IRAQ DEBT REDUCTION: TURKISH BUREAUCRATS RELUCTANT

C O N F I D E N T I A L ANKARA 006354

SIPDIS

TREASURY FOR INTERNATIONAL AFFAIRS - MILLS, DONOVAN, RALYEA

E.O. 12958: DECL: 11/03/2007
TAGS: EFIN IZ TU
SUBJECT: IRAQ DEBT REDUCTION: TURKISH BUREAUCRATS RELUCTANT

REF: A. STATE 238110


B. ANKARA 854

Classified By: AMBASSADOR ERIC S. EDELMAN FOR REASONS 1.4 (B) AND (D).


1. (C) Post discussed ref a talking points with MFA
officials and Treasury Undersecretary Ibrahim Canakci.
Neither was forthcoming: Canakci said the issue required
futher "study," while working level MFA officials were more
negative.


2. (C) Based on these and earlier discussions (ref b),we
expect Turkish bureaucrats and financial officials to resist
debt forgiveness and to not issue public or private
statements of support before or after the Paris Club meets.
They are likely to continue to assert that as a country that
is itself a beneficiary of the financial support of the
international community, and with its own financial problems
and relative underdevelopment, Turkey cannot be expected to
bear costs comparable to richer countries. More technically,
they also assert that the nature of most of Turkey's claims
is different from that of other creditors since the large
majority ($1.3 billion out of $1.6 billion total) are owed to
the Turkish central bank. They say that forgiveness of such
debts could undermine the independence of the central bank.


3. (C) Comment: We do not find either of these arguments
convincing. However, multilateral debt forgiveness is
uncharted territory for Turkey, and a legal and financial
framework to implement debt cancellation -- including for
compensating the Central Bank for its balance sheet losses --
appears to be lacking. Given Turkey's enormous stake in the
prosperity and success of Iraq, we believe it can, should,
and will find the ways and means. We intend to pursue this
question with the Foreign Minister and Prime Minister in the
near future.


4. (U) Baghdad minimize considered.
EDELMAN