Statements by U.S. Officials
Under Secretary Reuben Jeffery III and Ambassador Ross Wilson's Roundtable with Journalists
22 September 2007
Istanbul, Turkey
Under Secretary Jeffery:
Thanks for that very kind introduction and thank all of you for coming out on a rainy Saturday morning, to the airport of all places, to talk to us. Maybe in the way of format I’ll make a couple of comments but I’d also like to turn it over to [Assistant Secretary] Dan Sullivan, my partner back in Washington, who has been here as well over the past couple of days.
What we’ve been doing is really two-fold. The primary purpose of my visit was to attend a regional Chiefs of Mission Ambassadors Conference, hosted by Ambassador Wilson, the topic of which was essentially regional energy security issues. What better place to have it than in Istanbul, in Turkey, really in the heart of such a strategically important region. We had Ambassadors from Europe, the Caucasus, and Central Asia. This is something we do from time to time, probably not often enough. For the past day and a half, we really got our heads together to talk about ways in which we could continue to support the countries in the region in their efforts to develop energy resources – sources of supply of oil, natural gas – and to find ways to get those resources to markets.
This all stems from a broader recognized need on the part of Turkey, and again all the countries and economies in the region, and the United States government as well, to continue to work on developing energy supplies and access to markets for those supplies around the world as we, as a world economy, face increasing pressure with energy supplies and with growing energy demand. We want to work on a regional basis to broaden the base of supply, increase access to market, and do it in ways that are open, competitive and transparent and market oriented. Those of you who’ve been in Turkey for a while and have been following the energy sector in particular know that this is not a new topic. It’s one with respect to which we, as a government, and our partners and colleagues and friends in Turkey have been very much engaged with over the better part of the past decade.
Energy resources have been developed in the Caspian region. We and the Turks and others have worked on various projects – the CPC pipeline consortium, the Baku-Tbilisi-Ceyhan pipeline – and all with a view to develop resources and develop ways in which they can be brought to market. Over the course of our discussions, we talked about ways in which we can continue to build upon the success that’s been achieved to date in working with economies and countries in the region in a world which has become increasingly complex. Just developing the energy assets – it’s particularly so in the natural gas sector technically – on the upstream, working the downstream, arranging production, consumption arrangements, identifying pipeline projects, figuring out ways to construct those projects, finance them. We didn’t solve those problems in this – or those challenges – in this session. We talked about projects that were out there, opportunities that were out there and ways in which we – through our diplomatic efforts – working with our partners and friends in the region can support governments and the private sector in the development of energy assets and the delivery of those assets to market.
We also talked broadly about global energy security issues. When we talk about energy security, we’re really talking about energy diversity – ways in which to continue to identify and develop not just traditional-fossil-fuels-based resources but alternative fuels, bio fuels, renewable energy. Turkey for example is developing, as you know, wind energy. Working on ways to increase energy efficiency. Those of you who may have followed the APEC meetings that took place in Australia a couple of weeks ago, one of the important declarations from the twenty-one leaders who attended related to energy efficiency. They set a very powerful energy – or carbon intensity – goal or objective of reducing carbon intensity that goes into a unit of GDP by some 25 per cent by 2030. There’s nothing like an objective like that to drive investment and technology and private sector development of techniques by which we can all reduce our energy consumption.
Those are some of the broad themes we talked about over the course of our discussions. I would say my own personal professional view was that this was an extraordinarily productive and constructive event. There’s nothing like getting twenty experts in the field – these are experts in their respective countries – our Ambassadors and Chiefs of Mission, and many of them have long – I mean career-long – knowledge and expertise in this region and specific expertise and institutional memory in the energy sector. So I think we got the best input and judgment and some lively debate that we could possibly have, and sort of set the basis for us helping to continue to refocus, redouble our efforts in support of Turkey and countries in the region as they develop their own energy strategies and energy resources going forward.
Question:
[inaudible] What kind of alternatives you would [inaudible] to make them consider other options.
Under Secretary Jeffery:
As I said, this was an internal conference that we had – U.S. government representatives at the meetings. But on Iran, as those of you that follow Iran should know, the U.S. government standpoint as a matter of law and policy, we have stated opposition to investment in the Iranian energy sector. Iran has proven to be not the most reliable supplier of energy. Their pursuit of a nuclear program and support of terrorism has prompted numerous UN Security Council resolutions and sanctions, all of which speak to and go to their lack of ability to act as a responsible participant in the international energy community. We’re certainly working with Turkey and other governments to help effectively implement the letter and the spirit of not one – but now two – unanimous UN Security Council sanctions resolutions.
Question:
[inaudible] … major cuts of natural gas from Iran and it was translated as some sort of political message that Iran was expecting support, regional support [inaudible]. So if Turkey not to go further with Iranian gas, what is on the table?
Under Secretary Jeffery:
Well, again, one of the main thrusts of our discussion was again, as I said at the outset, developing alternative sources of gas. There’s Turkmen gas, there’s Azerbaijani gas, there’s Iraqi gas. I mean, there’s no shortage of gas in the region. The issue, the challenge, is obviously developing it in an economic and responsible way and also facilitating access of that gas, wherever situated, to markets, such as Turkey, through environments that are politically stable and are represented by governments that are responsible and responsible in the international community.
Question:
How soon should we expect those projects to be real?
Under Secretary Jeffery:
Well, there are a lot of projects out there. I’ll refer to sort of ten years of history. It takes time to develop natural resources, as you all well know, and develop the technical means of bringing those resources to the relevant markets. But the idea is there’s no one particular project or one particular source. What we want to do as a matter of diplomatic policy and pursuit of broader energy security and diversity efforts and in support of our partners and colleagues and friends in the region is to create multiple alternatives and multiple options for both sourcing and accessing the sources of supply in the region. Different projects move at different speeds, but there’s gas out there [inaudible]. And one wants to work on ways to make sure that there’s an assured source of gas supply in the region to Turkey and other countries on a reliable basis well into the future. [Inaudible] do these really important things which Turkey’s already doing and other countries are doing of developing alternative energy sources to traditional fossil fuels altogether.
Question:
I have actually a question for Ambassador Wilson. I’m only asking because it’s a follow up. You were quoted actually, there’s a story in which you were quoted as saying that possibility of exploration and extraction in Iraq and Central Asia was presented to Turkey as a way to discourage it from [inaudible].
Ambassador Wilson:
The specific Sabah story which I read a report about is a fabrication. I’m not sure where it came from.
Question:
There weren’t any kind of guarantees saying, well, you’re welcome to Iraqi gas…
Ambassador Wilson:
The conversation that was reported there doesn’t reflect any conversations that I ever had. As Under Secretary Jeffery indicated, there are a variety of sources out there. Some of these are in train now, it’s a dynamic process. Turkey recently, in July I believe, began receiving Azeri gas from the Shah Deniz field. It’s right now a very small quantity but it’s significant. Turkish officials have talked about – and Greek officials – have talked about what we call the Turkey-Greece interconnector, that will take that gas along further now into other European markets. There are plans to build onto that as well, in ways that will help foster European energy diversity and supply.
Question:
Nicholas Burns, your colleague from the Department was just here this week, and after he left, both the Prime Minister as well as the Energy Minister – their positions seemed a bit rigid about the contract with Iran, saying we absolutely have to have this gas. We get half of our [inaudible] from natural gas, and we don’t have the luxury of saying no to Iranian gas. And that seemed to be a direct response perhaps to the meetings with Mr. Burns. My question is twofold actually. Did Mr. Burns ask Turkey to cancel its contract with Iran? And second of all, what’s your response to this Turkish position that came a day later, saying absolutely not, we won’t cancel it.
Ambassador Wilson:
It’s not useful to get into the details of Under Secretary Burns’ discussions here. He made very clear our concerns that international diplomacy to persuade the Iranians to change course and to agree to negotiate with the rest of us on the nuclear issues that the Security Council has raised, in order to be effective, has got to have united action by a number of countries. And we hope Turkey, among those countries, along with many others. This is not a Turkey-specific exercise. He was here so he talked about Turkey, but it includes South Korea, Japan, a number of other European players, and others around the world.
Question:
What about the Prime Minister’s response? And Güler too, the Energy Minister, said, we need this gas, we’re not planning on canceling it. What would you say to that?
Under Secretary Jeffery:
Again, I wasn’t at the meetings and just got to town after the press reports came out to which you refer. But the overriding thrust of our discussions over the past couple of days really had what I would describe as a very positive energy agenda: working with responsible governments in the region on these critical issues of developing new sources or expanding existing sources of energy supply, particularly natural gas, and figuring out ways to get those to users, to consumers, in Turkey, in Europe, elsewhere around the world, in economically market-driven terms, through regions which have governments that are responsible in the international community. Some of this has been done to date. A lot of work has been done. Ambassador Wilson referred to the Azerbaijani gas. These are efforts that are ongoing and will take time – have brought fruit but will take time to continue to bring fruit. We have every confidence. And we know from our discussion with our Turkish counterparts with our counterparts in other capitals in the region, that there’s a broadly shared view of the necessity of developing these kinds of resources with responsible partners.
Question:
So you’re hoping perhaps that Turkey might change position on the contract?
Under Secretary Jeffery: [Inaudible] very positive [inaudible]. Ambassador Wilson and I have both stated pretty clear as to Under Secretary Burns’ position on the whole Iranian situation, our view of that, which again is broadly shared in the international community: two unanimous UN Security Council resolutions dealing with the Iran issues. And on a positive side, we continue to work, this is very granular work, again at the micro level with countries who have energy assets, who need to develop them, who need the resources, the technical expertise, the capital, to develop those in an appropriate, responsible way that that allows them, by the way, to further develop their own economies and help their own people develop and live better lives, and get those resources to market through various distribution mechanisms, to markets where there’s an acute need for additional energy assets to respond to growing demand.
Question:
I know there’s gas in Turkmenistan to be had, but I mean, how are you going to get it to Turkey? What’s the infrastructure, the proposal that you guys have to do this, because it’s logistically not that simple?
Under Secretary Jeffery:
Without going into the specifics of different proposals, there have been a number of pipeline proposals that have been vetted over time. And we’re not supporters of particular ones at this stage, but generally speaking, the notion of creating kind of a southern corridor through the Caspian region is something that does the job of getting the production to the market, and …
Question:
Doesn’t it go through Iran though?
Under Secretary Jeffery:
You’ve got to look at the map. I mean, there are different ways to do this – the Trans-Caspian, exactly. We don’t want to rule out alternatives, we want to support the alternatives that are economically viable and supported by governments in the region.
Question:
[Inaudible] the Nabucco project. But Russia [inaudible] – the Nabucco project.
Under Secretary Jeffery:
I know. I’m well familiar with it.
Question:
So what is your position regarding this project? The Nabucco project?
Under Secretary Jeffery:
This is just one of several projects that have been [inaudible]. It has some momentum and it does the job and we’re going to watch it as it evolves with great interest because anything that’s economically feasible, that offers the promise and the opportunity of getting gas from these places in the Caspian area, the countries and the producers in the Caspian region, to Western Europe and elsewhere is in the interest of the producers and it’s in the interest of the consumers.
Question:
Is there any pressure right now from the United States government on the [inaudible] I mean you talk about diversity, there’s also the South Stream [inaudible] in terms of getting gas to Europe, and I was just wondering should there be some pressure [inaudible] to get the process moving, because it’s been delayed.
Under Secretary Jeffery:
As I said, we’re certainly supportive of the process, we’re supportive of projects that are economically feasible, that have broad political support with the relevant governments, and bear or offer the promise to draw in the relevant private sector investment that’s going to be absolutely essential to development projects of this magnitude. But again, we hearken back to the success – and it’s proven to be a success to the producers, a success to the users, and a success to the governments and a tribute to the governmental involvement at the time – of the Baku-Tbilisi-Ceyhan pipeline. Ten years ago people wouldn’t have thought that was technically, politically, economically feasible. It’s up and running and doing the job, transporting oil and a certain amount of gas.
Question:
Nabucco is seen as critical for Europe’s energy diversification because it is so reliant on Russian gas. There’s talk of a Russian company now joining to some extent Nabucco. And also the South Stream project is seen as a direct competitor and taking away from the viability of Nabucco. My question is, How do you feel about the possibility of Russians supplying gas to Nabucco when its purpose initially was to provide alternative gas to the Russians? As well as, where are they going to get the gas, if they don’t get it from Russia, if they don’t get it from Iran? Initially, Azeri gas can supply the initial needs of the pipeline, but that’s only the initial needs. There needs to be more gas coming from different sources to fill up the pipeline. [inaudible]
Under Secretary Jeffery:
I think Azeri gas is certainly a prime source of supply and initial input for pipeline projects of the magnitude of Nabucco or other such projects. But keep in mind, the whole thrust of what we’ve been talking about here this morning and over the past couple days is continuing to work on developing not just Azeri gas, but other sources of gas supply.
Question:
I noticed in your speech in Russia last month, you said that diversified supplies are good for the exporters as well as the importers. How do you fulfill that argument to the Russians – to prove to them that it’s for their own benefit?
Under Secretary Jeffery:
I come from the perspective of, the basic notion that open, competitive, transparent, economic markets for just about any commodity, is a good thing. It coaxes out more supply, it encourages or assures that those who need the product have confidence that they’re paying a fair, market-driven price, and that as a general matter, markets operate that way. That has proven to be a good thing for producers, manufacturers and for users/consumers.
Question:
We see how Gazprom might disagree, since they’re overcharging their European customers. [Inaudible] The question that I asked about, what is the most viable source of gas other than Russia and Iran for Nabucco?
Under Secretary Jeffery:
Again, precisely how you get from here to there, the technical experts will have to comment, but we talked about Azeri, there’s Turkmenistan, there’s Kazakhstan, there’s a lot of gas. [Inaudible] how many units can go through a pipeline [inaudible]. But the point is, the region as a whole is a repository of very significant natural gas resources. And I’ll stress again what I said at the outset – and if I didn’t I should have – that it’s not one source of supply, there’s not one channel of distribution, this is a challenge as it’s been demonstrated over time, of developing a portfolio of sources of supply and routes of access to market. Again, and that stimulates competition, which stimulates further production, and this helps in terms of its pricing. [Inaudible.] A lot of it is about economic development in the countries in the region, which have these assets. But it’s also about providing the consumer, you and us and industry, who use this resource, who count on this resource, that there is competition in the price of gas.
Question:
I’m sorry, I don’t mean to dominate like this, but just one last question about Russia. What about Russia supplying gas to Nabucco. What is U.S. policy on that?
Under Secretary Jeffery:
As you said, enough about Nabucco, I’d suffice to say we’re supportive of the project in principle, we’re supportive of the notion of developing alternative routes to market in areas that are politically stable and through regions that source of supply, and method of accessing that supply and delivering it holds the promise of being consistent in the long term.
Question:
We know that Turkey made an agreement with Turkmenistan in 1996, I think, to buy natural gas from them. But it took more than a decade to come up with a pipeline project to transfer that gas. It seems the best idea they have right now is the Iranian project. So I’m wondering, are there any solid projects to bring this gas from Turkmenistan to Turkey from somewhere other than Iran? And also, Hilmi Güler, the Minister of Energy, has said that, it’s not only us who want this gas from Iran, but who [inaudible] to Europe. Are people in Europe willing to wait for Turkey or other countries to come up with alternative gas routes or supply routes? How are you handling this part of this problem? Because it takes more than unilateral action by Turkey to make more projects.
Ambassador Wilson:
On Turkmenistan gas, the route is obvious, it’s a trans-Caspian gas pipeline that brings in some way, to be figured out, brings gas from the eastern Caspian region – not just Turkmen, also Kazakh, maybe others – to the west Caspian connecting to the pipeline that runs from Baku to Erzurum, and then potentially through Turkey on to European markets in the West. Turkmen President Berdimuhamedow spoke several months ago about his interest in transit opportunities for his country’s gas across the Caspian to Azerbaijan and then beyond to international markets. He didn’t define exactly what that meant. But I think it’s clear that the Turkmen want to diversify their routes of export and that they’re interested in routes directly west through the Caucasus into Turkey. It would be wrong to assume that this is more complicated than a route through Iran that does not presently exist.
Question:
I would like to ask how high energy prices also have resulted and also have political implications such as the so-called resource nationalism: Latin America, Russia, to even Central Asia like Kazakhstan [inaudible]. Do you see this resource nationalism as a threat for free markets?
Under Secretary Jeffery:
It’s an excellent question. Your question gets to one of the reasons why we have a conference like this and take twenty Ambassadors from the region to talk about energy security issues. To put it in a positive way, what we are very supportive of – and we know this view is shared by other governments in the region – is responsible stewardship of energy assets. There is no doubt, it’s a documented fact, that the demand for worldwide energy, traditional fossil fuels, continues to increase in the traditional developed economies, but then we have the emerging economies of India and China who are putting additional pressure on the demand side of the equation. That puts a premium of course, on responsible and accelerated development of traditional fossil fuels sources, which is why the Caspian region is a particularly strong repository of such assets, but it also underscores the need on the part of governments around the world to actively and aggressively pursue alternatives to traditional fossil fuels. If there’s an unintended but positive side effect of the increase in energy prices or the price of traditional fossil fuels over the years, it’s that the economics of developing and aggressively producing renewable energy – wind power, solar power, hydropower, or alternative fuels such as bio fuels or nuclear for that matter – are much more favorable when compared against traditional fossil fuels. So what we’re talking about here is first and foremost responsible energy stewardship. Secondly, the continued active development of – and responsible development of – traditional hydrocarbon assets; but equally, if not more importantly, as we move into the future, alternatives that have heretofore not been fully exploited, but which the global economy has in many cases in relevant abundance of it some way; you know, wind, water….
Question:
With the talk of transparency and responsible governments, I’m curious what kind of leverage the U.S. government feels it has with governments like that of Kazakhstan. This week we had the Chevron CEO going there and the [inaudible] going. And this is not a transparent democracy, it seems more like a transparent feudal lordship. So I just wonder, the energy companies just want to get along and be responsible, because they’re global companies, but Kazakhstan is not a global nation. I’m just wondering what kind of leverage you can…?
Under Secretary Jeffery:
As a matter of U.S. government policy, it’s no surprise to any of you, obviously wherever we operate in the world, we’re going to be advocates of responsible government and good practices, ethical behavior, etc. When you talk about U.S. companies going into whatever region in the world – if you put aside specific names – U.S. companies take very seriously – U.S. energy companies no less than companies in other industries – their responsibilities under something that we call the Foreign Corrupt Practices Act. These people, they do business pursuant to sound business principles, high degrees of professionalism and ethical behavior, and if they can’t operate in a particular market – again I’m not talking about any particular country – but if they can’t operate in a particularly market pursuant to and consistent with the letter and the spirit of the U.S. domestic legal framework, they just can’t do that. So to the extent that U.S. investment in the energy sector and other sectors around the world, when we’re investing or U.S. companies are investing, they’re doing it on a responsible basis consistent with U.S. law, but also consistent with serving the objectives of the host country. And as part of many countries efforts to develop their energy assets they find themselves integrating more directly, more specifically, with other parts of the developed world and dealing accordingly.
Question:
Basically [inaudible] there were reports that Turkey intended to sign this agreement with Iran by the end of Ramadan. So working with this timeline, what should we expect from the U.S. administration in order to counteract that move.
Ambassador Wilson:
I don’t think we want to get into hypotheticals. We’ll deal with things as they develop.
Question:
What’s the U.S. policy towards the South Stream?
Under Secretary Jeffery:
As I said, what our meetings over the past couple of days have been about is developing, looking at ways in which we continue to develop energy assets in the particular countries that have them and a way we could bring them to market. We’ll look at each and every project that’s out there on their particular merits – economically, politically, and functionally from the perspective of does the particular pipeline or distribution project do the job of getting resources from point A or country A to country B, or whatever region….
Ambassador Ross Wilson:
I think I can add, what motivates our diplomacy here is diversity of energy sources and of energy supply, whether it’s where physical resources come from or diversity in terms of alternative fuels, nuclear, bio fuels [inaudible]. We think that’s important for the future of the region.
Under Secretary Jeffery:
Thank you all very much. We appreciate your taking the time and making the effort to visit with us this morning. It’s a pleasure to be in Istanbul. It’s magnificent, a beautiful city.
Question:
An economic question – with the whole credit [inaudible] thing going on in the U.S. How do you think emerging markets will be affected, markets like Turkey.
Under Secretary Jeffery:
One has to keep in mind – you’re referring to the sub-prime issues in the U.S. and potential slowdown in the housing market which has sort of been evolving since earlier this summer – I think you have to keep in mind a couple of things. One is that in a U.S. context and a world context, these economic developments come against the backdrop of strong, underlying, economic fundamentals worldwide. Not just in the U.S., but in Europe, Turkey, no less so than in any other country, and other emerging markets equally so. Also I think if you look around the world, I was actually in Indonesia a week or so ago, and this question – not surprisingly – came up a number of times in various forums. You look at the way the emerging markets writ large, where they stand today – it’s hard to generalize, I know, because each country has a slightly different history and background in this regard – but remember, keep in mind, ten years ago was the Asian financial crisis. You look at Asia as indicative of other emerging market economies in the world. Their economies are stronger today than they were ten years ago. They’re more diversified. Generally speaking, there’s a more robust regulatory environment in these individual countries and regions and the banking sectors tend to be sounder. So, all of which is to say, while the U.S. may have its specific issues and the experts and the policy people are working through with respect to sub-prime and housing, worldwide there is a backdrop of relatively strong, historically strong fundamentals.
Thank you all.