AMBASSADOR, FINANCE MINISTER DISCUSS TERROR

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 003234 SIPDIS STATE FOR E, EB/CBA, INL/C/CP, EB/ESC/TFS, S/CT AND EUR/SE TREASURY FOR OASIA/ADKINS AND MILLS, AND OFAD DIRECTOR NSC FOR GPETERS, MBRYZA, AND TMCKIBBEN E.O. 12958: DECL: 06/09/2014 TAGS: EFIN PTER EINV ETRD TU SUBJECT: AMBASSADOR, FINANCE MINISTER DISCUSS TERROR FINANCE, IMF, INVESTMENT AND BOEING REF: A. (A) ANKARA 1510 ¶B. (B) ANKARA 1232 (U) Classified by Ambassador Eric Edelman. Reasons: 1.4(b,d) ¶1. (C) Summary: In a June 9 meeting to discuss USG recommendations aimed at strenghthening Turkey's regime to combat terrorist finance, Finance Minister Unakitan stressed the importance that his government attaches to the issue, but unfortunately turned for discussion of the details to MASAK President Yarasli. Yarasli played down the problems highlighted in the USG report and argued that most of its recommendations were either being addressed or were not relevant. Ambassador stressed the importance of Unakitan staying personally involved, and won the Minister's commitment to a follow-on meeting after July's Fincen visit. Ambassador also stressed the need for further economic reform, made a strong pitch for the GOT to resolve outstanding problems affecting U.S. investors, and inquired about future relations with the IMF and potential Boeing aircraft sales. Unakitan said the GOT would continue to work with the Fund and to resolve investment issues, but was non-committal on Boeing. End Summary. ¶2. (C) Finance Minister Kemal Unakitan asked to see Ambassador June 9 to discuss terrorist finance, in response to the Ambassador's May 27 letter forwarding the executive summary of the report of the U.S. Financial Systems Assessment Team. That report had recommended several measures to strengthen Turkey's regime to combat terrorist financing, including improved legislation, efforts to strengthen Turkey's Financial Crimes Investigative Unit (MASAK),training of judges and prosecutors, and inclusion of alternative remittance systems in Turkey's control regime. ¶3. (C) Unakitan said the GOT attached great importance to combatting terrorist finance and to passage of new legislation designed to strengthen MASAK. Unfortunately, he then asked MASAK President Yarasli, whose weakness is a big part of the problem on this issue, to respond to the executive summary in more detail. Yarasli played down the problems highlighted in the executive summary, and argued that MASAK was fully capable of carrying out its responsibilities. He said pending legislation would define terrorism as a criminal offense, and otherwise would fully comply with FATF recommendations. He denied that there were "alternative remittance systems" in Turkey, said the government already was undertaking needed training of judges and prosecutors, and questioned the need for an "Intermittent Legal Advisor" from the Justice Department. ¶4. (C) Ambassador reiterated the importance of Unakitan making this issue a personal priority and of Turkey working with the international community to strengthen its regime. He proposed that, following this summer's visit by a Fincen team, he and the Minister meet again to discuss progress to date as well as ways to enhance bilateral cooperation. Yarasli interjected that MASAK would stay in touch with the Embassy, but Unakitan agreed to a follow-on meeting with the Ambassador (much to Yarasli's chagrin). ¶5. (SBU) Turning to the broader economy, Ambassador expressed disappointment over the GOT's inability to solve any of the outstanding disputes and problems affecting U.S. investors. He noted that, since their last discussion, a U.S. company (Dillingham Construction) had decided to pull out of Turkey because Turkish courts had refused to apply an international arbitral award in its favor. Such judicial decisions, the Ambassador continued, were a major deterrent to U.S. investors. He again stressed how useful it would be for Turkey if it could resolve at least 1-2 of the outstanding investment problems ahead of the President's visit. Unakitan took the point, and noted that the GOT had just sent to Parliament a zoning law designed to address the Cargill issue. ¶6. (SBU) Ambassador said it would also be good if the GOT could clarify how it plans to move forward on privatization, in the aftermath of failures on Tekel, Petkim and, most recently, Tupras. Similarly, investors wanted to know what Turkey's future relationship with the IMF would be. Markets had rallied based in large part on prudent fiscal and (independently-set) monetary policy, and would view the GOT's decision vis-a-vis the IMF as an important indicator of its intention to continue such policies. ¶7. (SBU) On privatization, Unakitan -- referring to the Tupras issue - noted that the courts were independent, adding that many judges were opposed to privatization and did not understand markets. He noted that the Justice Ministry is undertaking efforts to improve the effectiveness of the judicial system, an effort that would be greatly enhanced by the EU accession process. On the IMF, Unakitan said he would meet with the Fund mission the following day, and would make clear that the GOT was determined to continue to work with the IMF. He noted that the Prime Minister had said the same thing over the weekend. (Comment; Actually, the Prime Minister has made conflicting remarks, and even Unakitan did not clarify what he meant by "work with" the Fund. End Comment) ¶8. (SBU) Ambassador concluded by asking about Boeing's proposed sale of aircraft to Turkish Airlines. The Minister said he had had a good meeting with Boeing in the U.S., and looked forward to another meeting with the company in Turkey shortly. He was, however, non-committal. EDELMAN