a good friend of PM Erdogan. They both attended Istanbul Imam Hatip (religious high school). Ayan is in the PM's circle of friends including Mustafa Erdogan (PM's brother), Cihan Kamer (see para 2) and Mucahit Aslan. xxxxx. According to our research, xxxxx is active in port construction, fuel transshipments and other activities but doesn't appear to have any experience in upstream oil and gas development.

2. (C) In 2007, Kartet, an electricity generation and exporting company, signed a deal with Tavanir, Iran's state owned electricity company to import from Iran 1.4 billion kilowatt hours (kWh) of electricity to Turkey. Kartet applied to the Turkish authorities (the Electricity Markets Regulatory Board, EMRA) to get an electricity import license. In November 2007, a Turkish company called Savk Electricity, owned by PM Erdogan's friend Cihan Kamer, received a license from EMRA to import electricity from Iran. At that time, Kartet went public with the dispute and claimed Savk action's were unethical and illegal. Kartet Istanbul Managing Director Nuray Atacik told us on February 27 that Kartet had still not received any response from EMRA and had basically given up on the project. However, she added with a bit of glee, Savk Electricity has not been able to realize the deal either. “The Iranians prefer us and don't want to do a deal with a company that was forced on them,” Atacik said.

3. (C) Comment: If true, the PM's push of SOM Petrol to do the gas deal with Iran could actually slow progress on the deal. It is clear from the Savk Electricity case that Iran doesn't appreciate being assigned business partners. There are other reasons why this deal is on the slow-track, including lack of legal, regulatory and commercial framework for the deal and Iran's potential pique at the February 26 announcement that BOTAS won a USD 750 million arbitration case against Iran (although the award must still be accepted by Iranian authorities). End comment.

Visit Ankara's Classified Web Site at http://www.intelink.sgov.gov/wiki/Portal:Turk ey

Jeffrey

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