TURKISH CONGLOMERATE AND TRADE GROUPS WEIGHING SYRIAN

UNCLAS SECTION 01 OF 02 ADANA 000041

SIPDIS

SENSITIVE

NOT FOR INTERNET DISTRO

E.O. 12958: N/A
TAGS: ETRD ECON ETTC ELAB SY TU ADANA
SUBJECT: TURKISH CONGLOMERATE AND TRADE GROUPS WEIGHING SYRIAN
INVESTMENT

REF: A. O'DOWD REID E-MAIL FEB 7


B. ADANA 35



1. (SBU) Summary and guidance request: AMCON Adana in the last
three weeks has engaged with a large Turkish conglomerate and a
regional trade group whose members are considering investment in
Syria, primarily Aleppo, to familiarize the parties with the
U.S. sanctions against Syria. So far no large players seem to
be deciding to invest aggressively in cross-border joint
ventures, but the issue is still on the regional trade agenda as
Turkey and Syria consider ratification of a recent trade
agreement. We will continue to present such U.S. views on doing
business with Syria, but we would welcome more specific
guidance. End Summary and guidance request.


2. (SBU) In meetings on February 4 and 23, each with one of the
two Konukoglu brothers running the large SANKO group in
Gaziantep - one of Turkey's top ten industrial conglomerates and
a worldwide textile player - AMCON Adana PO has encountered
questions about U.S. sanctions against Syria, U.S. policy
vis-`-vis Syria and the risks to the group should they pursue
investments in Syria. The two brothers recounted pressure that
they have received from the Syria government to make capital
investments in Syria within the context of the new
Turkish-Syrian trade agreement and against the backdrop of their
ongoing importation of Syrian cotton and export of edible oils
to Syria. One outlined possible interest in investing in
ready-mix concrete and cement business and the possible transfer
of less energy efficient yarn and textile processing to Aleppo.


3. (SBU) In both discussions, AMCON Adana PO drew on press
guidance to explain U.S. concerns about Syrian support for
terrorism, lack of constructive role in the peace process,
relationship with Iraqi FRE's, questionable relationship to Iran
and U.S. and U.N. concerns about Syria's continuing presence in
Lebanon. AMCON Adana PO also familiarized the two Konukoglu
brothers with the Office of Foreign Asset Control (OFAC)
websites on Syria and explained the risk that a potential
capital venture in Syria inadvertently could lead them to be
connected with Syrian specially designated nationals, such as
those listed by OFAC. Based on communications with Embassy
Damascus, AMCON Adana also discussed rising labor wage rates and
energy cost trends in Syria to illustrate the potential fleeting
nature of perceived advantages for some industries weighing
investments in Syria.


4. (SBU) The two brothers appeared split in their opinions about
investing in Syria. One clearly wanted to avoid investing in
Syria and the other seemed to be keeping his options open.
However, neither seemed enthusiastic about being in business in
Syria, and even the more non-committal brother was soberly
appraising the pitfalls that PO outlined.


5. (SBU) The Gaziantep Chamber of Industry President attended
the February 4 meeting and seemed eager to learn U.S. thoughts
on investing in Syria. AMCON Adana PO followed up in a separate
meeting with the Industry Chamber's general secretary to
illustrate the information on the OFAC site and to discuss the
para. 3 issues should other chamber members be entertaining
similar moves.

GoT regional investment incentives in mix, too
-------------- --------------


6. (SBU) One Konukoglu brother also raised the GoT's continued
deliberations on domestic regional investment incentive plans
(ref. B) and how he thought current draft proposals were too
generous and too expensive for the GoT treasury. He said that
his conglomerate could "live with" incentives which gave nearby
provinces 10 to 15 percent investment breaks, such as through
reduced taxes or subsidized energy provision, but the proposal
to increase incentives were "unfair and anti-competitive" he
noted. He said such incentive plans also were distorting
investment plans in Gaziantep and elsewhere in southeast Turkey.
(Note: this is also the case in Adana province where some small
Adana-based capital investment in plant already is shifting to
neighboring Osmaniye. End Note.)


REID