TURKEY: SPECIAL BUSINESS REP MERMOUD DISCUSSES

UNCLAS SECTION 01 OF 03 ANKARA 002644 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. -------------- 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. -------------- Energy Bridge -------------- ¶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 ANKARA 00002644 002 OF 003 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. -------------- Year of the Americas -------------- ¶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. -------------- Privatizations Galore -------------- ¶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 ANKARA 00002644 003 OF 003 Frank Mermoud. Wilson