STATEMENTS BY U.S. OFFICIALS

Deputy Secretary of Energy Clay Sell, U.S. Ambassador to Turkey Ross Wilson
At a Roundtable With Journalists

Istanbul, July 12, 2006

Deputy Secretary Sell: I just want to express what a distinct honor and great pleasure it is for me to be here on behalf of the President to celebrate the great achievement of the opening of the BTC pipeline. This is an effort that was a long time in the making.  It was an effort of great strategic and economic importance to the countries involved, and it is an effort that the United States government takes great pride in our partnership in the countries and companies that were involved in making this effort so successful.  I was visiting with the Ambassador Wilson just earlier about the prospects of this effort when he first started working on it in 1997 and it really is a tremendous achievement which has set the standard and, I believe, will set the standard for future energy transit and pipeline projects throughout the world.  It is a great day for the broader energy security in this part of the world and other elements of the world as well, and I’m pleased to be here and answer any questions that you may have.

Question: Talking about the energy security issue, how is the BTC pipeline related to energy security?

Deputy Secretary Sell: One of the most important things when one talks about energy security is diversity: diversity of fuels, diversity of transit routes, diversity of technologies.  And there is a tremendous energy resource in the Caspian Basin that now has the benefit of a diversity of transit routes and a diversity of transit routes that gives the owners of those assets greater opportunities to new markets. And that is the definition of energy security.

Question: There have been developments in the conflict between Iran and the international community.  Given those developments, how do you think that will affect the security of the pipeline and the future of the pipeline? Will investments in Iranian oil also have an impact on the future of the pipeline?

Deputy Secretary Sell: Well, I think that the situation we’re seeing in Iran yet again speaks to the importance of this day, of this pipeline, of this transit route, from Azerbaijan to Georgia through Turkey, to the world markets.  And the situation we are seeing in Iran only reinforces the importance of these types of efforts.

Question: How would you compare the BTC pipeline to alternative energy projects, when we think globally?

Deputy Secretary Sell: The best thing is that this one is now open.  The interest of consuming nations, like the United States and other consuming nations in Europe and elsewhere, is to have a multitude of transit routes.  That is in the interest of consuming nations, it is in the interest of producing nations, it is in the interest of nations that are principally transit nations.  The more commercially viable the transit routes are to the marketplace, the better the situation is for all involved.  And so we will look forward to a building of the momentum and the progress that is represented in the opening of the BTC, to take this energy and momentum and put it likewise to similar projects as it relates to getting Caspian Basin gas to marketplaces and additional expansion of oil and gas transit routes.

Ambassador Wilson: Mr. Secretary, if I could just add a couple of additional points, from having been involved in this project over many years. This project is almost unique in the length and complexity of the political environment in which it has taken place.  Most oil pipelines go through one or maybe two countries; this one goes through three and as we bring in a Kazakh piece that will add a fourth at some point, we hope, in the near future.  So, a complex political environment that is difficult and harder, frankly, for the United States and Turkey to deal with than a number of projects. 

A second point of distinction: as Secretary Sell indicated, this project sets the standard for the sensitive and appropriate treatment of a whole wide range of environmental issues.  For those of you who will go down to Ceyhan, you’ll see this and compare the BTC terminals and tanks to the facilities at the other end of the Kirkuk-Ceyhan pipeline.  This is a state-of the art project, it was developed with full attention to environmental considerations in Turkey, in Georgia, in Azerbaijan.  And it’s a big achievement that sets the standard.

The third and most important, as Secretary Sell indicated, this project got done.  It got built.

Deputy Secretary Sell: There are many, many unbuilt projects. There are maps floating all over the world, this route, that route, the other. And I can’t overstate the importance of actually having this one done. It is a great, great accomplishment.

Question: Given this goal of diversity, what do you see as the next likely major project?

Deputy Secretary Sell: I often get questions like this; we have a strong belief in our government that commercial interest should decide the route of these pipelines.  Our interest is in having multiple routes, that contracts be done in an open and transparent manner, and that they be economically viable.  And other than that, to the extent routes meet our criteria, and I think that those are the world’s criteria, then wherever the next project goes, it goes.  I’ll ask the Ambassador if he wants to elaborate.

Ambassador Wilson: I think what the Secretary has said is absolutely right in terms of our approach in how these projects get realized.  There has been a certain amount of effort that we have put in here in Turkey and my counterpart in Azerbaijan as well, looking at the oil piece being in very good shape, there’s a gas piece that is not quite finished; the South Caucasus gas pipeline should be completed from the Georgian border to Erzurum to connect to the Turkish gas grid sometime soon. That is a big achievement.  The connector between Turkey and Greece is underway, or under construction at this point.  Connecting Caspian Basin gas to international markets in the west, the same way BTC connects Caspian basin oil to international markets in the West, is the next big project. Clearly the companies have the biggest share of the load, there is some work we’ve been trying to do as well.

Question: What do you think about the Ukraine/Russia conflict?

Deputy Secretary Sell: You mean the conflict of last year, the gas cut-off?  I think it speaks to the vulnerabilities that countries will be subject to if they are principally dependent on one supplier, and it speaks to the benefit that all countries will enjoy to the extent that we have competition.  Now, often competition is an affront to those that have a monopoly interest.  But competition is in the long-term interest, it is in the long-term interest of even the supplier countries.  And it is certainly in the long-term and near-term interests of consuming countries and those that will benefit from new transit routes.

Question: You said that the criteria that the U.S. administration has is that it’s commercially viable, but there is a lot of criticism of BTC over the years that it wasn’t commercially viable without the Kazakh link.  The geopolitical value far outweighed the commercial aspect.  How would you respond to that?

Deputy Secretary Sell: I would respond that it was built, and it was built by commercial interests and certainly with the involvement of state companies as well, that are making commercial decisions.

Bloomberg: So the fact that it’s going through Turkey, a NATO ally, through a friendly country, perhaps you could expand some more on the geostrategic and political importance of this route.

Deputy Secretary Sell: Once again, it was the commercial interest, ultimately, that determined this route as being the most appropriate, and that is ideally the way decisions should and I believe will be made in the future.  Commercial interests made their judgments on what was economically viable and got the pipeline built.  Certainly I don’t mean to suggest that there was not a tremendous amount of work, diplomatic work, partnership work among the partner nations that led to the success, but ultimately it was made successful because of the commercial interest involved.

Question: Given that you are in the neighborhood, are you planning to go to Moscow and participate in the G-8 discussions?

Deputy Secretary Sell: No.

Referans: I ask because the policy imperative of the U.S. when it comes to diversity is not shared with the same enthusiasm by Russia.  Do you think that this issue, that the opening of the BTC pipeline on the eve of the G-8 summit in Moscow, will influence those policy discussions on energy issues between the U.S. and Russia?

Deputy Secretary Sell: We have a long, rich, and ongoing policy discussion with Russia on matters related to energy security and on other matters as well.  Russia decided to make this G-8, which they are hosting in St. Petersburg, about energy security and certainly what we are talking about today impacts on that, but much of the work has been done, and I’m sure today’s developments have influenced those discussions and will continue to influence those discussions.

Question: You talked about the commercial interest being the driving factor behind the building of this pipeline, but when we look at the political interest behind it, do you think that this pipeline will in any way contribute to the regional stability and in what way?

Deputy Secretary Sell: I think trade always contributes to regional stability. And energy security and a diversity of trade routes always contributes to regional stability.

Question: What kind of conflicts in the region do you think could be resolved through this cooperation?

Deputy Secretary Sell: This question may be better for the Ambassador, but certainly history has taught us, to the extent that countries trade together, to the extent that they are intertwined collectively with their common economic interest, they are more motivated, they have economic motivations to resolve disputes peacefully.  But I’ll ask the Ambassador, who is more of an expert in the field that you are asking.

Ambassador Wilson: I would just add a couple of things.  The U.S. and Turkey began to work hard to support this project in 1997 and to support the development of a broader East-West energy corridor precisely because we felt that independent access to international markets was essential to the long-term prosperity and health and stability of these new independent states, which in 1997 were only six or seven years old.  To their ability to stand up on their own and deal with their own affairs.  So, an explicit goal at the outset was to promote regional security, regional stability, and regional prosperity. Of course, a pipeline isn’t going to solve some conflict, but the fact that these countries, Georgia, Azerbaijan, Kazakhstan, we hope, at some point soon, Turkmenistan, get drawn into this East-West energy corridor and can take advantage of it, they have an economic lifeline to the rest of the world that is independent of any of the big competitors around them that may want to monopolize for themselves that access to markets or may want to cut it off.

Question: Some newspapers say the BTC pipeline will decrease dependency of the U.S. on OPEC countries; would you agree with this?  Also, what kinds of energy do you think will be rising stars globally and how do you feel about nuclear energy in that perspective?

Deputy Secretary Sell: I don’t know the answer as to how much of the oil coming out of Ceyhan is going to end up in the U.S., but the reality is that we are in a global oil market and I think principally most of this oil will end up in western Europe, but it is a world oil market and as the largest participant in that market, we are affected by things throughout the world and directly or indirectly we are beneficiaries of good things that are happening throughout the world, like the opening of this pipeline.  In terms of your other question?

Question: About nuclear energy, because Turkey is discussing nuclear energy and there is news that the U.S. government supports this project.

Deputy Secretary Sell: We look forward to working with the Turkish government on their desire to more broadly develop, or to develop a commercial nuclear energy sector here. We have had in the past an agreement with Turkey for civil nuclear cooperation, which now needs to be extended, and I believe that progress is being made on that front. We have welcomed Turkish government officials to the United States to visit with us at the Department of the Energy as well as to visit with the United States Nuclear Regulatory Commission, as to how to develop an appropriate regulatory framework to ensure the safety of Turkish citizens and the environment.  So, we are highly supportive of those efforts.

Furthermore, President Bush has laid out quite an aggressive agenda for a much broader use of nuclear power throughout the world, and when one looks at the tremendous energy demand that the world will face over the next 25 years: an increase of 50% in the next 25 years; on electricity, an increase of 75%; an increase of 75% worldwide in electricity demand over the next 25 years and it certainly begs the question: how will we meet that demand?  Certainly broader use of nuclear energy must be a
part of the solution, particularly when one considers the environmental reasons and the accumulation of greenhouse gases in the environment. For those reasons alone, nuclear power must play a greater role.  So we welcome Turkey’s decision to pursue that and we look forward to working with Turkey in the global nuclear energy partnership to ensure
assured fuel supplies, a diversity of fuel supplies to any country that wishes to pursue commercial nuclear power.

Question: What is the stance of the U.S. on the Blue Stream 2 gas pipeline from Samsun to Ceyhan, given that the U.S. has insisted that Russia should not be a monopoly of gas supply?

Deputy Secretary Sell: I think that the United States’ desire and what I believe to be the Turkish interest, is to have a diversity of suppliers. To the extent there is a choice and to the extent commercial interests are making choices as to where the next set of investments should go, I think that should be taken into consideration.

Question: Given that Turkmen and Azeri gas can be alternatives, although there are problems, and Turkmenistan is the main source of the gas that Russia sells to the West, did you take any steps after the conflict over gas between Russia and the West to facilitate the transfer of Turkmen gas through Turkey to the Western market and Turkey?

Ambassador Wilson: We’ve had a dialogue with the Turkmen that has gone back a number of years on the issue of facilitating the transport of Turkmen gas and oil as part of this broader East-West corridor.  Over the course of the last several months there have been renewed discussions about this and about the possibilities of the trans-Caspian gas pipeline. I think that it is something that we are very interested in.  We are also interested in the possibility of a trans-Caspian line for Kazakh gas that may exist in the Kazakh Caspian Basin of oil and gas fields. It reflects the same interest that we have in getting Kazakh oil as part of that East-West corridor. The overall East-West strategy is one that we are committed to; Turkmenistan is definitely an important part of that. There are a variety of motivations that Mr. Niyazov has that you can probably speculate about as well as we can.

Question: Talking about the security of the BTC pipeline project, we’ve had bad experiences with the Kirkuk-Ceyhan pipeline. There were a lot of attacks on that pipeline.  Will the U.S. show the same kind of sensitivity with the Kirkuk-Ceyhan pipeline as it has shown with the BTC pipeline?

Ambassador Wilson: The short answer is: yes, of course.  However, I should note that the responsibility for the security of the BTC pipeline within Turkey rests with the Turkish authorities, not with the United States. We’ve provided some help to Azerbaijan and some to Georgia.  I believe that there was some consultative advice here, but basically this is a role that Turkey is well prepared to play and we expect as the Kirkuk-Ceyhan pipeline comes back on stream, the Turkish and Iraqi governments will work out the appropriate security arrangements so that it can operate securely.

Question: When we talk to the energy companies about the Black Sea in general, there is a lament that there is not a good, effective transnational organization in place to negotiate a lot of these discussions and that vacuum ends up being filled by the energy companies when it comes to shipping across the Black Sea, on environmental issues and energy issues.  But the Black Sea Economic Cooperation organization hasn’t been able to get its arms around that
political task.  Do you see momentum from this success and with the G-8 summit around the corner, any potential for strengthening cooperation among the littoral states of the Black Sea around this set of issues?

Deputy Secretary Sell: There is a tremendous amount of interest in government effort, certainly on our part and on the part of other governments on the Black Sea, to address this issue.  And these issues are difficult, they are tough and it requires a tremendous amount of work from a lot of talented and committed individuals and well-functioning government bureaus to move these things along.  We are committed to the success of those efforts, in supporting commercial interests in finding the appropriate transit routes.  That is a general statement.  As to your more specific question about the state of the Black Sea forum, I don’t have a more specific answer.

Ambassador Wilson: I would only add that we are very interested in trying to see the BSEC forum become a more useful, engaged forum for fostering economic integration in this region.  I gave a speech on this very subject about 10 days ago here in Istanbul, a conference, the German Marshall fund/Ari conference on the Black Sea, and you can find it on our website.  I talked there on the importance of having BSEC focus on the issues that are of most concern to the companies in this region, focus the governments on solving those issues, frankly speaking, rather than the issues that government bureaucrats would like to focus on.  Energy, trade, can certainly be one of those.  There are many other issues, related to business facilitation, and customs and standards and so forth, where there’s a wide scope of potential activity for BSEC that we would like to support and would welcome.

Question: Turkey is quite energy poor, but more and more sees itself as an energy hub in the region.  In terms of the EU process and by helping to export energy to Europe, it becomes more and more integrated.  Is that something you can comment about?

Deputy Secretary Sell: Yes, I would agree on the contention of your question.

Question: Is it viable and what are your thoughts on it?

Ambassador Wilson: I spoke earlier on the importance of this East-West energy corridor.  Clearly on the immediate western end of it is Turkey and through Turkey on to markets elsewhere in the rest of Europe.  Turkey is a transit country, an energy hub.  Whatever it is, it clearly has an essential role to play in this overall East-West energy corridor.  There are a variety of reasons why the EU is interested in Turkey and why Turkey is interested in becoming a member of the EU.  I think that energy is one of them, but there are many others related to the rapid growth of this economy, related to the dynamic nature of its economy and the young, growing population that exists here, related to some of the sensitive issues on Turkey’s southern borders that are obviously of a lot of interest to the EU and its members.  So there are a number of things going on. Clearly the Europeans’ interest in Turkey as a transit route through which to acquire more diverse energy sources is a part of that.