TURKEY: SCENESETTER FOR CODELS BEREUTER, HASTERT,

UNCLAS SECTION 01 OF 06 ANKARA 008110

SIPDIS


CENTCOM AND EUCOM: PLEASE PASS TO POLADS AND J-5


E.O. 12958: N/A
TAGS: PREL PGOV PINS ECON OTRA TU
SUBJECT: TURKEY: SCENESETTER FOR CODELS BEREUTER, HASTERT,
ISSA, SMITH



1. Summary: Turkey's Nov. 3 national elections produced a
landslide victory for the Islam-influenced AK Party, which
thus far has chosen to follow a reasonable path with emphasis
on EU membership. The economy is on eggshells, and the new
government will need to stick to the IMF-backed reform
program to avoid another crisis. Turkish officials are
concerned about the possible negative effects on the economy
of an operation in Iraq, stress the need for international
legitimacy and a mandate from the UNSC, and state their
preference for a peaceful process of disarmament. End
summary.


--------------
Domestic Political Snapshot
--------------



2. Islam-influenced Justice and Development (AK) Party's
landslide victory and Establishment standard-bearer
Republican People's Party's (CHP) distant second-place finish
in Turkey's Nov. 3 general elections cuts the number of
parties in parliament back to only two for the first time in
decades. More than anything else, AK's victory reflects
broad public dissatisfaction with business as usual: in
particular on pocketbook issues, corruption, and the tired
direction given by a group of political leaders, some of whom
have been on the scene for over 40 years. AK has made the
drive for EU membership -- including passage of necessary
economic and political reforms -- its top priority. AK
leader R. Tayyip Erdogan is currently not eligible to stand
for Prime Minister because of past legal problems, stemming
from his conviction for the public recitation of a poem.
However, AK will form a government with almost the two-thirds
majority needed to allow it to amend the Constitution (to
restore Erdogan's political rights),and may be able to find
the remaining votes needed from independent M.P.s. Final
election results show that (1) 45% of the votes cast will not
be represented in the new parliament because they went to
parties unable to cross the 10% vote threshold; (2) upwards
of 60% of the vote went to non-Establishment parties; (3) the
traditional center-right parties, which have dominated
Turkish politics for generations, got only 15% of the vote.
While P.M. Ecevit and Kemalist pundits professed shock at the
election results, a varied spectrum of other commentators and
leading businessmen made balanced and forward-looking
assessments. The current government under Ecevit will
continue as a lame-duck administration until the new AK
government receives a vote of confidence in Parliament,
probably sometime in early December.


--------------
EU and Human Rights
--------------



3. In February, March and August Parliament passed extensive
reforms intended to meet the political requirements for
European Union membership. The EU Commission in its October
report praised the reforms, but stated that "considerable
further efforts are needed" to bring Turkey into compliance
with membership criteria. It recommended that the EU: 1)
enhance its support for Turkey's pre-accession preparations,
and provide additional resources; 2) revise the Accession
Partnership agreement; and 3) extend and improve the
functioning of the Customs Union. The Turkish Government
criticized the report for failing to give proper credit for
the reform effort, but remains committed to EU membership.
With strong U.S. support, Turkey is lobbying EU officials and
member states. The Turkish Government wants the EU at its
December 12-13 Summit in Copenhagen to set a date to begin
accession talks. Some EU-member-state leaders have raised
the possibility of a "conditional date," contingent upon
further reforms.



4. The three reform packages are focused on improving human
rights, applying to such areas as free speech, pre-trial
detention, and the rights of religious groups, among others.
Parliament abolished the death penalty during peacetime and
lifted bans on private courses and TV broadcasts in Kurdish
and other non-Turkish languages.



5. The Turkish government does not recognize the ecumenical
nature of the Patriarchate in Istanbul. Nor has the
government changed its position against allowing the
reopening of the Ecumenical Patriarchate's seminary on the
island of Halki despite the Patriarchate's continual
requests; the seminary was closed in 1971 when the Turkish
government nationalized private institutions of higher
learning. In October, the Ambassador accompanied a
delegation from the Archons of the Order of Saint Andrew the
Apostle in New York during a visit to the Patriarchate and
Halki and meetings in Ankara.


--------------
Economic Situation
--------------



6. Turkey's financial situation remains fragile, with the
main vulnerability being the country's ability to continue
servicing a large sovereign debt burden in 2003. Concerns
with the effects of an external shock on their own debt
sustainability underlie many Turks' misgivings -- both in
private sector and in government -- with an Iraq operation.
Turkey has, nevertheless, performed well for the first 18
months under an IMF-backed economic reform program. By year
end 2002, inflation will be cut in half (to 34 percent),
growth is expected to come in at 4 percent (after a deep
recession in 2001),and the banking sector is much better
regulated and as a result in a stronger position than it was
before the 2001 crisis. Political uncertainty, however, has
cost Turkey in terms of higher interest rates on government
bonds which will add to Turkey's financing bill next year.
The focus now is on the direction of the AK-led government
that will emerge in the coming weeks. The expectation in the
markets is that the new administration must continue with the
existing IMF-backed reform program. Any deviation from this
program -- especially on fiscal austerity and on structural
reforms -- will again cause uncertainty and interest rates to
rise. The new government will have to do everything right in
order to retain investor confidence and to avoid a serious
financing problem in 2003 -- with or without an external
shock.


--------------
Foreign Investment
--------------



7. Attracting more foreign direct investment is a key
element of Turkey's reform program. Turkey currently
receives very small flows of foreign direct investment,
compared with other emerging market countries. For instance,
Poland attracts $4-5 billion per year on average, while
Turkey gets less than $1 billion (thus far in 2002, Turkey
has only received $180 million in foreign direct investment).
Political and economic instability, and unresolved business
disputes involving large U.S. companies, have hurt Turkey's
business image and limited investment flows. The AK Party
has said that improving the business climate and attracting
more FDI is a high priority.


--------------
Bilateral Trade
--------------



8. On bilateral trade ties, our trade is roughly in balance
-- each country exports about $3 billion to the other. In
order to boost trade with Turkey, the President has proposed
creating a Qualifying Industrial Zone (QIZ); products
exported from a QIZ enter the U.S. duty free provided they
meet certain conditions. Legislation authorizing QIZs in
Turkey is currently pending in Congress. Other key trade
issues involve Turkish action to enhance protection of
intellectual property rights and to reduce tariff and
non-tariff barriers to U.S. agricultural exports.


--------------
Energy
--------------



9. On regional energy issues involving Turkey, we have seen
important progress on the realization of the East-West energy
corridor from the Caspian to the Mediterranean, which
continues to be a major U.S. policy objective in Turkey. The
Baku-Tbilisi-Ceyhan (BTC) oil pipeline is firmly on track,
and is entering the construction phase. The governments of
Turkey and Azerbaijan have recently reached final agreement
on a gas sales purchase agreement for the
Baku-Tbilisi-Erzurum, or Shah Deniz, gas pipeline, which
likely will be sanctioned by the project owners in February

2003. The U.S. is working closely with the Government of
Turkey to help it achieve its goal of becoming a transit
country for Caspian gas to Europe.


--------------
Greece
--------------



10. Relations between Turkey and Greece are better now than
they have been in decades. The positive climate grew out of
the personal friendship between Greek F.M. Papandreou and
former Turkish F.M. Cem and has been largely sustained
despite Cem's departure from government in July. Greece
appears to have become one of the most vocal supporters in
the EU for an accession negotiation date for Turkey, and
Greek P.M. Simitis was the first foreign leader to
congratulate Erdogan on AK's electoral victory.
Nevertheless, potential problem areas remain in the form of:
1) territorial issues related to sea and airspace in the
Aegean; 2) continental shelf; and 3) Cyprus.


--------------
Cyprus
--------------



11. The Cyprus issue has long kept Turkey and Greece at
odds. Settlement talks continue under the auspices of the
UN. We believe that there is an opportunity for a lasting
solution on the island in the context of the EU accession
process. Nevertheless, Turkish officials have raised the
public specter of a potential "train wreck" that could affect
not only the situation on the island but also Greek-Turkey
and EU-Turkey relations. The admission of Cyprus to the EU
before a settlement has been reached, and before Turkey has
received at least a date for accession negotiations, is
anathema to Turks. The landslide victory of AK in the Nov. 3
elections, however, could create some room for maneuver.
While sympathizing with Turkish sensitivities, AK has
criticized "Turkish Republic of Northern Cyprus" leader
Denktash for his mismanagement of the "TRNC" and, as a
single-party government with a significant mandate from the
Turkish public, might be more open to seeking a solution
where past Turkish governments have remained intransigent.


-------------- -
Armenia/Nagorno-Karabakh (NK) and Central Asia
-------------- -



12. Armenian diaspora attempts to have Western legislatures
pass resolutions condemning what Armenians consider a 1915
genocide by the Ottoman Empire continues to roil relations
between Ankara and Yerevan. Moreover, normalization of
relations is likely to occur only with the resolution of the
Nagorno-Karabakh conflict between Armenia and Azerbaijan,
Turkey's closest ally in the region; such a solution would
have to resolve the status of NK, which is Azerbaijani
territory but currently occupied by Armenia; and the question
of a land corridor across Armenia to connect Azerbaijan's
main territory with its exclave Nakhcivan. Turkey has had
aspirations to play a leading role in Central Asia for the
past decade, but its initial attempts after 1991 reminded
Central Asian states of the Big Brother approach of Soviet
Russia; uneven Turkish economic growth led Central Asians to
question the value of a special relationship with Turkey; and
some Central Asian states also grew concerned that Turkish
promotion of new schools set up in the region under the aegis
of Turkish Islamic figure Fethullah Gulen was a wedge to
introduce more militant Islam into the region. As a result,
Turkey had to scale back its ambitions. Growth of Turkish
influence in the region will depend to a great extent on how
well Turkey demonstrates its economic vigor and ability to
maintain a moderate Islamic identity.


--------------
OEF and the Global War on Terrorism (GWOT)
--------------



13. Our only predominantly Muslim NATO Ally, Turkey has
participated actively in GWOT. In doing so, it has supported
our message that GWOT is not a war on Islam. In the
aftermath of 9/11, the Turks issued strong public statements
condemning the attacks, and, in the face of considerable
public opposition, pushed through a parliamentary resolution
authorizing the deployment of Turkish troops abroad for
Operation Enduring Freedom (OEF) and the stationing of
additional foreign troops in Turkey. Turkey was one of the
first countries to offer Special Operations Forces for OEF.
Turkey also streamlined customs procedures for equipment used
for OEF, granted blanket permission for US OEF aircraft to
operate and refuel in Turkish airspace (over 5,000 flights to
date),dispatched liaison officers to CENTCOM, EUCOM and to
Kandahar, offered the use of additional air bases for
operations through Turkey, offered two KC-135 tankers in
support of air operations, and increased its force protection
posture at US military facilities in the country.


--------------
ISAF
--------------



14. Turkey was one of the first countries to contribute
forces to the International Security Assistance Force (ISAF)
in Afghanistan. In June 2002, Turkey assumed the leadership
role and currently has 1,400 troops on the ground. Turkey's
tenure as ISAF lead nation ends o/a December 20 and the Turks
are looking to the USG -- their key strategic partner -- to
have a successor in place as close to that date as possible.
The Germans/Dutch have agreed to take over ISAF command from
the Turks, but have said they will not be able to do so until
March 2003 at the earliest. The US is working with the
Germans and Dutch to speed up the transfer of ISAF command so
as to minimize the extra time (and money) the Turks are
required to remain in Kabul.


--------------
Iraq
--------------



15. The Turkish government has consistently preferred a
peaceful solution or a solution legitimated by new UN
Security Council resolutions. A majority of Turks worries
about the consequences of military action against Iraq;
Turkey vigorously opposes creation of an independent Kurdish
state in Northern Iraq. However, should the U.S. decide to
initiate military operations, Turkey would likely support us,
while insisting on guarantees that its interests be protected
and seeking economic compensation for projected losses. AK
Party has said Turkey,s position will depend on the mandate
established by UNSC resolutions. The well-know Turkish
concerns include damage to the fragile Turkish economy
(especially investment and tourism); the potential for
Iraq,s disintegration/the emergence of an independent
Kurdish state in northern Iraq; Iraqi Kurdish control of
Mosul or Kirkuk oil fields; preventing refugee flows into
Turkey; and protection of the Iraqi Turkmen population. The
Turks will also expect the U.S. to live up to President
Bush,s January 2002 commitment to PM Ecevit that the US
would consult with Turkey every step of the way on Iraq.


--------------
NATO
--------------



16. Turkey continues to view NATO as its strongest link to
Europe and therefore places great importance on the Alliance
and its continued viability. It supports a robust
enlargement but worries that the organization's enlargement
may erode NATO's efficiency and ability to act. The Turks
also seek to ensure that their own influence in the Alliance
is not diluted by the addition of new members and that NATO's
presence in Turkey is not trimmed in the process of NATO
command structure reform.


--------------
ESDP
--------------



17. Permanent arrangements for NATO-EU cooperation in the
form of Berlin Plus are currently stalled due to the lack of
an agreement on the participation of non-EU NATO Allies in
ESDP in return for guaranteed access to NATO assets. The US,
Turkey and other Allies are opposed to ad hoc arrangements
that would allow the EU to "deploy" ESDP in the Balkans
pending permanent resolution of Berlin Plus. In the
meantime, key players, including the UK, Turkey, Greece, and
EU HiRep Solana are working to negotiate a deal that will
satisfy Turkey's national security concerns and the EU's need
to protect its sovereignty of decisionmaking. The Turks will
expect US backing on ESDP if they believe the EU is pressing
for an agreement that compromises Turkish national interests.


--------------
Military Capabilities
--------------



18. Turkey spends one of the highest proportions of its GNP
among all Allies on defense and is supportive of US efforts
to prod other Allies to increase their capabilities. Turkey
is undertaking a serious military modernization program over
the next several years, but is hampered by the ongoing
economic crisis. While Turkey may support the concept of
"niche capabilities" in NATO, it likely will continue to
invest in its own defense priorities given its perception
that threats to Turkey are different than those to other
Allies and its belief that NATO (i.e., the Europeans) may not
invoke Article V to protect Turkey against Kurdish terrorists.


--------------
Arms Sales
--------------



19. Bell Textron has been in contract negotiations with the
Turks for nearly two years for 50 anti-armor helicopters
based on the U.S. Marine Corps' AH-1Z King Cobra, a contract
valued between $1.5-2B dollars. Negotiations have bogged
down over Turkish demands that Bell, while only a
sub-contractor to Turkish aircraft industries, assume an
inordinate degree of risk. We are supporting Bell,s efforts
to develop a roadmap to reach contract signature by the end
of the year. The Turks remained concerned that after
contract signature, the sale will get bogged down in
licensing and Congressional notification process.


-------------- -
Indigenous and Transnational Terrorist Attacks
-------------- -



20. In the aftermath of the Gulf War, the predecessor to the
Turkish terrorist group Revolutionary People's Liberation
Party/Front (DHKP/C) assassinated four Americans in Turkey
and carried out numerous bombings of U.S. targets (mostly
private sector businesses, although two rockets were directed
toward the Consulate General in Istanbul). Other Turkish
terrorist groups with anti-western sympathies include Turkish
Communist Party/Marxist Leninist (TKP/ML),Turkish Workers
and Peasants Revolutionary Army (TIKKO) and Islamic Greater
Eastern Raiders/Front (IBDA/C). A renewed conflict with Iraq
could cause these groups to actively target U.S. interests in
Turkey. Al-Qaida threats to target U.S. bases in Turkey have
been pubic knowledge for some time. We can also assume Iraqi
intelligence operatives could plan subversive operations in
Turkey should the Turks offer support to the U.S. initiative
in Iraq. The Turkish National Police (TNP) are quite
responsive in their role as protector of U.S diplomatic and
military interests in Turkey. TNP has provided enhanced
coverage at our two most vulnerable facilities (Istanbul and
Adana),closing two city streets bordering each facility.
Mission Turkey is confident the TNP will continue their high
level of responsiveness for U.S. facilities.


--------------
Homeland Security Issues
--------------



21. In FY 2002 US Embassy Ankara and American Consulate
Istanbul adjudicated approximately 70,000 non-immigrant visa
applications -- most from Turks -- and more than 6,000
immigrant visa applications. Ankara and Istanbul also
processed around 6,000 Iranian non-immigrant visa
applications. Iran's status as a state sponsor of terrorism
poses a particular challenge in these cases. Embassy Ankara
last year submitted more than 295 names of potential
terrorists for inclusion in the Consular Lookout namecheck
system. This year we have added some 300 more names to the
system. The use of supplemental application forms and other
measures to improve our ability to scrutinize each
application has lengthened the entire process. While
consular officers offer as expeditious service as possible,
their primary responsibility is to carry out U.S. law and to
ensure those who receive visas will not pose a threat to the
U.S. As new Homeland Security visa requirements are
implemented, such as the inclusion of biometric data on
visas, we will have new challenges to process.
--------------
Security Issues for Mission Turkey
--------------



22. Embassy Ankara has outgrown its 1950's era chancery.
Driven by intense U.S. policy interests in Turkey, staff
continues to expand but we have no more room. Three
buildings on the compound have minimal setback to Paris
Caddesi and are a major concern. Efforts are underway to
consolidate the staff of the Public Affairs Building (located
in a renovated apartment building outside of perimeter wall)
onto the compound. This will improve our security and allow
us to concentrate our resources on the chancery compound.
The ongoing facility space plan will relocate many offices as
far away from the perimeter as possible to reduce overall
vulnerability. Current space conditions necessitate the use
of the two annex buildings along the perimeter. While we
have deployed local guards and TNP to reduce the perimeter
threat, a longer term solution is needed The Consulate in
Istanbul will move from the current historic but exposed
quarters to new office building, meeting security standards,
next spring.


--------------
Facility to House Consulate Adana
--------------



23. The lease for the current Consulate expires in 12/02 and
landlord does not wish to renew. Embassy team began an
exhaustive search for a new Consulate site for Adana in
2000/2001 with no success. The commercial real estate market
in Adana cannot meet our physical security standards for this
type facility. A possible solution we explored using space
as a tenant in a wing of the Hilton Hotel reconstructed to
DOS standards recently disappeared. We continue to experience
difficulty finding options to relocate our Consulate in
secure offices.
PEARSON