TURKEY: SPECIAL BUSINESS REP MERMOUD DISCUSSES

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SIPDIS

USDOE FOR CHARLES WASHINGTON
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EINV BEXP TU ZK
SUBJECT: TURKEY: SPECIAL BUSINESS REP MERMOUD DISCUSSES
CENTRAL ASIA


Sensitive But Unclassified. Please handle accordingly.

This cable was coordinated with ConGen Istanbul.


1. (SBU) SUMMARY: Following closely on the heels of the
Secretary's visit to Turkey, which broached an enhanced

SIPDIS
bilateral strategic vision and dialogue on economic - as
well as political and security issues, EB/CBA Special
Representative Frank Mermoud conducted a series of meetings
in Istanbul and Ankara May 3-4, focusing on potential for
U.S.-Turkey cooperation in third countries including Central
Asia and the Caucasus. Mermoud found strong interest from
both Turkish government and business officials on developing
ways to expand commercial engagement and cooperation in
Central Asia and elsewhere. Also, Mermoud discussed
opportunities to expand U.S.-Turkey trade and investment
with Privatization Administration, Foreign Trade
Undersecretariat, energy officials, and businesspeople,
including pharmaceutical reps. End Summary.

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Bridge to Central Asia
--------------


2. (SBU) Meeting with the Istanbul-based Turkish-Azeri
Business Council, Mermoud and Chairman Cengiz Gul agreed
that a brainstorming session between the council and other
Turkish-U.S. economic organizations to explore areas for
cooperation would be a useful way forward in expanding U.S.-
Turkey commercial cooperation in third countries. Gul said
Turkey is the largest foreign investor in Azerbaijan and its
companies had won several billion dollars in construction
contracts there. Mermoud said the U.S. hopes to see
Turkey's economic influence in the region expand as regional
economic anchor.


3. (SBU) In Ankara, Representatives of TOBB (the leading
Turkish business federation) agreed with Mermoud that Turkey
was uniquely positioned as a catalyst for regional
integration and cooperation, both with respect to Central
Asia and also with respect to its EU accession process. The
TOBB officials said they would be sending a large Turkish
business delegation to Baku at the end of 2006 or in early

2007. They said that TOBB had helped create a business
chamber network in Central Asia and Turkey. The TOBB reps
cited the revitalization of the historical Silk Road for
modern transportation and trade as a key initiative on which
they are cooperating with the U.S. Chamber of Commerce.
Foreign Trade Undersecretariat (FTU) officials also
expressed strong support for cooperation in third countries
like Central Asia. TOBB also cited other initiatives such
as modernization and expansion of Turkey's border crossings
with Georgia, Iraq, and other neighbors and working with the
GOT to revitalize the economic dimension of the Black Sea
Economic Cooperation (BSEC) organization.

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Energy Bridge
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4. (SBU) At a separate lunch devoted to energy issues,
Mermoud and other invitees agreed that Turkey was positioned
to build on first oil from BTC to establish other regional
energy links from Central Asia and Iraq to Europe. A state
pipeline company BOTAS official emphasized that Turkmen or
Kazakh gas volumes must be secured to provision a serious
bridge to Europe (and as an alternative to Iran). He said
that Turkey had incremental capacity of over 15 BCM pa
available in its trunk line, but to feed a potential Nabucco
pipeline to central Europe there would have to be a new

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dedicated pipeline through Turkey. A state oil company TPIC
official said that the U.S. should advance and lead oil and
gas business opportunities in Iraq, taking advantage of
Turkish companies' contacts, experience, and equipment in
Iraq.

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Year of the Americas
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5. (SBU) Foreign Trade Under-Secretariat (FTU) DG for
Agreements Sevket Ilgac described the GOT's plans this year
for the "Year of the Americas" campaign, aimed at increasing
growth in trade with the U.S. and complementing the efforts
of TOBB and the American Turkish Council (ATC). FTU has
targeted the six states of New York, Georgia, Florida,
Illinois, California, and Texas. The FTU officials said
that they were also ready to assist U.S. companies in
Turkey, noting also that Turkey could serve as a platform
for the U.S. for third countries; in addition to Central
Asia, he mentioned Libya, Algeria, and the Caucasus. The
trade officials also expressed a desire to improve
commercial relations with U.S. pharmaceutical companies and
assure restarting of fuel product shipments from Turkey to
SOMO (State Oil Company) in Iraq (in fact, restarted on May
7)


6. (SBU) Mermoud held separate meetings with pharmaceutical
reps in Istanbul and the Privatization Authority (PA) in
Ankara. Representatives of two leading U.S. research-based
pharmaceutical companies offered a downbeat assessment of
recent developments, noting that their problems extend
beyond Turkey's inadequate implementation of data
exclusivity to pricing and registration difficulties. They
concurred with Mermoud's suggestion that a letter from the
U.S. Trade Representative or Secretary of Commerce to Prime
Minister Erdogan on the issue would be a useful step
forward, as without attention at the "highest level" of the
Turkish government, nothing can be accomplished. While FTU
officials could not dispute pharmaceutical problems, they
were hopeful that they could be resolved.

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Privatizations Galore
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7. (SBU) Coming off a banner year in 2005 (Turk Telekom,
Erdemir/Steel, and TUPRAS/refinery),Privatization
Administration (PA) President Metin Kilci described targets
for the coming year: sugar companies, port facilities-
particularly Istanbul's Galataport, the state petrochemical
company (PETKIM),the cigarette state firm (Tekel),a bank,
and the electricity distribution (TEDAS). In response to
Mermoud's questions related to the interest of U.S. firm AES
in electricity distribution, Kilci said that he expected
imminent passage of required legal amendments, finalization
of tariff structure, one-on-one meetings with investors, and
possible addition of a provision for international
arbitration ("after exhausting domestic legal recourse").
The PA President said he hoped to achieve transfer of 1-3
regional networks by the end of 2006. Kilci said the PA was
waiting for a Capital Market Board ruling to pursue an IPO
for over 25% of Turkish Airlines, aimed at reducing the
GOT's share to less than 50%. Longer-term, Kilci said that
state pipeline company BOTAS and state electricity
transmission company TEIAS were under study. Finally,
Kilci noted that the high state court stay on the refiner
TUPRAS privatization would be overcome.


8. (U) This cable was cleared by Special Representative

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Frank Mermoud.

Wilson