change, economic stabilization, Iran, and the Middle East Peace Process, Sarkozy represents a key actor in the fulfillment of our shared policy goals. We will not always see eye-to-eye, and differences on key issues (such as non-proliferation and disarmament, which are seen as critical to French national interests) are looming. However, through enhanced consultation (including, and perhaps especially, at the highest levels), I believe we can address these differences, minimize unhelpful proposals and foster increased collaboration to better leverage French interests to fulfill ours. France is a like-minded country with a major economy and the second-largest deployed military and diplomatic forces in the world. By striking the right note in our bilateral relationship, we can leverage Sarkozy’s strengths, including his willingness to take a stand on unpopular issues, to be a major contributor to U.S. goals. We must also recognize that Sarkozy has an extraordinary degree of decision-making power which is vested in him alone as the French president. In my opinion it will necessitate periodic Presidential intervention to reassure Sarkozy of our commitment as an ally and partner and, in many cases, to close the deal. Sarkozy will remain a power to be reckoned with in France and a significant driver of Europe for the foreseeable future. It is clearly in our interest to work hard to channel his energy and initiatives into a constructive form of cooperation that enhances our ability to solve global issues together. End comment. RIVKIN
‘BP IS STEALING OUR OIL’,
AZERBAIJAN PRESIDENT TELLS US
Tuesday, 09 October 2007, 14:14
CONFIDENTIAL SECTION 01 OF 03 BAKU 001227
SIPDIS
SIPDIS
VILNIUS PLEASE PASS TO MATT BRYZA
EO 12958 DECL: 10/09/2017
TAGS ENRG, PREL, PGOV, RS”>RS, TU, UP, KZ, PL, GG, LH, TX, AJ
SUBJECT: PRESIDENT ALIYEV ON ENERGY ISSUES IN ADVANCE OF THE VILNIUS ENERGY SUMMIT
REF: A. (A) BAKU 1224 B. (B) TBILISI 2498
Classified By: Ambassador Anne E. Derse. Reason: 1.4 (B)(D)
1. (C) SUMMARY: In a one-hour one-on-one meeting with the Ambassador on October 8, President Aliyev outlined with frustration current problems on energy in advance of the Vilnius Summit. British Petroleum (BP) is “stealing our oil,” he asserted sharply, seeking to put pressure on Azerbaijan to delay to 2010 the advent of an 80/20 profit split due next year under the Azeri Chirag Guneshli (ACG) Production Sharing Agreement (PSA) by threatening to cut back on gas it provides to the GOAJ from the ACG field from 3 bcm to 1.4 bcm. “Only Georgia will suffer” if BP continues down this path, he warned, noting Azerbaijan’s commitment, otherwise, to help Georgia on gas this winter. He said the Georgian PM had promised him to enlist Washington’s help with BP. He said BP had asked for time, until October 19, to resume talks. If a good response is not found, Azerbaijan “will make public that BP is stealing our oil,” Aliyev stated. Similarly, he said, Turkey’s 15 percent netback pricing scheme for gas transit is “unacceptable” as it would require Azerbaijan to disclose to Turkey sales agreements with customers in Europe and allow Turkey to sell 15 percent of Azerbaijan’s gas to European markets. A transit agreement is “not so urgent for us that we will accept unjustified conditions from Turkey.”
2. (C) Summary Continued: Azerbaijan has an MOU with Greece, will soon launch talks with Italy, and will not allow Turkey to “block the Azerbaijan-Europe partnership.” He said Turkmenistan seems to want the trans-Caspian option to be implemented but “to hide it from Russia.” Azerbaijan has shown “maximum constructiveness” – offering its infrastructure to Turkmenistan and pledging to serve as purely a transit country – but Azerbaijan will not initiate next steps with Turkmenistan – “We cannot want it more than they do.” Azerbaijan does support the Odessa-Brody- Plotsk oil pipeline for political reasons (“Ukraine, Poland, Georgia are friends to us.”) and will present a concrete plan on next steps at a meeting in Vilnius with Ukraine, Poland, Lithuania, and Georgia with the aim of making the project commercially feasible. Aliyev asked that the U.S. try to deliver the message on the unacceptability of the 15 percent netback pricing proposal to Turkey. He continues to support Nazarbayev’s idea of a 3-way summit between Kazakhstan, Azerbaijan and Turkmenistan as a good signal and a way to strengthen 3-way relations, but will not initiate the meeting. End Summary.
Georgian Winter Gas
3. (C) President Aliyev opened the discussion on energy by saying that Azerbaijan will help Georgia this winter as it has in the past. He said he confirmed this to the visiting Georgian PM during his September 27 visit to Baku. The GOAJ, however, is having some difficulties with BP, he said. Because the GOAJ halted negotiations on PSA extension and Shah Deniz development, BP is now “trying to put political pressure on us by cutting back on gas it is giving to Azerbaijan, from 3 bcm to 1.4 bcm.” But “only Georgia will suffer” from this step because the Shah Deniz gas they will receive from Azerbaijan will not be enough. “If BP reduces the gas it is giving Azerbaijan, Georgia will get less.” The Georgian PM, Aliyev said, had told him he is aware of this danger, and had said he would talk to Washington to “get them to help us.” (See Ref. A for background on Azerbaijan-BP negotiations.)
4. (C) Aliyev continued that “these things are inter-connected. If BP is supportive and helpful, there will be no problem supplying Georgia.” But the situation with BP is “unpleasant – they are cheating us on the PSA profit split according to our calculations.” The GOAJ believes that the profit split should have changed in the second quarter of this year. “They are stealing our oil – they are unilaterally changing the formula on the ROR (rate of return) so the profit split will take place in 2010. SOCAR spoke to (BP Azerbaijan head) Bill Schrader. BP asked for time, until October 19, to come back to discussions.”
BAKU 00001227 002 OF 003
(Comment: BP Azerbaijan on October 9 had no news of an impending visit by BP CEO, per Ref. B. End comment.) If there is not a good response, “we’ll make public that BP is stealing our oil … oil that belongs to Azerbaijan, because BP wants the 80/20 profit split that should occur next year to be pushed to 2010.” The Georgian situation, Aliyev repeated, “is connected to that.”
Turkey Transit Agreement
5. (C) Aliyev said that Azerbaijan rejects the Turks’ 15 percent netback proposal. The Turkish formula would require Azerbaijan to disclose to the GOT its commercial agreements with Greece, Italy, and other European countries – “anywhere our gas goes.” The netback pricing proposal is “not acceptable – it does not exist in any other transit agreement. We would lose money and Turkey could sell 15 percent of our oil to our markets. This is not fair. We’ll pay an agreed transit tariff. We want to do it on the basis of best international practice. Our position with Turkey is pretty strong. If they block an agreement, they are responsible. The Minister always says Turkey will do the necessary, but then does nothing. We will not accept pressure.”
6. (C) Aliyev noted that it is Turkey and European consumers who need the transit agreement. “It is not so urgent for us that we will agree to unjustified conditions with Turkey.” Azerbaijan has existing and adequate markets for its gas in Georgia and Turkey, he noted. Aliyev asked that the U.S. “deliver (to Turkey) if it can, this message. Turkey wants to get everything.” Turkey does not understand that Azerbaijan has signed an MOU with
