US embassy cable - 03ANKARA3537

UNCLAS SECTION 01 OF 02 ANKARA 003537 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR NEA, EB, EUR/SE 
 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, EPET, IZ, TU 
SUBJECT: DISCUSSION WITH MFA ON TURKEY-IRAQ TRADE AND 
OIL/GAS SHIPMENTS 
 
 
1.  (U)   This cable contains an action request.  See para 8. 
 
 
2.  (SBU) Summary:  DCM met with MFA Deputy U/S for Economic 
Affairs Alev Kilic May 29 to discuss ways in which Turkey 
could begin establishing a normal trading relationship with 
Iraq.  Kilic said the MFA was ready to move forward on 
swapping Iraqi refined fuel for Turkish LPG/benzine, getting 
Kirkuk-Yumurtalik oil flowing again, and normalizing 
cross-border trade and transit with Iraq, but requested that 
the U.S. provide information on each of these issues (see 
action request para 8).  End summary. 
 
 
3.   (SBU)  DCM emphasized to MFA Deputy U/S for Economic 
Affairs Alev Kilic on May 29 that establishing normal trade 
links between Turkey and Iraq was key to the reconstruction 
of Iraq, and would also benefit Turkey's economy. DCM raised 
three situations where Turkey could help.  First, he noted 
that Iraq was facing a critical shortage of Liquid Petroleum 
Gas (LPG) and benzine (gasoline).  The DCM said he understood 
that SOMO had signed a barter contract with the Turkish 
company Delta Petroleum, under which Delta would supply LPG 
and benzine in return for Iraqi refined fuel oil, which Delta 
would export to third countries.  Since the U.S. was 
currently buying these products in Turkey and delivering them 
to Iraq through U.S. military contractor KBR, a swap deal 
with SOMO would help alleviate the shortage in Iraq while 
saving the U.S. taxpayer tens of millions of dollars (and 
providing business to Turkish companies).  DCM requested the 
MFA's assistance in obtaining rapid GOT approval of the deal 
(GOT approval is needed so the goods can cross the border.) 
 
 
4.   (SBU)  Kilic responded that the MFA team that had 
recently traveled to Iraq had reported the LPG/benzine 
shortage in Iraq.  He said the import of oil products from 
Iraq was subject to certain restrictions and was governed by 
the Foreign Trade Undersecretariat.  Kilic said the MFA would 
look favorably on a swap deal, and would pass this on to the 
Trade Undersecretariat.  (Note:  On May 28, Embassy had 
arranged a meeting for Delta executives with Finance Minister 
Unakitan, with whom Ambassador had previously raised this 
issue.  During the meeting, Unakitan called the Foreign Trade 
Under Secretary to instruct him to try to find a solution. 
Foreign Trade chaired an interagency meeting on the subject 
on May 29, which we understand was "positive" but took no 
decision.  Late on May 30, Delta Petroleum executives called 
to report that Finance Minister Unakitan had informed them 
that the Foreign Minister would "clear" on the deal shortly, 
and that he would personally take it to PM Erdogan for final 
approval.  End note) 
 
 
5.   (SBU)  The DCM said the second area where Turkey could 
help was in getting the Kirkuk-Yumurtalik oil flow started 
again. Kilic reponded that the GOT shared our interest in 
resuming the flow, in part because the Turkish refinery at 
Kirikalle was designed for Iraqi crude (reftel).  Kilic said 
that state oil refining company Tupras was ready to start 
importing crude from Iraq, but needed a contact name at SOMO. 
 DCM responded that we would try to provide the GOT a contact 
at SOMO as soon as possible.  The DCM and Kilic agreed that 
the status of the oil already in storage at Ceyhan (which was 
pumped before sanctions were lifted) was not clear, and 
agreed to raise this issue with their respective UN missions. 
 (Note:  Embassy subsequently obtained SOMO contact 
information from ORHA staff and passed it to MFA and Tupras. 
End note) 
 
 
6.   (SBU)  Finally, DCM asked for the GOT's assistance in 
establishing simplified procedures for the passage of cargo 
and people at Habur Gate.  For example, DCM said, U.S. 
military contractor KBR was now moving hundreds of Turkish 
trucks across the border daily, and needed to send some of 
its expat employees with these convoys.  Under current 
procedures a U.S. citizen seeking to cross into Iraq at Habur 
required approval from several GOT agencies after the embassy 
sent diplomatic note, a process which rook weeks. 
 
 
7.   (SBU)  Kilic responded that he had just participated in 
an interagency meeting in which the GOT decided that May 22, 
the day sanctions were lifted, marked the dawn of a new era 
for transit and trade between Turkey and Iraq.  He said the 
GOT would seek to normalize all transit and trade across the 
border, including for non-Turkish citizens, as soon as 
possible.  DCM and Kilic agreed that the entry requirements 
for individuals seeking to enter Iraq were not clear, and DCM 
said he would try to obtain this information if possible. 
Kilic told DCM he would update us as soon as new procedures 
were in place.  In the meantime, he said, the GOT wanted to 
request U.S. assistance on the Iraqi side of the border. 
Kilic said that although authorities in Iraq had announced 
that no customs duties would be levied on imports into Iraq 
until 2004, the "local administration" in Northern Iraq was 
charging trucks from Turkey "fees" at whim.  He asked if the 
U.S. could help resolve this situation.  MFA Coordinator for 
Iraq Reconstruction Ambassador Ahmed Okcun echoed this 
complaint in a May 29 conversation with EconCouns. 
 
 
8.   (SBU)  Action request:  In order to respond to the GOT's 
questions and concerns, and move these issues forward as soon 
as possible, post requests Department and/or USUN's guidance 
on the following issues: 
 
 
--  The legal status of the oil in storage at Ceyhan, which 
was pumped before sanctions were lifted; 
 
 
--  Any information regarding entry requirements for 
individuals seeking to travel to Iraq across the Turkish 
border; 
 
 
--  Any information Department can provide on the GOT's 
claims that local groups are charging levies for imports from 
Turkey into Northern Iraq. 
 
 
 
 
PEARSON