CARGILL'S SWEETENER PLANT CONTINUES TO SOUR IN TURKEY

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SIPDIS

DEPT PASS USTR FOR LERRION
TREASURY FOR OASIA
USDOC/ITA/MAC/CRUSNACK
DEPT PASS EXIM FOR MARGARET KOSTIC
USDA OSEC FOR DEP U/S TERPSTRA
USDA FAS FOR OA YOST; ITP/SHEIKH; FAA/DEVER

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EAGR EINV BEXP TU
SUBJECT: CARGILL'S SWEETENER PLANT CONTINUES TO SOUR IN TURKEY



1. (SBU) Cargill representatives will meet with Turkish PM Erdogan
on September 30 in New York to once again ask for his intervention
in continuing legal troubles regarding Cargill's sweetener plant
near the city of Bursa in northwestern Turkey. In addition to the
meeting with Erdogan, we understand Cargill has requested a meeting
with EB A/S Daniel Sullivan. The following provides an update on
the Cargill situation and recommended next steps for their
representatives in Turkey.

UPDATE ON CARGILL PLANT'S STATUS IN TURKEY
--------------


2. (SBU) On March 17, 2006, the 10th Chamber of the Council of State
(the Danistay - Turkey's administrative court) issued a stay order
canceling the Private Industrial Zone designation for the plant
location under a 2005 law that had supposedly resolved the zoning
dispute that has plagued the investment since its inception.
Cargill appealed this ruling to the General Assembly of the
Danistay, which generally rules in accordance with lower Chamber
decisions. On September 14, 2006, the 6th Chamber of the General
Assembly agreed with the lower court's decision. Following this
decision, the local governing body of the town in which the plant is
located, Gemlik, which is independently elected, delivered a
"cancellation letter" to Cargill and gave a deadline of October 11
to close the plant.


3. (SBU) PM Erdogan met with local Cargill officials during a
recent visit to Bursa and asked the Governor of Bursa, who is
appointed by the Prime Ministry, and AK Party Deputy President Faruk
Celik, who was with him during the visit, to resolve the problem.
Celik intervened with Osman Pepe, Minister of Environment and
Forestry, to argue that Cargill's environmental permits should not
be cancelled because of the High Court's ruling, which does not
directly address such permits. Cargill maintains that because the
previous law ended the original court cases, they would need to be
reintroduced in the court system for a final decision before the
plant can be closed. The Minister is currently evaluating the case
with his General Counsel.

BACKGROUND
--------------


4. (SBU) In the largest foreign investment in Turkey's agricultural
sector and the company's largest investment worldwide, Cargill
invested $150 million in a starch/sweetener plant in the town of
Orhangazi, near Bursa, Turkey, that began production in 2000.
Although the investment had been approved by local authorities and
was supported by the GOT, local NGO's filed court challenges against
the Ministry of Environment and Forestry that sought to nullify the
environmental permits approved by the Ministry by alleging that the
land was zoned for agricultural, not industrial, use and created an
environmental hazard. In an attempt to permanently resolve the
matter, an application was made in 2002 to the Turkish Parliament
for conversion of the land into a Private Industrial Zone. On July
5, 2005, after a long advocacy campaign by Cargill and USG
officials, the Council of Ministers approved this legislation, which
ended the previous court cases by changing the zoning laws and
environmental permit requirements for the plant. The original NGO's
who filed the court challenges appealed this legislation to the
Danistay.

CARGILL NEEDS TO INVOLVE OTHER GOT MINISTRIES
--------------


5. (SBU) The issue is complicated by the fact that it is in the
Turkish court system. Local Cargill representatives have emphasized
that the GOT supports their position, noting that the legal
challenges are against the government's prior approvals of licenses
and permits. Unfortunately, Cargill has seen the issue in purely
political terms and exclusively lobbied the Prime Minister's office,
although we have encouraged them to reach out to other government
ministries. For example, the Treasury Foreign Investment Department
has told us it is willing to work with Cargill to devise a new law.


6. (SBU) Our economic and commercial officers, and the Ambassador,
have raised this issue with GOT officials. The issue was also
raised by Commerce Deputy Secretary Sampson during a March 2006
meeting with State Minister for Foreign Trade Kursad Tuzmen. In an
August letter to D/S Sampson aa Foreign Trade Undersecretariat
official stated that "since legal proceedings have been started by

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several non-governmental organizations...for the moment we need to
wait for the final court ruling in the case."


6. (SBU) We would suggest that A/S Sullivan deliver the following
message to Cargill:

-- Our embassy officials continue to follow this matter closely and
discuss it with government officials.

-- In a recent meeting, the Treasury Ministry's Foreign Investment
Department told our economic section that they would be open to
discussing this issue with you and assisting Cargill in anyway
possible.

-- While the PM's office has been very supportive of your efforts,
we strongly encourage you to reach out to other ministries,
including Treasury and Environment and Forestry Ministry.
WILSON