US embassy cable - 03ANKARA2052

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 002052 
 
SIPDIS 
 
 
STATE FOR E, P, EUR/SE AND EB 
TREASURY FOR OASIA - MILLS AND LEICHTER 
NSC FOR QUANRUD AND BRYZA 
 
 
E.O. 12958: DECL: 03/27/2008 
TAGS: ECON, EFIN, PREL, TU 
SUBJECT: DEMARCHES ON WAR SUPPLEMENTAL AND BOLSTERING 
MARKET CONFIDENCE 
 
REF: A. (A) STATE 77719 
     B. (B) STATE 74060 
 
 
 (U) Classified by Ambassador W. Robert Pearson.  Reasons: 
1.5 (b,d) 
 
 
1.  (U) This is an action request -- see para 9. 
 
 
2.  (C) Summary:  DCM delivered ref A and B points to 
Treasury U/S Oztrak and MFA Deputy U/S Kilic March 26-27, and 
EconCouns separately presented them to State Planning U/S 
Tiktik and AK Deputy Reha Denemec.  DCM stressed that USG was 
very concerned about the lack of market confidence in GOT 
economic policies, and strongly urged the government to take 
tangible steps quickly to restore confidence.  He noted that 
USG assistance could be helpful in that context, but that 
Congress' willingness to approve that assistance would depend 
greatly on Turkish cooperation in the days and weeks ahead, 
particularly on Northern Iraq.  GOT officials welcomed the 
U.S. move as a sign the Administration wants to maintain the 
relationship, but stressed that they would not rely on 
possible assistance in their economic planning.  While our 
economic interlocutors did not delve into the forward 
military cooperation that could help garner Congressional 
support for the Administration's request, we would welcome 
guidance in the expectation that such questions will be 
forthcoming.  End Summary. 
 
 
3.  (C) In meetings March 26 and 27, DCM delivered reftel 
points to Treasury U/S Faik Oztrak and MFA Deputy U/S Kilic, 
while EconCouns presented them to State Planning U/S Tiktik 
and AK Deputy Reha Denemec, who is close to PM Erdogan.  We 
stressed USG concern about the fragility of Turkey's public 
finances, as market players tell us their confidence in the 
government is extremely low, and urged the government to move 
rapidly to conclude its LOI with the IMF and to take 
additional steps to bolster market confidence.  DCM stressed 
that the President's decision to include the assistance 
request in the War Supplemental reflected U.S. recognition of 
Turkey's importance and economic problems, but warned that 
improved cooperation on Iraq, particularly Northern Iraq, 
would be critical in overcoming Congressional skepticism 
about the aid in light of recent unfavorable developments. 
 
 
4.  (C) Treasury U/S Oztrak and SPO U/S Tiktik welcomed the 
U.S. move and noted that it had already bolstered the 
markets, but said the government would not count on the money 
in formulating its economic plans.  They, along with MP 
Denemec, acknowledged Turkey's financial fragility and the 
lack of market confidence.  They argued that the government 
was fully committed to implementing the reform program, 
including reaching final agreement with the IMF, and noted 
recent comments to that effect by PM Erdogan and Deputy PM 
Sener.  DCM/EconCouns responded that investors wanted more 
than rhetoric; they were insisting on concrete steps, 
including rapid completion of the 4th review, accelerated 
privatization, and steps to improve the investment 
environment.  Oztrak pointed out that the government had 
taken many tangible steps, including approval of new taxes, 
and would shortly approve a very tight budget and 
long-delayed direct tax reform.  He conceded, however, that 
the government, like its predecessor, tended to emphasize in 
public those policies that played to its constituents (i.e. 
populist policies), while staying mum on its more 
"responsible" policies. 
 
 
5.  (C) Deputy U/S Kilic also welcomed the proposed U.S. 
assistance, saying it not only bolstered market confidence 
but also indicated that the bilateral relationship was back 
on track.  He understood it involved double conditionality: 
approval by the Congress, and -- even assuming that approval 
-- continuing Turkish cooperation on Iraq.  He noted that 
Turkey was well aware of Congressional sensitivities -- they 
had experience with the Congress on such matters in the past 
-- and thus saw this as a good test case.  DCM responded that 
the decision clearly reflected the Administration's desire to 
assist Turkey, but that we were also looking to Turkey to 
find ways to help us on Iraq.  He noted that the Embassy was 
keeping track of Turkish cooperation, such as recent 
permissions to allow U.S. aircraft to make emergency 
landings, but believed more could be done. 
 
 
6.  (C) Kilic said Turkey had plenty of goodwill and was 
anxious to restore the "long-cherished" bilateral 
relationship.  It wanted to do that, irrespective of the fate 
of the proposed assistance package.  He acknowleged that 
recent developments had harmed the relationship, and noted 
that the GOT had made several forthcoming moves in recent 
days to help repair the damage.    Kilic also noted Turkey's 
interest in participating in Iraq reconstruction, and asked 
that the Embassy provide whatever information it could. 
 
 
7.  (C) Comment:  While we received some questions about 
financial conditions of the supplemental request, none of our 
interlocutors posed questions about military cooperation 
requirements.  They chose to view the request as a sign that 
there is a U.S. commitment to a strong relationship with 
mutual support, but like most of Turkey, they did not look 
proactively on how they could act to demonstrate Turkey's 
support for the U.S.  While they obviously recognize the 
possibility that Congress will not support the 
Administration's request, they seem unwilling to look for 
areas where they might be helpful.  We recognize that reftel 
makes no direct linkage between assistance and support for 
U.S. military operations in Iraq.  Nonetheless, it could be 
helpful to offer the Turks some ideas of support that would 
strengthen the Administration's arguments in seeking 
Congressional approval of the assistance request.  Such 
support might include: 
 
 
-- Stronger political support of the coalition in 
international fora; 
 
 
-- Facilitating humanitarian relief across the border; 
 
 
-- Support for commerical logistical resupply of non-military 
items for U.S. forces in Northern Iraq; 
 
 
-- Continuing support for emergency landings at Turkish 
airbases for refueling or other "humanitarian" reasons; 
 
 
-- An established, flexible approach to medical evacuation 
and SAR needs coming out of Iraq for assistance at medical 
facilities in Turkey, such as Incirlik; 
 
 
8.  (C) Any additional military requests, such as basing CSAR 
assets or tankers from Turkey, that would require further 
Parliamentary approval, must be treated in a different 
category.  PM Erdogan has been quoted repeatedly as saying 
another motion is not under consideration.  Many speculate 
such an idea has become increasingly problematic as coverage 
of the ongoing war has turned Turkish attitudes even more 
negative. 
 
 
9.  (C) Mission would appreciate any further guidance 
available on how the assistance request would relate to 
further support elements we seek. 
PEARSON