US embassy cable - 05ADANA41

UNCLAS SECTION 01 OF 02 ADANA 000041 
 
SIPDIS 
 
SENSITIVE 
 
NOT FOR INTERNET DISTRO 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, ETTC, ELAB, SY, TU, ADANA 
SUBJECT: TURKISH CONGLOMERATE AND TRADE GROUPS WEIGHING SYRIAN 
INVESTMENT 
 
REF: A. O'DOWD REID E-MAIL FEB 7 
 
     B. ADANA 35 
 
 
1. (SBU)  Summary and guidance request:  AMCON Adana in the last 
three weeks has engaged with a large Turkish conglomerate and a 
regional trade group whose members are considering investment in 
Syria, primarily Aleppo, to familiarize the parties with the 
U.S. sanctions against Syria.  So far no large players seem to 
be deciding to invest aggressively in cross-border joint 
ventures, but the issue is still on the regional trade agenda as 
Turkey and Syria consider ratification of a recent trade 
agreement.  We will continue to present such U.S. views on doing 
business with Syria, but we would welcome more specific 
guidance.  End Summary and guidance request. 
 
2. (SBU)  In meetings on February 4 and 23, each with one of the 
two Konukoglu brothers running the large SANKO group in 
Gaziantep - one of Turkey's top ten industrial conglomerates and 
a worldwide textile player - AMCON Adana PO has encountered 
questions about U.S. sanctions against Syria, U.S. policy 
vis-`-vis Syria and the risks to the group should they pursue 
investments in Syria.  The two brothers recounted pressure that 
they have received from the Syria government to make capital 
investments in Syria within the context of the new 
Turkish-Syrian trade agreement and against the backdrop of their 
ongoing importation of Syrian cotton and export of edible oils 
to Syria.  One outlined possible interest in investing in 
ready-mix concrete and cement business and the possible transfer 
of less energy efficient yarn and textile processing to Aleppo. 
 
3. (SBU)  In both discussions, AMCON Adana PO drew on press 
guidance to explain U.S. concerns about Syrian support for 
terrorism, lack of constructive role in the peace process, 
relationship with Iraqi FRE's, questionable relationship to Iran 
and U.S. and U.N. concerns about Syria's continuing presence in 
Lebanon.  AMCON Adana PO also familiarized the two Konukoglu 
brothers with the Office of Foreign Asset Control (OFAC) 
websites on Syria and explained the risk that a potential 
capital venture in Syria inadvertently could lead them to be 
connected with Syrian specially designated nationals, such as 
those listed by OFAC.  Based on communications with Embassy 
Damascus, AMCON Adana also discussed rising labor wage rates and 
energy cost trends in Syria to illustrate the potential fleeting 
nature of perceived advantages for some industries weighing 
investments in Syria. 
 
4. (SBU) The two brothers appeared split in their opinions about 
investing in Syria.  One clearly wanted to avoid investing in 
Syria and the other seemed to be keeping his options open. 
However, neither seemed enthusiastic about being in business in 
Syria, and even the more non-committal brother was soberly 
appraising the pitfalls that PO outlined. 
 
5. (SBU)  The Gaziantep Chamber of Industry President attended 
the February 4 meeting and seemed eager to learn U.S. thoughts 
on investing in Syria.  AMCON Adana PO followed up in a separate 
meeting with the Industry Chamber's general secretary to 
illustrate the information on the OFAC site and to discuss the 
para. 3 issues should other chamber members be entertaining 
similar moves. 
 
GoT regional investment incentives in mix, too 
--------------------------------------------- ------------ 
 
6. (SBU)  One Konukoglu brother also raised the GoT's continued 
deliberations on domestic regional investment incentive plans 
(ref. B) and how he thought current draft proposals were too 
generous and too expensive for the GoT treasury.  He said that 
his conglomerate could "live with" incentives which gave nearby 
provinces 10 to 15 percent investment breaks, such as through 
reduced taxes or subsidized energy provision, but the proposal 
to increase incentives were "unfair and anti-competitive" he 
noted.  He said such incentive plans also were distorting 
investment plans in Gaziantep and elsewhere in southeast Turkey. 
 (Note: this is also the case in Adana province where some small 
Adana-based capital investment in plant already is shifting to 
neighboring Osmaniye.  End Note.) 
 
 
REID