GOT STICKS TO HARD LINE ON BOT ENERGY PROJECTS

UNCLAS ANKARA 000402

SIPDIS


SENSITIVE


STATE FOR E, EB AND EUR/SE
TREASURY FOR OASIA - MILLS AND LEICHTER
STATE PASS USTR FOR ERRION
USDOC FOR 4212/ITA/MAC/OEURA/DDEFALCO


E.O. 12958: N/A
TAGS: ENRG EINV PREL US
SUBJECT: GOT STICKS TO HARD LINE ON BOT ENERGY PROJECTS

REF: A. (A) ANKARA 777

B. (B) 03 ANKARA 7180

C. (C) 03 ANKARA 7103



1. (SBU) Summary: Despite Energy Minister Guler's recent
public comment that he had a "secret plan" to resolve the BOT
energy disputes by the end of the month, we see no sign of
progress. In fact, the companies and the government are not
even seriously discussing possible compromises. Instead, the
government continues to pressure the companies via a series
of tax and customs-related investigations, while the
companies continue to operate without operating licenses.
Embassy has been pressing hard in recent weeks for the GOT to
adopt a more conciliatory approach, but without success. Our
efforts would benefit by more of an organized campaign on the
part of the companies. However, the local representatives
claim they are "out of the loop," and we have not heard from
U.S.-based executives since mid-November. End Summary.



2. (SBU) Energy Minister Hilmi Guler announced early this
month that he had a "secret plan" to resolve the
long-festering dispute between the government and the BOT
energy companies over tariffs and operating licenses.
However, there appears to be no movement toward a resolution.
The local reps for Trakya and Doga tell us they have no idea
what is going on, and Energy U/S Sami Demirbilek told us
January 16 that there were no serious discussions underway
(or planned) between the government and the companies.



3. (SBU) Demirbilek said a government buy-out of the
companies was a last-resort. The government's preferred
outcome, he said, was for the companies to agree to reduce
their tariffs in line with the GOT's requests. He noted that
the GOT had reduced the companies' input costs (natural gas),
a savings the companies were passing on to consumers, but
still expected the companies to make a further, unilateral
reduction.



4. (SBU) We complained that the government was unfairly
pressuring the companies by withholding operating licenses
and sending a steady stream of tax, customs, and other
inspectors to pour through company books (refs b and c).
Demirbilek said the companies were being allowed to operate
without licenses. As for the inspections, it was not as if
the government had made a policy decision to launch a
coordinated series of investigations. Rather, he said,
individual government inspection arms had decided on their
own to look at company books. The aim, he said, was to press
the companies until they gave in on price. We responded that
treating investors with signed contracts this way was a great
way to keep other would-be investors away from Turkey, and
that U.S. officials were obligated to tell other U.S.
companies the truth about how existing investors were being
treated here.



5. (SBU) Comment: Ambassador and Embassy staff have been
pushing GOT officials hard to resolve this and other
investment disputes (ref a). While we see signs of openness
on some of the disputes, the GOT continues to take a hard
line on the energy BOTs. Our efforts would be strengthened
by an organized campaign on the part of the companies
themselves. However, the local company representatives tell
us that they are "out of the loop," and we have not heard
from U.S.-based company executives since early November.
EDELMAN