AMBASSADOR'S REMARKS AND PUBLIC EVENTS

Ambassador Ross Wilson’s Interview with Mustafa Salih, Editor Global Energy Magazine

Istanbul, June 29, 2006

QUESTION:   What are the solutions of the U.S. with regard to the energy problems in the world, especially in the Middle East and Caspian region?

 

AMBASSADOR WILSON:  Our number one priority is to work with others to diversify our sources of supply and to diversify the means by which those supplies get to the market: the pipelines, the other routes that energy can take.  It has been at the heart of our efforts specifically in the Caspian Basin over the last ten or twelve years to promote the development of these new energy resources, or new-to-the-market energy resources, that can both add to the overall global supplies but also be a different place and a different basis from which the world can draw energy.  Similarly, we attach a lot of importance to developing multiple pipeline groups, to bring energy from the Caspian Basin from other parts of the world by different means and different routes to the international market place.  Dependence on one supplier or a couple of suppliers is bad for us; it’s bad for pretty much everybody.  And it’s maybe not necessarily good for the supplier either.  But having a diversified set of suppliers assures most effective, diversified supplies, and diversified routes ensure in the best way against the disruption that might be caused by any of a variety of factors, sometimes political as we saw the beginning of this year.  But there could be other factors: a natural disaster.  It’s a problem in the Bosphorus.  You can imagine any number of things in many different parts in the world that can interrupt supplies.  If you have many sources and many ways of getting energy you are much more likely to be able to run (inaudible).  One other element I think that is inherent in U.S. energy policy now is an increased emphasis on energy conservation, on developing alternative fuels.  This is reflected in President Bush’s speech on energy issues maybe three or four months ago, I think.  We believe that, too, has to be part of the mix.

 

QUESTION: Before you came to Turkey, you were the U.S. Ambassador to Azerbaijan.  Does your appointment to Turkey have a connection to the fact that you are a specialist in Caspian region problems and energy?

 

AMBASSADOR WILSON:   Well, it probably didn’t hurt my prospects for this job that I had been involved in Caspian energy matters.  That I had served in another Turkic country in Azerbaijan.  That I had been to Turkey and worked with Turkey on some of the regional energy issues and other economic issues that are important to the United States.  I am not sure that was the only reason.  I am hoping that people believed that I had some other skills and background experiences to bring here as well.

 

QUESTION:  The interest of United States and Turkey are crossing (inaudible)

 

AMBASSADOR WILSON:   I don’t think they are very divergent.  I think they’re crossing and really coming together this year, and we’re looking ahead to what we do next.  The coming together part is Baku-Tblisi-Ceyhan, the South Caucasus gas pipeline.  These are immensely important achievements.  They date back in terms of their adoption as U.S. goals and objectives to about 1996 or 1997.  They were very difficult to bring about; they required a decade of painstaking diplomacy by the United States with Turkey, with Azerbaijan, with Georgia, with others.  It also required U.S.-Turkish work with those countries and with the oil companies to make these projects commercially viable. And it is no exaggeration to say that these really can fundamentally change the nature of energy relationships and some of the political relationships in the region as well. 

 

As we look to our agenda in the future, the United States and Turkey are increasingly turning their attention to the next step.  Just in the last couple of weeks, Kazakhstan finally signed an inter-governmental arrangement with Azerbaijan to facilitate a flow of Kazak oil into the Baku-Tblisi-Ceyhan pipeline.  We have started informal discussions about trans-Caspian gas, to bring gas from Kazakhstan, from Turkmenistan, potentially maybe some other countries -- but especially those two to begin with -- into the South Caucasus line and then onward to Turkey and to international markets.  There will be a lot of work to do there.  But that is an important area where I think we will be working on increasingly together. 

 

A third item to flag is nuclear energy cooperation.  We hosted a visit in January by Energy Minister Guler to Washington.  While he was there, he went to one of our big nuclear power plants, near Washington.  And we arranged some meetings for him with the suppliers of our nuclear energy technologies.  You have seen the reports in the press that I have seen about the government’s plans to announce some big new initiatives and goals in the area of nuclear power generation.   We support that.  We want to do what we can to try to facilitate it.

 

The last item is with respect to energy conservation and alternative energy sources, issues that I highlighted as U.S. administration priorities.  There, too, we have started some work with the Turkish Energy Ministry.  That, too, was part of the discussion with Minister Guler when he went to the United States.  We are looking to get some pilot projects off the ground, practical projects started here with the Energy Minister in these fields to help spur the development of alternative energies, to spur conservation practices here to the extent that this is what the government believes would be useful to pursue.

 

QUESTION:  As you know Turkey has a close connection on energy issues with Russia.  This cooperation, does it disturb America?

 

AMBASSADOR WILSON: That cooperation with Russia does not disturb the United States.  We know Turkey wants to have friendly relations with its neighbors, including with Russia.  That is a reasonable thing and is probably a good thing for Turkey and Turkey’s long term interest.

We likewise recognize, I think, that Russia is a country that has immense natural gas and oil and other energy resources.  And Russia will play, as a practical matter, a major role in the energy portfolios of consuming countries all around it, including Turkey.

What we do emphasize is something I referred to earlier, when it comes to our own energy policy.  And that is the importance of diversity, both for Turkey and for countries that Turkey is concerned about.  Diversity of sources and diversity of supply routes.  Turkey currently gets, I think, around 65 or 70 % of its gas from Russia.  It will not be wise for a country to be overly dependent on one source.  The second important point to me that pertains to Russia is that Turkey now is looking at gas purchase arrangements, looking ahead five, six, eight, ten years.  And there are several different sources that are being talked about.  One is Russia.  Russia has large resources.  Its ability to bring some of that to market may be under some question, but certainly they have the gas.  But there is also other gas out there.  There is Azeri gas and there is Kazakh gas.  We have reservations about countries that sign up for long term arrangements with one supplier, especially one that already has a very large share of the market.  That effectively would freeze out some of these other new suppliers and would hinder as a practical matter, hinder the development of those resources, hinder the development of pipelines to bring those resources to Turkey and to Europe as a whole.  That is the reservation we have, but in terms of what Turkey does now, we do not have a problem with that.

 

QUESTION:  Secretary Rice, during her visit to Greece, said that Financial Times wrote that we should take the gas from Azerbaijan instead of Russia.  What is the meaning of this?

 

AMBASSADOR WILSON:   Well, I am not in a position to interpret what Secretary Rice may or may not have said, particularly what she may or may not have said in another country that I don’t have responsibility for.  But I think, I would say that I’d answer your question in more or less the same way I answered the last. The issue here is, in part, ensuring that countries think about the need to have diversity of supply, and diversity of routes of supply first.  And second, as a stepping stone, to get that diversity of supply, to ensure that Kazak and Azeri, Iraqi, and potentially other gas that may be available, is not effectively frozen out of the market.  And its development doesn’t get delayed because the excess demand that is anticipated here or in Greece or elsewhere in Europe, looking out ten years, doesn’t get all soaked up by one supplier that already has a very large share of the market.  That is not good for the region.  I would submit that it is probably not good for Russia or Gazprom either.  So we have encouraged countries to think about these issues as they devise their energy strategies. 

 

QUESTION:  How do you see the independence of the EU on Russian energy supplies?

 

AMBASSADOR WILSON:   It is basically the same answer, now on a somewhat larger scale.  The decisions about what the EU does, any of the member states do, of course are fundamentally up to them.  It is not for us to tell them what to do. What we are highlighting and what they seem to become to be much more aware of after the events of last January, was the need to have a little bit more diversity, whether it’s different suppliers of natural gas, different ways of getting oil, and different suppliers of oil, or looking at a more serious way at some of these renewable energy and alternative energy source issues that we and others are looking at.  Again, it doesn’t serve anybody’s interest to be dependent on one supplier; competition, multiple pipelines, multiple suppliers:  those are engines that drive economic growth and development all over the world that are going to be the engines that drive growth and development in the energy sector, too.

 

QUESTION:  Which pipeline you are supporting?  Alexandropolis or Samsun-Ceyhan?

 

AMBASSADOR WILSON: We don’t have a position among those variants.  As I indicated in remarks I gave at this conference today, we support the idea of a bypass pipeline and support efforts that Turkey, and some of the companies and others are engaged in to try them out, any bypass group.  The issues fundamentally we think should be worked out in this case by the companies involved, together with the governments, to develop a commercially viable project that will help to bring this (inaudible). We do not pick among the various alternatives. 

 

QUESTION:  One company is American; that is why we asked.

 

AMBASSADOR WILSON:  We are aware of that.  The United States Government is not currently choosing among these different alternatives.

 

QUESTION:  How do American companies see the Turkish energy market, especially the electricity market? And how do they see the potential?  How do they view the Turkish market?

 

AMBASSADOR WILSON:  Well I’d say a couple of things.  First, our energy companies look at Turkey as the fastest growing large economy in Europe.  It has been for a number of years.  So they see a lot of opportunities here.  Turkey does not currently need additional sources of supply, particularly.  But as Turkey looks to where it will be in five, six, seven years, it will need additional supplies.  And the steps to make in order to bring that capacity on board have to be taken now.  Our companies are very interested in seeing if there are ways to participate in these developments that would be mutually advantageous to Turkey and to our firms.  They are particularly interested in, and have been following closely, the reform of the energy sector here which is in process and there a number of important details that either have yet to be worked out or, if they have been worked out, they have not been well explained to potential foreign investors.  Whether it is electric generation from new production capacity with gas or other resources of that sort, or some of the hydroelectric projects that our two governments agreed to try to pursue maybe five or six, seven years ago, or nuclear energy that I referred to.  The companies are very, very interested, and are closely following developments here.  They very much want to play a role.

 

QUESTION: When we can start making contacts with investors?

 

AMBASSADOR WILSON: That fundamentally depends on, I think, at least in the first instance, the decisions that the Turkish government makes, whether it is the privatization (inaudible) the distribution network.  There are American companies that have had discussions with the Turkish authorities about bidding on these projects, are bidding on that (inaudible).  There are a number of engineering companies that are pursuing…I refer to projects our governments have agreed upon a number of years ago.  Hydroelectric projects primarily… that American firms will play a role in developing those companies that have had active discussions here over the course of last year or more.  And our nuclear companies, I believe, are following up some of the conversations that they had in Washington with Minister Guler.  The Turkish government needs to do some work to complete the privatization and reforms of its energy policy.  Our companies need to be active, and then hopefully this will come together in a way that is mutually advantageous for both of us. 

 

QUESTION:  Some six or eight months ago there were articles published that the USA is supporting, intends to develop, the pipeline from north Iraq to Israel.  Are these articles true?

 

AMBASSADOR WILSON: I am not aware of any evidence that we are supporting or actively working to try to bring about the Kirkuk-Haifa pipeline.  And although I don’t know all the details, I can assume that there are many, many very serious political, not to mention engineering and logistic challenges, to try to bring that about.  There is an existing Kirkuk to Ceyhan pipeline.  I was in Ceyhan in March, and saw the new facilities that BTC operators have built there.  Right next to it are all the tanks that belong to the Kirkuk-Ceyhan line.  I think our priority and certainly the easiest thing to do is to take the steps necessary to get that pipeline fixed and operational again so that Iraqi oil can flow into those pipes and be exported in the international markets that need the supply.  Certainly, the Iraqis need the money, and I also know the Iraqi authorities, the new government, has started to focus on this as one of fifty or sixty things that they are trying to focus on as something that they need to try to work on in the very near future to bring about.  I think that Kirkuk-Ceyhan is much more (inaudible).

 

QUESTION: There is a big potential of hydrocarbon reserves in northern Iraq.  What do you think, how should these resources be controlled or shared; what is the position of the U.S.?

 

AMBASSADOR WILSON: I think the most definitive thing I can tell you is we believe that those issues may be worked out by the Iraqis themselves.  They have just elected their first permanent democratic government.  That government has just finished its selection.  And the ministers are taking their positions and starting to work on practical issues.  This is one for them to figure out, for them to work on, not for us.  Having said that, I think, our view is that the market principles ought to drive the development of the Iraqi energy sector.  And among other thing that should include a role for foreign participation of foreign investment, which can be extremely important because it can bring resources to bear that Iraq does not presently have and isn’t going to have in the very near future until some new production capacities are brought online, or old production is brought online, new capacities brought online and pipelines are restored to operation to take those products to the international market.  But as far as the sharing is concerned and how that relates to the new regional authority in Northern Iraq, the Kurdistan Regional Authority, that is something for the Iraqi people and the new Iraqi government to figure out. 

 

QUESTION: (inaudible)

 

AMBASSADOR WILSON:  BTC was always important to us because it was a way to increase international, increase the quantity of oil available on the international market, because it provided and provides an alternative to dependence on Russia or dependence on Iran, as a way for the countries of the Caspian base and to export their oil.  And because of both those things it was and is a major contributor to the real independence and the real sovereignty and to the prospects for prosperity in the countries that have these resources and as well as the transit countries, including especially Georgia.  Now Turkey is both a transit country and a recipient of the oil or a user of some of that oil. The oil is fungible, it goes on to different places.  And Turkey will be earning some money out of the transit fees.  For an economy like Turkey, this is not particularly significant. But by helping to bring these projects about, Turkey and the United States have cooperated on what is a very, very important strategic objective, which is supporting the independence and the prosperity and the prospects for the future of these new independent states in the former Soviet Union.  And so we see this as a big, big strategic achievement by both of us.

 

QUESTION:  Does this decrease the independence of America on oil from the Middle East?

 

AMBASSADOR WILSON:  It won’t disappear.  This project will not have a particularly significant impact on the U.S. energy picture, per se.  We don’t expect to be major consumers of BTC oil, we the United States.  That oil is going to be most competitive in European markets.  The transit distances are more favorable.  There are probably other factors as well.  But that is going to be the main one.  And so this was never a project that we were most interested in because we thought this would make a whole lot of difference in terms of our energy consumption.  The current capacity of the pipeline in any case is only a million barrels a day.  I have forgotten now what our consumption is per day, it’s many tons of millions per day.  So the contribution to the energy supplies I think has to do more with Europe and the Mediterranean region.  And the broader political and economic impact is here, in the Caucasus in Central Asia.