Building on Success: Expanding Markets and Economic Growth Through Regional Cooperation

Thank you very much Mr. Hisarciklioglu for your kind introduction. I am very pleased to be here among such distinguished guests from the business community of Istanbul.

Thank you also Minister Mithat Balkan for your remarks on Turkey's leadership promoting regional energy cooperation. I want to mention at the onset that I am happy that our two remarks share a similar theme of partnership in support of international energy security.

I also want to recognize Chairman Rifat Hisarciklioglu, Ambassador Ross Wilson, and Kristal Alley, regional representative of the U.S. Chamber of Commerce, who, just before today's lunch, launched the new book "Guide to Doing Business in the United States." This wonderful book, written in Turkish, was prepared by TOBB and the U.S. Chamber of Commerce to foster even greater cooperation between Turkish and U.S. business people. It is a real pleasure and honor for me to return to Turkey and to speak with you again about energy and economic cooperation on behalf of the Government of the United States of America.

Seven months ago, I was fortunate to attend the formal inauguration of the Baku-Tbilisi-Ceyhan, or BTC, pipeline on my first international trip as Assistant Secretary for Economic and Business Affairs. The inauguration of the BTC was an unforgettable event that highlighted the importance of public-private teamwork in large-scale energy projects.

From every point of view, the BTC and its companion South Caucasus Gas Pipeline are remarkable successes. For the nation of Turkey, for its partners Georgia and Azerbaijan, and indeed for the entire world, these pipelines are projects of great strategic and economic importance. The United States government is also proud of our partnership with the countries and companies that made this 10 year effort succeed. The oil now flowing through the BTC pipeline and the gas about to flow through the South Caucasus Gas Pipeline are continuous reminders of the rewards of regional cooperation. These pipelines demonstrate the effectiveness of public-private partnership that brings technical know-how and investment to large energy projects. They each stretch more than 1000 miles across three countries; and they employ the highest standards of care and sensitivity to the environment.

Just one week before my visit to the BTC inauguration, Secretary Rice hosted Foreign Minister Abdullah Gul during his visit to Washington. Together they announced the U.S.-Turkey Shared Vision and Structured Dialogue and pledged to work even harder to advance our partnership.

Broadening economic and commercial relations and promoting new investments are two important elements of our U.S.-Turkey Shared Vision. This Vision contributes a great deal to regional stability. I am delighted that my colleagues from the Departments of Energy, Treasury and Commerce and I will be departing tonight for Ankara to conduct our third U.S.-Turkey Economic Partnership Commission.

Turkey's economic success story is impressive, including its outstanding performance for over a decade in implementing its IMF-mandated reforms. This success has opened up new possibilities for economic cooperation between our countries. The growing U.S. business presence in Istanbul is evidence of this. I'm also delighted to note the participation here today of the newest member of that group as Merrill Lynch launches an American presence here on the Bosphorus. Tomorrow, Under Secretary Ertugrul Apakan and I will be leading important and timely discussions about how to leverage our economic strengths to increase bilateral trade and investment. We will discuss our mutual interests in promoting investments, enhancing trade with special focus on attracting knowledge based industry to Turkey, expanding access to Caspian energy, and how the United States and Turkey can cooperate to promote economic development in the Caucasus, Central Asia, Afghanistan and Iraq.

The completion of the BTC pipeline project and our renewed pledges to strengthen the U.S.-Turkey economic relationship form two parts of a solid foundation for success. This foundation is a good beginning on top of which we can build expanding energy markets and growing economic activities.

With today's tight balance between energy supply and global energy demand, the actions that we take together can have a significant impact on meeting the world's energy security challenge. Economic growth is a good thing, but it is also driving world energy demand. Ensuring the proper function of the energy marketplace with a diversity of suppliers and supply routes is a high priority. Maintaining the energy marketplace is no easy task. Many of the world's major oil producing regions are also locations of geopolitical tension and possibilities exist of unexpected supply disruptions.

I am proud that the United States is playing a leading role in addressing the world's energy challenge and ensuring a secure energy future. Two weeks ago, during his State of the Union address, President Bush announced an ambitious plan to strengthen American's energy security. President Bush laid out a plan that builds energy security through diversity of both the type and the source of our energy resource. The President presented a powerful vision for energy freedom that begins at home with actions the United States must take domestically. This vision also guides our international energy policy, and we invite our Allies and partners to join us to advance their own energy security and the world's.

The first two parts of the President's plan are (1) diversity of energy sources and (2) wise management of energy demand. A way forward for both is through new technology. A centerpiece of the President's plan is to reduce America's gasoline usage by 20 percent in 10 years. To achieve this, the United States needs to diversify the fuels we use to power our cars and trucks by increasing the use of renewable biofuels, like ethanol, and use energy more wisely by setting high standards for automotive efficiency.

The third and fourth parts of the President's plan for energy security reduce over time our nation's vulnerability caused by oil import dependency. The plan calls for (3) doubling the size of our strategic petroleum reserves and (4) stepping-up our production of domestic oil supply in environmentally sensitive ways.

America's energy security strategy does not stop at our border. In fact, energy security concerns are deeply incorporated into our foreign policy. The international energy security strategy of the United States promotes abroad the President's vision for energy security at home. We support (1) greater diversity of energy sources, like alternate fuels and clean coal, (2) the wise use of energy through efficiency and conservation, (3) a diversity of secure and reliable energy supply routes, and (4) a diversity of energy suppliers working in an open and transparent energy marketplace. Our strategy employs every tool at our disposal: diplomatic engagements including bilateral and regional activities, U.S. leadership and active participation in multinational institutions, like the International Energy Agency (IEA), energy-focused foreign assistance programs aimed to reduce energy poverty, and public-private dialogues to promote energy investment and innovative commercial activity.

Although these energy security objectives are far-reaching and ambitious, we have already made significant progress. One example of our international energy policy is our deep engagement with strategic economic and energy dialogs. These dialogues have their beginnings like our Economic Partnership Commission with Turkey tomorrow. They include (1) the LEA's new accelerated outreach program to draw China and India into the more market-based partnership that characterizes the OECD, and (2) the recent five party energy ministerial bringing together China, India, Japan, Korea, and the United States, representing nearly half of the world's energy consumers, to discuss joint energy and economic challenges.

These dialogues have been very successful. They have encouraged nations with growing energy needs to recognize that they are now stakeholders in the energy marketplace and that unilateral efforts, like buying upstream oil assets, will not guarantee their energy security. They have resulted in agreements to enhance strategic petroleum stocks and manage their use with shared principles and prudent policies. These dialogs have also enhanced membership in U.S. advanced energy technology forums that aim to jointly develop nearly emission-free power from coal, share best practices for energy efficiency, and pursue policies for fuel diversification.

We have noticed too the good progress made by Turkey to reduce its use of dirty and low-quality coal. Today, more than half of Turkey's electrical power plants use clean-burning natural gas. As we move forward with our U.S.-Turkey dialogue, we will be looking for ways that to work together to bring to Turkey even more new energy technology, like clean-coal combustion systems.

There may be no better topical example of our international energy policy than our consistent and dependable support for Eurasian energy security. Our Eurasian energy policy focuses on encouraging energy production, promoting competition, diversifying energy sources, supplies and markets, promoting energy efficiency, developing advanced technologies, and enhancing the safety of energy infrastructure.

Central to our efforts to expanding production and diversifying energy sources is our effort to develop the Southern Corridor for oil and gas from the landlocked Caspian region. Using the words of Prime Minister Recep Tayyip Erdogan last July at the BTC inauguration, the Southern Corridor is "the Silk Road of the 21st century." Turkey is strategically located and offers to Europe the benefits of multiple oil and gas supply routes.

While the BTC's opening crowned the first phase of Caspian development, now is the time to build on success and move on to the next phase.

Oil and natural gas production from the Caspian region is expected to increase rapidly during the next 10 years. Oil production from Azerbaijan and Kazakhstan has been increasing steadily for more than a decade. Commercial natural gas production from the Shah Deniz field offshore Baku began last month and so have start-up operations for the South Caucasus Pipeline, which carries gas to Turkey along side the BTC.

During the past year, we have increasingly focused our bilateral energy cooperation on natural gas. Turkey has a chance to emerge as the key connection between a new generation of natural gas production projects in the Caspian region and major pipeline projects that can deliver that gas into the rest of Southern and Eastern Europe. Azerbaijan provides the key, initial producer of such gas that can help realize the Turkey-Greece-Italy pipeline. With offshore gas developments continuing, the onset of significant Azeri natural gas production will occur soon. Our challenge over the next few years will be to help companies and governments synchronize investment decisions to ensure sufficient gas volumes are available at the right time to meet the demand of pipeline developers in Europe. Later, we hope to see trans-Caspian shipments of gas from Kazakhstan and Turkmenistan, as well as Iraqi gas flowing to Europe via Azerbaijan, Georgia, and Turkey.

To play this important strategic role Turkey must ensure that it provides commercially attractive terms for transit of natural gas, just as Turkey did for oil in BTC. The crucial next step is to conclude a gas transit agreement with Azerbaijan. This will assure investors that gas produced in Azerbaijan and later Central Asia and Iraq will reach European markets. Delivering more Caspian oil to the world market and delivering more Caspian gas to Europe are the exciting next opportunities for Caspian energy.

As I have said this afternoon, the best way forward is to build on our success. The BTC pipeline has shown the world how regional cooperation and the power of free and transparent commerce can attract the long-term private sector investment needed to start and complete large energy projects. The cordial and collaborative manner in which Turkey, Georgia, and Azerbaijan work together on matters of energy security and energy business--particularly this winter--deserves our praise and recognition. Your continued regional cooperation is essential to the completion of new and expanded oil and gas pipelines and, as a consequence, to your receiving the benefits from the significant Caspian resources that will flow for decades to come. The United States is proud of our central role in supporting international energy security throughout the world and in supporting the East-West energy corridor uniting Caspian resources with European energy needs.

As exemplified by our strengthened U.S.-Turkey partnership, we pledge our strong and active support for the next phase of regional energy development. We firmly believe partnership points the way forward to expanding energy markets and fostering economic growth.

On behalf of my colleagues joining me today from the Departments of State, Energy, Treasury and Commerce, we look forward to tomorrow's Economic Partnership Commission in Ankara and to the success of the next phase of Caspian energy development.

Thank you.