Wednesday, September 19, 2018

Ataş Refinery 1992

Contract negotiation at Ataş Refinery in Mersin, 1992

We received an invitation in 1992 from Ataş Refinery, which had annual oil refine capacity of 4.4 million tons, which was commissioned in Mersin in 1962 and ended in 2004.
They had three high capacity steam boilers, they wanted rehabilitation. We had site seeing prior to proposal submission. They were American Combustion Engineering design boilers with oil burners at four corners. The old steam pipes would be changed with new ones, the whole boiler insulation would be renewed.
We took technical drawings, we made calculations for material and labour pricing, pipe replacement. We put a reasonable profit, we set the last price. Then we were invited to the workplace after the evaluation. We went to the refinery as a team of four people heading our English General Manager of the JV company in Ankara. In face to face meeting with the client in their Mersin refinery, we talked about our price, our references, our past experience, our competence. Our competitors' proposals were opened before us. Competitors who have done business before they did not succeed, our price is a little expensive but that was not important. If we would come to the same level as were informally whispered that we would receive the order.
Aside from the price issue, we entered the negotiation of the contract document. A 100 page draft contract document on the matter, we together reviewed sentence by sentence, simple issues we have passed. Document was in English. Since Refinery was a foreign-partnered JV company, the contract must be in English. It was not a problem for our team, we had British general manager, all rest were graduated from METU University which has curriculum in English..
We passed the contract clauses slowly, we finally came to the force majeure clause
At the contract, the contractor clearly specified the reasons for the force majeure and they did not accept anything other than that. They wanted the net reason or wording for the proposed modification.
We have sent the English document to our US partner before and got their opinion. Our US lawyers wanted a new expression to be entered into a final contract, as "Force Majeure means any event or circumstances beyond the reasonable control of a Party which prevents the performance by that Party of its obligations", which is now standard definition.
Refinery team refused that wording since it was too loose statement. We are telling examples, such as "if a plane falls on the refinery, a submarine explodes nearby" since these were not under our control, but the negative situations created by third parties.
Refinery team understood the situation, but they did not want to change their own text.
As for the price section, our competitor's proposal figures were disclosed, we were asked to reduce our final price to the cheapest price. We were asked to go down for this price.
At that point, our negotiation was over, we have no more patience in our team who has been negotiating from morning to night for a week.
"We stopped the negotiation, we left the meeting and we went on the weekend of Friday weekend, we returned to Ankara.
On Monday morning, our joint venture company's English general manager told the latest status to top decision makers of our domestic partner company. This last price and their contract was impossible to take the job. Local parent company top management gathered together among its own. Two-hours later, they said "We do want this work with this price and with this contract. No matter how you tie the job, but do fix the order," they said.
The British general manager returned to his office, he wrote a new letter of acceptance as if he hadn't broken the ropes on the previous Friday, he thanked Refinery, we got the job.
A week later, we went back to Ataş Refinery, we signed the contract. The first kickoff (starting) meeting was gathered at the nearby fish restaurant of Karatoprak by the sea. We ate fish and then we evaluated the project on fish-scented papers.
Those papers entered the files as a starting document for the kickoff meeting of notes.
The work took a year. The submarine did not pass, the refinery did not fall down, we had no need for force majeure. Why did I tell you this story? Foreigners, especially Americans, Anglo-Saxons, Western Europeans, Japanese, they clearly identify risks and make prices for risks, while Turks are more likely to take risks without pricing.

Ankara, 18 September 2018

Saturday, September 15, 2018

Turkish Foreign Policy

Turkish Foreign Policy on Syria and Russia

I have been in Syria, Israel and Jordan during 1990-1999 due to my sales and marketing of industrial steam boilers. I spent a lot of time here. I got profitable jobs for the private company I worked at that time. We are in a business environment very similar to Turkey. This business environment had a well-functioning commercial climate to make good money. At the moment, maybe for the next 10-years you can not do business around Syria. Unfortunately not.
In the past, Syria was our natural market. Syria were our backyard to make business. Unfortunately, there is no longer Syrian market. Damascus, Aleppo, Homs, Diar-el-Zor are now in ruins. How the new Syria will be formed, how it will develop, how it will become a market again, it is hard to predict. But if you want to avoid war, you always have to be ready for war.
Turks are not Arab, we are in a different environment, our languages are different. So it is very difficult for Turks to stand out in the Islamic world. We should not be surprised by the premises of the early Republic period, tested during the Second World War, verified, not to interfere with others' internal affairs, "Peace at home, Peace at world" principles. Being involved in other countries' internal affairs hurts us. Trade is stopped, millions of unemployed- poor- uneducated problem people came to us, as refugees, as immigrants. Rich immigrants did not stop in Turkey, they moved into Europe, America.

There is a large Russian Naval Base in Tartus on the Mediterranean coast of Syria. This is where the Russians get the strongest logistical support in the Mediterranean. Assad government provided this area as a base to the Russians. All Russian warships are receiving logistical support, fuel, food here in the Mediterranean, maintenance is done here. Losing this base for the Russians is not acceptable. They will not negotiate by any means.
Further south is the Russian Khmeimin Air Base with two asphalt 3km runways beside Assad International Airport in the south-east of the city of Latakia. With the agreement between Syria and Russia, it was opened in 2015 indefinite period and free of charge. In this air base, there are 11 types of latest-generation SU-57, SU-25, SU-24, SU-22 Russian fighter planes ranging in number from 37-50. There are also numerous T-90 battle tanks and S-400 missiles here. Without knowledge of Russia, even birds can not fly.
There are only national interests in foreign policy. It is not our job to bring democracy to others. It is not our job to solve the internal problems of other countries. If we want to get along well with the Russians, we have to pay attention to the interests of the Russians, their red lines, their sensitivities. Russia is not only a transatlantic superpower, it is our closest neighbor, the most intensely commercial and social neighbor we are. Without paying attention to Russia's defense sensitivities, it is difficult to carry out the outpost in this region, it is almost impossible. Russia is no longer the old "Soviet Union". After 1989, they set up a democracy according to his own. You like it or not, they have their own electoral system, they have their own democratic scheme. Russian market economy is gradually settling down. Old "Comrade" Russians came out as the new businessman, the businesswoman, the business-people. There are no old Russian car makers in front of the Kremlin. Russian-made automobiles are no longer produced. They are all BMW, Mercedes, Audi. Russians have money to buy the best. They have their own space and nuclear technology.

Russian President Vladimir Putin, comes to Turkey often in daytime 8-hour work schedule. We wish he comes more often. We learn mutual interests, sensitivities, common business opportunities. We have so much to learn from each other. It is always necessary to keep all kinds of information exchange channels open.
Vladimir Putin is a very rational, very realistic person. He has Ph.D. degree from Leningrad-St.Petersburg University on International Law and Economics. He speaks German fluently. He also learned English. He knows the outside world. He knows what he wants.
These are important. We live in an age when the US Secretary of State can not speak any other language than English. The last US Secretary of State, Mike Pompeo, does not speak any other language than English. He does not feel obliged to know.
Our relations with Russia were not good during the cold war period. But now the walls are down, the cold war is over. There are currently thousands of qualified Turkish workers working in civil contracting services in Russia. There are marriages between Russians and Turks. Our Russian brides are the grandchildren of Tolstoy, Dostoyevsky and Tchaikovsky. They are multicultural, very educated and very beautiful women. Most of the 400 nuclear students we send to Russia, will marry Russian women in the future. The Russian language will enter into Turkish families.
We have high degree dependency on natural gas in Russia. That is why our "Current Deficit" is high. Imported coal and future nuclear dependency are also to be added. We must reduce dependency to acceptable figures. We need to open common business areas.
The world is now more free, more independent, more free thanks to the internet. A more relaxed free market in Russia has been formed. The black market is finished but the service / service sector is still not good. Russian women are well educated and beautiful, men are more business minded, ballet-opera performances are great again.
We should not interfere with others' internal affairs, we should believe in the synergy of doing common business, let's not leave the principle of "peace in the country, peace in the world."


Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of ODTÜ Alumni and Chamber of Turkish Mechanical Engineers Energy Working Group.
Ankara, 15 September 2018

Saturday, September 08, 2018

Bratsk Project, East Siberia 1992-1996

Bratsk Project, Eastern Siberia, 1992-1996

In 1992, our American Parent company was asked to submit a proposal for high-capacity soda recovery boiler for the paper and pulp plant for the Bratsk East Siberia Forest Products Complex.
The boiler was beyond our joint venture license agreement so our Turkish American jV company was asked to supply local sales support.
Six top officials from the Turkish parent company first went to Moscow. They met with six expert engineers from the US partner company, in the airport hotel and both parties decided on a sales strategy. Then together they flew to Bratsk, 10 hours away from Moscow in a Russian-made Tupolev-154. Bratsk is in East Siberia, near the Baykal Lake. Bratsk was a place that had not even a decent business hotel to stay at that time. Our Turkish members purchased gifts whiskey, perfume, cigarettes and cigars for the hosts in Bratsk from duty free sales outlets in Istanbul and Moscow airports. Bratsk airport had a narrow strip, which was made for military purposes. The Tupolev had to stop very quickly as soon as they landed. In the year 1992, the Berlin Wall was demolished, the Soviet Union was dissolved, and Russian institutions, companies plants were ready to open to the world.
In the Bratsk Forest Products Complex, the paper and pulp plant was in need of new high capacity soda recovery boiler to replace the existing old unit. The steam boiler was in special design, and it was out of JV license of the Turkish American joint venture company.
Turkish engineers stayed in Bratsk for one week, they visited the site, and made on-site negotiations with local engineers. The project was to be carried out in a very far difficult environment almost 13-hour plane flight from Turkey.
Negotiations talks were over, the team was to leave the site, they had not so optimistic to carry out the next move. However the host Russian authorities evaluated the situation and decided to give a small order to keep them attached, since “They came all the way from a far distance”. Local authority gave them a Tank-Farm job at a price of US dollars 10 million.
Upon receipt of an order, one of the Turkish officials stayed there. He then became the Bratsk project field and site chief manager. He spent one week at the hotel, after other officials returned home.
A week later, 50+ qualified Turkish workers arrived at Bratsk on a charter air flight. The site was set up, the current worker barracks were taken over, they were modified, renovated, made more usable for employees. Turkish cook’s kitchen started to work, our hygiene scheme, bathroom toilet, workers’ bedrooms, kitchen set up.
The old tank farm, which consist large-capacity cylindrical oil storage tanks, were demolished, old materials were scrap, necessary steel sheets were purchased and transported to Bratsk site.
While our tank-farm project was going on, our US partner gave the proposal for the steam boiler, got the job at the equivalent of 200m US dollars. It was necessary to finish the job in 24 months, but the project was a little late because of the financial difficulties.
Steam Boiler site assembly erection works was given to us again, from which we had a share of US $ 20 million. The number of working Turkish workers occasionally became 200+. They worked 7/24 in shifts with one day off per week..
Bratsk city is very different now. There are a lot of comfortable hotels, better airport. The world’s largest paper and pulp mills and forest products factories are here.
In the following years, Turkish engineers built workshops, industrial facilities, factories in the remote areas of Kamchatka, on the North Sea coast, in Kazakhstan Tengiz region. If there are still Turkish people working there today, it was thanks to those who went there in 1992 and provided us with a place to hold. We owe them a lot. Our Bratsk Project ended in 1996. A large number of Turkish workers worked here. I tried to tell the story from the best memory I have, but does it not seem like a fairy tale?
Project: Bratsk, East Siberia - Bratsky LPK Forest Industry Complex, Building Soda Recovery Boilers and Various Equipment For Pulp and Paper Production.


Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of ODTÜ Alumni and Chamber of Turkish Mechanical Engineers Energy Working Group.
Ankara, 8 September 2018


Wednesday, September 05, 2018

Pakistan Quetta Project 1997-2001

Nowadays, we have more news about Pakistan which has started to emerge in international news media on recent general elections and new Prime Minister Imran Khan. For a long period of time, Pakistan was plagued with wide spread corruption, inefficient public administration, conflict on Afghan border, tension with neighboring India. In our 1922 independence war, Indian muslims sent donations to our war efforts. Turkish people has friendly relations with Pakistan and generally with Indian muslims. We are very grateful for their assistance.
Recently we sold 30 each T129 Attack (Atak) helicopters and 4 each Milgem Corvette naval ships of our new production to Pakistan with an intergovernmental agreement. Profits in intergovernmental agreements are not so important. The important thing is the long term relationships, and respect to reciprocal interests.
As a private sector, we have to see the risks ahead and we have to price them. Now herein below, we will tell you about our Pakistani Quetta project, which was very difficult for us to execute.
Our Turkish 50-50% Joint Venture company had an Italian representative, who was a resident in Milan. Since we are the closest JV joint venture company to Milan, we were invited for company tour in Italy. Our American general manager and I plus one sales manager from the US headquarters came to Milan. We visited a lot of reputable Italian contractors in Milan and Rome . At that time, natural gas sales were exploded all over the world. Sales of natural gas-operated gas turbines and waste heat boilers (or heat recovery steam generators, HRSG for short) connected to their back were increased. We had a newly finished horizontal pass natural circulation waste heat boiler design. We sold in the domestic market, so detailed projects were ready. Everything was ready for foreign markets.
After company tour in Italy, a short time later, we received a request from Fiat Avio, a company we introduced in Milan.
As Fiat Avio, they were selling three GE LM-6000 gas turbines for the Quetta Power Company's new combined cycle power plant that will supply electricity to the Quetta city of Pakistan. Fiat Avio were asking for a price for the waste heat boilers to be placed behind.
Earlier in the domestic market, we have delivered a similar capacity waste heat boiler to the Akenerji Yalova Aksa factory, it was delivered, site erected, and working.
We prepared the same bid very quickly for Fiat Avio, and we sent it by courier. Our representative in Milan has received our proposal package, multiplied the offer and delivered it. After a while Fiat Avio invited us to their Milan office for meeting and final negotiation.
We made bid offer and price negotiation in Fiat for a week. In the end, we completed our negotiation, based on factory delivery basis, with a final price of US $ 4 million.
On the last minute, Fiat team wanted the on-site assembly price.
How could you declare a price for on-site installation in Quetta, Pakistan? We had no earlier preparation to quote for on site installation. We had no idea about Pakistan Quetta.
The proposal department of our parent local company assisted us, and our Italian representative gave other indicative prices about Pakistan. We asked tentative site installation prices from Pakistani companies in rush, in the end with an additional installation fee of around 1 million US $ for on-site assembly within a year.
The signatures were inked, the press release was published. Detail projects have already been prepared in four months, material procurement has been done, production has been started and finished, the vessel has been painted, it was ready in our Ankara factory ready to ship. The local shipping company has taken it to Mersin port, we have loaded the vessels on a ship to go to Pakistan. The ship crossed the Suez Canal, then passed through Red Sea, the Indian Ocean, and came to the port of Karachi, Pakistan.
We had a delivery item in our contract. We would pay penalty per day if we were late. But if we deliver early, we would get a bonus up to half the penalty per day. The contract was transferred by Fiat to the Pakistani power company. The Quetta power company authorities have resorted to another option that is more appropriate for them than giving us early delivery bonuses. The ship was held on the open sea for a month by the authorities of the port of Karachi for some artificial reason, then time has passed and when the penalty is begun, permission to enter seaport has been released. We could not get the early delivery bonus.
Then our field master moved the steam boiler to the city of Quetta. Our assembly team began field assembly with local contractors.
Our team could not have a long term residence permit for their employees. Our staff started to go in and out of Pakistan with a three month tourist visa. In the meantime, our field manager, due to intensive field work, he passed a few days. He was immediately taken into custody and detained by local authorities. We could not communicate with our field manager. We put our Pakistani embassy to get information. At the end of a month, we detected his location. We commissioned the mediators as required by Pakistani justice. We got our field officer out of the detention center. We brought him to home. But after spending one month in a detention center, staying with the Pakistani criminals ruined his psychology. He had to go out for a long vacation so he could recover. Our new field staffs were following the local rules meticulously. They never exceeded their legal three-month stay in the country.
Our new construction supervisor began to make uncontrollable expenses in a very remote environment. It was difficult to control him monetarily. He consumed and exceeded the budget. At the end of the site installation works in Quetta plant, we completed our job, finished, delivered, operated, tested, got our completion certificate.
In Quetta there was an earthquake later, and the surroundings of the central buildings were destroyed. The Afghan war in the immediate vicinity affected the city, and the power station.
Since then, the Plant is still in operation. There are many Turkish contractors in Pakistan, still working and earning good money. Prinkipo, 5 September 2018


Saturday, September 01, 2018

Turkish politics, self fulfilling prophesy

Self fulfilling prohecy in Turkish political environment

A self-fulfilling prophecy is a prediction that, in being made, actually causes itself to become true. Although examples of self-fulfilling prophecies can be found in human literature as far back as ancient Greece and ancient India, it is 20th century sociologist Robert K. Merton who is credited with coining the expression "self-fulfilling prophecy" and formalising its structure and consequences. In his book Social Theory and Social Structure, Merton gives the following definition:

The self-fulfilling prophecy is, in the beginning, a false definition of the situation evoking a new behaviour which makes the original false conception come true.

Let us evaluate the latest local political - economical - social situation and if this is "Self-fulfilling prophecy" or Strategic Investigation of the existing situation?

A serious financial crises is expected  in the local market due to the fragile social atmosphere. That will create a difficult time for the people in Turkey in the short run. We cannot estimate how the administration in power will handle these difficult times.

There is no response from business circles, no evaluation nor any statement from local Industrialist & Businessmen Association nor from local Chamber of Commerce. They all are seemed to be so silent, appearing to accept the statu-quo. We really need to know what they know that we do not know at this time.

We understand that all related political parties have a certain consensus not to create too much social tension, nor any interference during upcoming local election period. Foreign experts reinforce above brief analysis as in the latest reports of Fichtner, Morgan Stanley and Standard & Poors.

Reputable foreign correspondents who are stationed in Turkey, and those who are very competent in analyzing the local politics, are also surprisingly so silent. They are seemed to be unable to evaluate the silence in the local intellectual environment. That is due to appearent repression in the local environment.

Sociological studies cannot foresee that in case of such-and-such event we can expect such an outcome. Social events cannot be observed rationally in the form of hard sciences. Social explosions are special events. It is not possible to predict them in advance. The dynamics of social explosions are such that the participants themselves cannot even predict what will happen next.

In The past decade, the economy seemed strong, domestic politics solid. Economic indicators were good, the domestic market was happy; everything was fine. The same, however, cannot be said of now.

At the time, the prevailing political power was saying, “the separation of powers is preventing us from taking care of business”. It is not fair for a political party in power for more than 16 years to still play on a victimization discourse and then start to implement similar repressive public policies against the opposition.

Compared to the old, rotten inactive opposition parties, the new Kurdish Party, with a male and female co-chair in practice for each party post, is a very good, effective example of new democratic practices.

Under the repression of 1980s, a local feminist movement flourished in this country. Repression creates opportunities for new, alternative movements. The 2013 uprising was created by young people born after the 1980s. They participated in a large-scale sociological movement, probably for the first time in their lives. Most of them were students. They were apolitical and in closed and indifferent communities until the movement.

The movement has nothing to do with the classical left/right conception of politics. We don’t feel that there will be any new political party as a consequence of these activities. The young people who were participating in the movement have attitudes different from all past conceptions. There is equality between men and women. There is high degree of environmental awareness. There is solidarity, created by a high degree of fast social media use via email, YouTube, Facebook, and Twitter. They have a sense of individual freedom.

Some of the female participants had headscarves but the issue was not an important for them. They were not interested in what you wear; you could dress as you wish.
No longer is there a separation of powers in this land. However, separation of powers is deemed fundamentally necessary for real Western democracy. All power is at the mercy of the ruling party. Perhaps this is good, perhaps not. Before, executive power was under the control of the judiciary and sometimes, undemocratically, soldiers. During the reconciliation process for accession to the European Union all these independent bureaucratic audit mechanisms were abolished, modified or brought under the strict rule of executive power.

There is an inevitable struggle within the ruling party over the distribution of wealth, which, with time, has apparently led to fissures. The opposition will certainly interfere and maximize its gains from that dissension. The governing power is vulnerable to all these developments and should consider restructuring over time.

The new opposition was first initiated by locals facing the risk of losing their farmlands and water resources in rural regions. Villagers started campaigning against hydroelectric dam construction, locals at touristic seaside areas protested against new, imported coal-firing thermal power plant construction.

The increasing number of shopping malls has also engendered reactions. Similarly, loose, rubber-stamp EIA (Environmental Impact Assessment) approvals for energy investment programs, followed by expropriations of farmland, touristic seaside resorts, the environmentally-not-so-friendly Channel Istanbul, the third Istanbul Bosporus bridge, and the third Istanbul Airport investments have elicited local reactions. Women’s rights, the anti-abortion law, and prohibitions on liquor with religious motifs on top of more interventions into private life have created explosions.

The traditional “peace at home, peace in the world” foreign policy replaced with neo-Ottoman expectations, the unnecessary interventions into the internal conflicts of foreign neighbors, the unnecessary tensions with neighboring countries,

Despite the Central Bank’s repeated interventions into the money markets by selling hard currencies in order to keep the local money stable, apparently there is a continuous exit of foreign investors from our stock market. Financial credibility is not stable enough to cover expensive new investment projects – to the point where most of them may stay idle in future. A long-term stability of the local markets is sourced with a new political structure.

“President’s regime” is questioned under the influence of these new social developments. Such social uprising is too costly for the new changes in the long term, and they are totally unsuitable for markets and investment financing.

Nowadays, a lot of social media networks are working under their own regulating and monitoring mechanisms. The disproportionate use of brutal force is still present, much like oriental, repressive regimes. TV channels and the written press are kept under pressure; journalists are in prison in disproportionate numbers.
“Disproportionate intelligence” or “humor, in short” has emerged as the largest opposition. Humor is kept under pressure with disproportionate lawsuits in courts, in forms unseen in Western democracies.

However, the banners during and after college graduation ceremonies infused the events with colorfulness and humorous language. They were very effective.
We do not need to look elsewhere to evaluate the events in our backyard.

Global capitalism is now being questioned here. This social inquiry is pioneer in our history, replacing the old democratic habits, to create new better applications and implementations in future.

It’s not right to abandon the traditionally peaceful relations with the neighboring countries and get involved in the internal conflicts and civil war south of the border. This is not a part of our traditional foreign policy. Interference into the civil wars of foreign nations is not in our interest. Neo-Ottoman policies are not correct.
We cannot “grab a slice of the cake” or “get our share in looting” during clashes. There is no such thing. We all lose in war; there is surely no winner.

A neo-Ottoman foreign policy may be costly for us in the end. Displeased allies may respond with increased fuel prices in tough winter conditions, we may even face gas flow interruptions. The economic well being of our nation can only be secured through peace and good relations with neighboring counties.

There is no way to defeat an educated public  by using overwhelming force like an oriental, absolutist Middle Eastern regime. Embracing Western-type democratic rule is always the best way to win over every segment of society. In democracies, political power naturally renews itself by restructuring and creating alternatives within itself in accordance with the expectations of market forces. Long-term restructuring seems like the inevitable way to go.

In democratic systems, it is important to have “freedom of speech”, “independent courts”, a “free press”, “separated powers”, and “pluralistic constitutions to protect minorities”.

More moderate, more harmonious, more caring governance will surely appear soon through better communication with young people in the country. The new governance will be in line with the power centers of the European Community and the United States. It will exist in accordance with policies on democracy and freedom of expression in the press. It will be tolerant toward and similarly unharmed by critics and humor, and hence it will support freedom of expression and respect for the rights of people.

We are very sure that a new political structure will inevitably be created in the near future. This is a “self-fulfilling prophecy” or “rational expectations” -- or the “rational choice” of local markets for the well-being of all in a Western-type democracy.
Wikipedia: A self-fulfilling prophecy is a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior.

Prinkipo, 31-August 2018

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