US embassy cable - 05ANKARA3357

UNCLAS ANKARA 003357 
 
SIPDIS 
 
USDOC FOR ADVOCACY CENTER AND DEFALCO 
TREASURY FOR OASIA - CHRIS PLANTIER 
PASS OPIC FOR ROSS CONNELLY 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: BEXP, EFIN, EINV, TU, OPIC 
SUBJECT: GMAC/DILLINGHAM UPDATE 
 
1.  (SBU)  On June 1, ECON/C raised GMAC/Dillingham's 
problems in completing the long-delayed Izmir Ring Road 
project with Under Secretary Ibrahim Canakci, the head 
of the Turkish Treasury who reports directly to State 
Minister Ali Babacan.  Canakci was familiar with the 
letter sent by OPIC VP Ross Connelly to Deputy Prime 
Minister Sener, as well as with Ambassador Edelman's 
letters to Babacan and Finance Minister Unakitan. 
Canakci said he had staffed the letter and the issue 
out for detailed study in the Treasury. 
 
2.  (SBU)  Canakci said that there were numerous 
projects to which the GOT had committed itself before 
the financial crisis that it was simply no longer able 
to fund consistently with sound fiscal policy.  He said 
the size of the overall budget allocated for government 
investment (capital spending) projects was set by the 
GOT within the parameters agreed with the IMFTreasury, 
and that it was the responsibility of the State 
Planning Office (SPO) to set priorities within this 
envelope.  Also, it was the responsibility of the 
Treasury to determine whether or not to draw on the 
offshore loan established to help fund the ring road 
project. 
 
3.  (SBU)  At the same time, Canakci understood that if 
the inability of the GOT to allocate sufficient funds 
to the project led to a situation in which 
GMAC/Dillingham was unable to perform its contractual 
responsibilities, it would seem unfair for the State 
Highway Department to call the OPIC-insured performance 
bond issued by GMAC/Dillingham and its Turkish joint 
venture partner.  However, he said that the legalities 
would depend on the precise terms of the contract 
between the Highway Department and GMAC/Dillingham, as 
well as on the contract between GMAC/Dillingham and 
OPIC.  ECON/C stressed that especially in the wake of 
PM Erdogan's visit to Washington, we were hopefully in 
the process of cleaning up old investment and 
commercial disputes and that we hoped to avoid any new 
negatives -- understanding that it was the government 
of Turkey's responsibility to set its budget 
priorities.  Canakci agreed and promised to stay in 
touch on the subject. 
 
4.  (SBU)  Comment:  The constraints of sound fiscal 
policy -- which we support bilaterally as well as 
through the IMF program -- are genuine.  The GOT may 
simply not be able to prioritize this project at this 
time, whatever the on-the-ground need for a new road in 
Izmir.  However, Canakci's personal knowledge of the 
case shows that we have succeeded in getting the GOT to 
pay attention at senior levels to the issue and to the 
USG interest in its equitable and amicable resolution. 
EDELMAN