AZERBAIJAN: PRESIDENT ALIYEV ON UPCOMING GAS
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06BAKU1771 SUBJECT AZERBAIJAN: PRESIDENT ALIYEV ON UPCOMING GAS DATE
2006-12-05 15:03:00 CLASSIFICATION CONFIDENTIAL ORIGIN Embassy Baku
TEXT Tuesday, 05 December 2006, 15:44 C O N F I D E N T I A L SECTION
01 OF 03 BAKU 001771 SIPDIS SIPDIS DEPT FOR DAS BRYZA EO 12958 DECL:
12/04/2016 TAGS ENRG, GA, PGOV, PREL, TU, AJ SUBJECT: AZERBAIJAN:
PRESIDENT ALIYEV ON UPCOMING GAS TRILATERAL REF: BAKU 1720 Classified
By: Ambassador Anne E. Derse, Reasons 1.4 (b,d) ¶1. (U) ACTION REQUEST:
Please see Paragraph 10.
¶2. (C) SUMMARY: President Aliyev told the Ambassador on December 5
that he expected the December 8 Trilateral meeting of Energy Ministers
in Tbilisi to “clarify” whether Turkey was willing to help Georgia with
its winter gas problems. He said Azerbaijan would host a subsequent
December 14 meeting in Baku among Azerbaijan, Georgia and Turkey,
plus BP and Statoil. Aliyev again blamed BP for linking commercial
issues to the current gas problems, and reported that “nothing had
changed” in Azerbaijan,s gas negotiations with Russia during Russia
PM Fradkov,s visit to Baku. END SUMMARY.
¶3. (C) On December 5 the Ambassador met with President Aliyev and
discussed both energy and press freedom issues (septel). Energyoff
was notetaker.
Russian PM Fradkov Visit Readout
——————————————– ¶4. (C) Concerning
the just concluded visit to Baku of Russian Prime Minister Mikhail
Fradkov, Aliyev said that “nothing had changed” concerning the Gazprom
offer of gas to Azerbaijan at 1.5 billion cubic meters (bcm) at USD
230 per thousand cubic meters (mcm). Aliyev said that Russia knows
Azerbaijan will not buy at this price, which would be more expensive
than Azerbaijan’s burning mazut in its power plants.
Aliyev said that he did not even seek to raise the issue with Fradkov,
but that Fradkov had broached it. Aliyev said that Fradkov contended
that the Gazprom offer was not “anti-Azerbaijan,” and was purely a
commercial decision, but Aliyev added that Gazprom’s sales of gas to
Ukraine at USD 130 per mcm belies this claim. Aliyev said that Russia
justifies its lower gas sales price to Armenia by its being Armenia’s
close ally and by purchase of the Iran-Armenia gas pipeline, by which,
he said, Russia seeks to control strategic future gas export routes
to Europe. Russia was trying to “circle the European gas market,”
which also was influencing its negotiations with Belarus, but here
too there has not been an agreement on sales price.
¶5. (C) Aliyev said that Fradkov also proposed that Russia could
help Azerbaijan in transporting its gas to third countries, although
Aliyev told the Ambassador his response was that he did not see how
such ‘help’ would be possible. Fradkov told Aliyev that Russia was
going to need more gas for domestic use, which would reduce volumes
it could sell to Europe. Aliyev said that Russia was working with
Algeria to form a gas monopoly.
Gas Trilat ———— ¶6. (C) The Ambassador said she knew that
Aliyev had had a good discussion with DAS Bryza on energy issues
in Minsk and with Georgian PM Noghaideli when he visited Baku on
November 30, and that based on the latter meeting there was going
to be a trilateral meeting of the Turkish, Georgian and Azerbaijani
Energy Ministers in Tbilisi on December 8. Aliyev said Georgian and
Azerbaijan shared a common strategic vision on energy issues, would be
coordinating closely in this regard, and as such, during Noghaideli’s
December 4-14 visit to the United States he would be delivering an
Azerbaijani message as well as a Georgian one (Comment: The Georgian
Ambassador told the Ambassador on December 5 that in his US visit
Georgian PM Noghaideli would ask Secretary Rice and Vice-President
Cheney to “encourage” BP to help this winter). Aliyev said that
he had expected the Turkish and Georgian governments to have had
positive discussions prior to Noghaideli’s November 30 visit to Baku
but that this did not happen, and that the answer Georgia received
from Turkey at that time concerning redistribution of Shah Deniz gas
was negative, and contrary to the common understanding arrived at in
July 2006 among the leaders of the three countries.
BAKU 00001771 002 OF 003 Aliyev said he felt that “the Turkish
approach was not sincere,” and as such Azerbaijan and Georgia needed
to coordinate tactics and strategy. At a recent high-level meeting
of his government Aliyev said he stressed his commitment to the
longer-term strategic project of delivering Caspian gas to Europe and
that “Azerbaijan should not sacrifice its long-term energy strategy
for day-to-day needs.”
Azerbaijan’s strategic goal, which Aliyev said was currently more
important for Europe than it was for Azerbaijan, was to enter European
markets. Putin is saying that Azerbaijan and Kazakhstan cannot
supply gas to Europe – “if we don’t do it, we lose the battle.” As
such, Azerbaijan has put forward the best possible solution for the
short-term gas crunch: some gas for Georgia, some for Turkey, some
for Azerbaijan, and some for Greece.
¶7. (C) The Ambassador said that the Georgians have been led to
believe that the Turkish government is going to be more positive in
the December 8 Tbilisi meeting, although she could not confirm this
assessment (Comment: the Georgian Ambassador told the Ambassador on
December 5 that Georgia’s Embassy in Ankara has reported that the
Turkish Foreign Ministry is saying that Turkey is now ready to discuss
redistributing its 2007 Shah Deniz gas volumes) . She said that DAS
Bryza has suggested that after the December 8 trilateral, it might be
useful to have another trilateral meeting on December 14 in Baku with
the inclusion of BP and Statoil, and she asked the President for his
opinion. Aliyev said that “we don’t have time to wait,” noting that
the winter holidays were fast approaching. He said he approved the
proposed December 14 meeting — trilateral plus BP and Statoil — and
would be willing for Baku to host it. He added that he had wanted Baku
to host the December 8 meeting, but deferred to the Georgian desire to
have it in Tbilisi. He said USG involvement in the December 14 meeting
would be useful. He said that the December 8 Tbilisi meeting would
be very important as it would ‘clarify’ the Turkish position, i.e.
whether they were willing to help, and that the December 14 meeting
would be similarly important as it would clarify whether BP was
willing to help.
BP’s Dangerous Game —————————- ¶8. (C) Aliyev
said that BP could deliver more associated gas from the ACG field to
Azerbaijan for domestic use, but that it was linking its cooperation in
this regard with its desire to extend its Production Sharing Agreement
(PSA) with Azerbaijan to develop ACG deep gas.
Aliyev said it was inappropriate for BP to link all of its issues such
as PSA extension, ACG deep gas, transportation tariff agreements and
others into one bundle; it also was inappropriate for BP to link the
solution of those issues to Azerbaijan’s “temporary troubles.” He said
that BP was using “mild blackmail” and argued that BP must instead
act in good faith. Aliyev said that he had instructed his officials
to tell BP that if it were not “supportive” with ACG associated gas,
it would not get its way with PSA extension and ACG deep gas. “If BP
won’t give us more ACG associated gas, I have instructed our officials
to tell them no PSA extensions or ACG deep gas,” Aliyev underscored.
He said that he did not want this to happen, since from an economic
viewpoint both the AIOC Consortium and Azerbaijan would benefit from
extending the PSA and for the Consortium being the ones to develop
ACG deep gas. But it was not just Azerbaijan, but also Europe and
Georgia who had a stake in this issue. Aliyev concluded by saying
that if Turkey agreed to redistribute its 2007 Shah Deniz gas that
“would almost be the way out,” but that then Azerbaijan would still
need BP support in both redistributing this Shah Deniz gas and also
in giving Azerbaijan more ACG associated gas.
¶9. (C) The President also mused that “we could cut the gas supply
to Turkey” if need be. The Ambassador pointed out that this would be
an extreme measure with serious repercussions. She asked Aliyev if he
knew the reasons for Turkish truculence concerning gas redistribution.
He said he did not, but suspected it could be monetary, i.e. buying gas
at USD 120 per mcm and selling it at USD 230. He also BAKU 00001771
003 OF 003 conjectured that Turkey could be under serious pressure
from Russia.
¶10. ACTION REQUEST: Ambassador will meet with BP Azerbaijan President
Bill Schrader December 8. Department’s guidance, particularly
information on the message being delivered to BP officials
in Washington, is requested. DERSE HEADER VZCZCXRO6781 OO RUEHAG
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XTAGS: XTAGENRG, XTAGGA, XTAGPGOV, XTAGPREL, XTAGTU, XTAGAJ 06BAKU1771
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From: A. Papazian