US embassy cable - 04ANKARA218

C O N F I D E N T I A L ANKARA 000218 
 
SIPDIS 
 
 
STATE FOR E, P, EB/IFD, AND EUR/SE 
TREASURY FOR OASIA -- LOEVINGER, MILLS AND LEICHTER 
NSC FOR BRYZA AND MCKIBBEN 
 
 
E.O. 12958: DECL: 01/13/2014 
TAGS: EFIN, PREL, TU, IZ 
SUBJECT: UPDATE ON FINANCIAL AGREEMENT 
 
 
REF: 03 ANKARA 7096 
 
 
(U) Classified by Ambassador Eric S. Edelman.  Reason: 1.5 
(b,d) 
 
 
1.  (C) In Ambassador's January 12 conversation with MFA U/S 
Ziyal, as well as in his recent discussions with the Prime 
Minister, Finance Minister Unakitan, and State Minister 
Babacan, the Turks have acknowledged that the complications 
surrounding the conditionality in the Financial Agreement are 
purely a domestic political issue, and one that they created 
themselves.  They have expressed concern that the opposition 
-- which has been irresponsible on everything Iraq-related -- 
will use the political conditionality language in the 
agreement in a distorted way to suggest the GOT has entered 
into a binding legal agreement that limits its foreign policy 
options.  While the leaders stress that they have no interest 
in "intervening" in Northern Iraq, they also say they do not 
want to be accused of "selling out" Turkey's interests, 
especially with local elections looming on March 28. 
 
 
2.  (C) In that context, U/S Ziyal told Ambassador January 13 
that, while he appreciated the USG's continuing efforts to 
make this work, the latest language from Washington -- "this 
clause is required by United States domestic legal 
requirements" -- would not solve the GOT's political problem. 
 He asked if the U.S. could accept two wording changes in the 
two sentences in sub-paragraph (2) of the proposed amendment 
(Ziyal did not explain why these editorial changes might 
help): 
 
 
-- In the first sentence, replace "found in" with "of."  The 
sentence would then read:  "Turkey is satisfying all relevant 
conditions of Public Law 108-11, 117 Stat. 559, 575 (2003)." 
 
 
-- In the second sentence, add the word "binding" after 
United States.  The sentence would then read:  "This clause 
is required by United States binding domestic legal 
requirements." 
 
 
3.  (C) Without appearing to push the GOT to take the money, 
Embassy believes it is still in the U.S. interest to keep it 
on the table.  Therefore, we favor continuing to work, to the 
extent possible, to find a satisfactory solution.  We also 
note that the Turkish domestic political problem might become 
less of a factor after the March 28 elections.  In terms of 
next steps, we see three (not necessarily mutually exclusive) 
possible paths forward: 
 
 
-- Washington reviews the latest Turkish language (above) and 
determines if it is acceptable (although it is not clear that 
even these changes would pass muster with the Prime Minister); 
 
 
-- Washington ask Embassy to propose to the GOT the 
alternative formulation we understand was developed in late 
December:  "This clause concerns United States legal 
requirements that merely limit the eligibility of the 
Government of Turkey to access the funds authorized by Public 
Law 108-11, 117 Stat 559, 575 (2003), and that do not bind 
the parties to undertake or refrain from certain policies." 
 
 
-- Based on our discussions (including with Treasury U/S 
Canakci on January 9), it seems the GOT might be 
contemplating asking to take the money in the form of a 
grant, rather than loan.  While this would not eliminate 
their political problem, it might make it more manageable. 
We do not need to take any action on this for the moment, but 
should keep in mind that it is a possibility. 
 
 
4.  (C) Although we have not heard this from any GOT sources, 
Embassy believes that the Prime Minister might raise the 
Financial Agreement -- specifically his desire to soften the 
political conditionality -- in his meeting with the President 
later this month. 
EDELMAN