UNCLAS SECTION 01 OF 04 ISTANBUL 001504

SIPDIS

C O R R E C T E D C O P Y (PARAGRAPH 2 AND Z CODE CHANGED)
SENSITIVE
SIPDIS

DEPARTMENT FOR H, EUR, AND EUR/NB
FOR SENATOR MCCAIN FROM AMBASSADOR WILSON

E.O. 12958: N/A
TAGS: AFIN AMGT ASEC DA GG IT MW OREP TU
SUBJECT: SCENESETTER FOR AUGUST 25-26 VISIT OF CODEL MCCAIN
TO TURKEY

REF: STATE 133481

ISTANBUL 00001504 001.6 OF 004



1. (SBU) SUMMARY: Mission Turkey warmly welcomes the visit of
Codel McCain to Turkey. Turkey is an ally in the Global War
on Terrorism (GWOT), facilitating the distribution of
supplies and fuel to the coalition in Iraq and supporting the
NATO Training Mission (NTM-I) there; publicly calling on Iran
to comply with its IAEA commitments; and pressuring Syria and
Hamas to renounce their support for terrorism. Turkey is
considering contributing forces to UNIFIL in Lebanon.
Earlier this month, Turkey began sharing command of
ISAF-Central with France and Italy and plans to open its
first Provincial Reconstruction Team (PRT) in Afghanistan by
November.


2. (SBU) SUMMARY, con't: But there are challenges. Defense
industry cooperation is on the decline. PKK terrorist
attacks have resulted in pressure on the government to strike
at PKK safehavens in northern Iraq. We are committed to
helping Turkey address PKK terrorism. Turkey's EU accession
aspirations are frustrated by slow implementation of reforms
and Cyprus-related issues. END SUMMARY.

STRATEGIC DIALOGUE
--------------


3. (SBU) During an April 25 visit to Ankara, Secretary Rice
unveiled with Foreign Minister Gul plans to regularize a
series of bilateral consultations on issues such as Iraq,
Iran, the Caucasus and Central Asia, economic and mil-to-mil
relations, among others. A Shared Vision and Structured
Dialogue document was finalized and publicly released during
a visit by Gul to Washington on July 5. As a majority Muslim
country that straddles Europe and the Middle East, Turkey
shares a history and culture with many countries of US
concern and is interested in playing a more active role.

A PARTNER IN GWOT
--------------

Lebanon:


4. (SBU) FM Gul visited Lebanon August 16 to show Turkish
support for UNSC Resoluti

on 1701 and to discuss a possible
contribution of Turkish forces to UNIFIL. PM Erdogan has
spoken positively about Turkish participation, but the
government has not yet made a decision on whether and what
type or numbers of troops to provide. Gul traveled to Israel
on August 20 to continue consultations. While recognizing
Hezbollah's complicity in the crisis, since the start of the
conflict Turkey pushed hard for an immediate cease-fire. The
Turkish public has responded to graphic media reports of the
carnage and increasingly has blamed Israel -- and to a large
extent, the US -- for the current crisis. The Jewish
community here talks of a rise in anti-Semitism. Turkey
welcomed and assisted thousands of evacuees from Lebanon in
late July, including approximately 1700 Americans.

Iraq:


5. (SBU) Turkey's agreement to allow the use of its territory
as a logistical hub has been a crucial asset in
our Iraq operations. Two-thirds of gasoline and diesel fuel
shipments (3 million gallons per day) for the Iraqi
people and 25% of sustainment fuel for the coalition crosses
into Iraq through the Ground Line of Communication
at Habur border crossing from Turkey. Since Turkey approved
the use of Incirlik Air Base as a cargo hub to support
coalition operations in Iraq in May 2005, over 152 million
pounds of equipment has been shipped to US troops. Six C-17
aircraft now deliver from Incirlik the amount of supplies it
took 9-10 planes to deliver from Germany. Additionally ten
KC-135 tanker aircraft based at Incirlik since 2003 have run
2800 refueling sorties, delivering 192 million pounds of fuel
in support of Operation Enduring Freedom and Operation Iraqi
Freedom. Turkey is also considering our request to
retrograde equipment out of Iraq through its ports. Turkey
has four personnel assigned to NTM-I in Iraq and, under this
rubric, has trained 57 Iraqi military officers in Turkey.
Iraqis have pledged to send officers to at least seven
additional courses this year.

ISTANBUL 00001504 002.6 OF 004




6. (SBU) Turkey shares the US goal of a unified, democratic
Iraq that is secure within it borders. While Kurdish
aspirations and the PKK presence in northern Iraq remain a
concern, the government is contributing to Iraq's success.
It supported the participation of all ethnic and religious
groups in the elections and the constitutional referendum.
It hosted a multi-party conference on the Iraqi constitution,
a dialogue of hard-line Sunni leaders with US Ambassador
Khalilzad, and a meeting of tribal leaders from the city of
Talafar in an effort to calm the situation there. It
provided training to over 300 Iraqi diplomats and political
party members, and spearheaded a "neighbors meetings" process
which has helped Iraqi government leaders interact with their
regional counterparts.


7. (SBU) Turkish-Iraqi bilateral trade in 2005 was $2.87
billion, of which $2.42B was Turkish exports to Iraq. Turkey
exports 270 MW of electricity to Iraq. Both countries aim to
increase electricity exports from Turkey to 1000MW, which
equates to 25% of Iraq's current peak capacity. Turkey has
pledged $50M in assistance to Iraq for energy, health and
other projects, which remains mostly unfunded for security
reasons. Turkey's port of Ceyhan is the terminus of the oil
pipeline from Kirkuk.

Afghanistan:


8. (SBU) Turkey has twice successfully led the International
Security Assistance Force (ISAF) in Afghanistan, most
recently from February to August 2005. In early August, it
began sharing joint command of ISAF-Central in Kabul for a
two-year period. By November, it will open its first PRT in
the neighboring province of Wardak. PM Erdogan visited
Afghanistan in spring 2005 and subsequently increased
Turkey's pledged assistance ten-fold to $100M. This will be
allocated in $16M increments for five years to build schools,
hospitals, medical clinics and drinking water wells
throughout the country. Four hospitals have already been
constructed. The GOT provides counter-narcotics training in
Turkey to Afghan security forces and will initiate such
training in Afghanistan this year under the auspices of the
Wardak PRT. President Karzai demonstrated his gratitude for
Turkey's assistance by participating in a March
counter-terrorism conference at Turkey's NATO Center of
Excellence for the Defense Against Terrorism.

Other:


9. (SBU) Turkey continues to contribute forces to the
peacekeeping efforts in the Balkans and provides training to
Georgian security forces, including for pipeline security.
It has contributed $41M in equipment to Georgia over the past
six years, and has trained some 1400 Georgian personnel. In
Azerbaijan, Turkey has provided some $150M in equipment and
over $100M in training and facilities over the past six
years.

INCREASING PKK THREAT
--------------


10. (SBU) Since declaring an end to its "cease-fire," in May
2004, the PKK has stepped up bomb attacks
in Istanbul and increasingly clashed with Turkish security
forces in the country's southeast. A PKK off-shoot, the
Kurdish Freedom Hawks (TAK), has warned foreigners to stay
away from Turkey and has carried out attacks in tourist
centers. The funerals of 14 PKK terrorists killed in a March
operation led to violent unrest in Diyarbakir and
other southeastern cities. Some 500 Turkish citizens have
been killed so far this year in PKK violence, and televised
news programs are filled with the funerals of Turkish
security forces. Tourism bookings, which were expected to
exceed last year's record levels, are slightly down from
2005, although revenue remains flat. Two August bombings in
the heart of Istanbul's tourist area resulted in several
injuries and may further deter visitors.


11. (SBU) The PKK issue is the biggest irritant in bilateral
relations. The government welcomes our efforts with European
allies to eliminate the PKK's financing sources and support

ISTANBUL 00001504 003.6 OF 004


networks in Europe and our intelligence-sharing program, but
both the GOT and the public insist on US action against the
PKK presence in northern Iraq. While recognizing that the
insurgency prevents coalition troops from engaging the PKK in
Iraq, the GOT remains frustrated at its inability, and
perceived US unwillingness, to stop attacks it believes are
emanating from the other side of its border.


12. (SBU) Security forces have had some success against the
PKK in Istanbul and Ankara, where significant caches of
plastic explosives were found and suspects arrested.
Increased terrorism has hastened the military's push to
strengthen its troop presence along Turkey's border with
Iraq, as it does every spring. In July, public parallels
between Israel's right to defend itself in Lebanon and the
PKK situation were drawn. The government responded to public
outcries for a cross-border operation against the PKK by
renewing pressure on Iraq and the US to take concrete steps.
The Iraqi government recently pledged to take steps. The US
is working with Turkey and Iraq to establish a high-level
trilateral mechanism for joint work on the problem.

REGIONAL DIPLOMACY: IRAN AND SYRIA
--------------


13. (SBU) Given its historical, cultural and religious ties
with countries in the region and its geographic location
bridging both east and west, Turkey feels both a right and a
responsibility to engage countries of concern on issues of
importance to the international community. Turkey has worked
in recent years to strengthen ties with Iran and Syria. It
believes that, as the only Muslim country that has good
relations with both Israel and the Palestinians, it can play
a constructive role in the peace process. Despite Western
disapproval, however, the foreign minister, representing the
ruling Justice and Development Party (AKP), welcomed a Hamas
delegation to Ankara in February 2006, and the prime minister
and foreign minister continue to engage the Iranian and
Syrian governments. In all cases, they assure us, they are
sending the right messages in private.


14. (SBU) The MFA, military and many in the AKP government
view a nuclear Iran as a threat to Turkey but all view
diplomacy as the only road to a solution and therefore insist
on engagement. The GOT is averse to broad economic
sanctions that could disrupt a growing commercial
relationship with Iran, particularly energy imports. The
government's public statements have significantly
strengthened since Iran resumed uranium enrichment. FM Gul
visited Tehran in June and July to push for acceptance of the
P5 1 package; Iranian FM Mottaki has visited Turkey twice
since then, on his own initiative.

CYPRUS THREATENS TURKEY'S EU BID
--------------


15. (SBU) The EU has expressed frustration with what it
perceives as lackluster GOT efforts to fully implement
democratic reforms integral to Turkey's EU bid. Indictments
against novelist Orhan Pamuk and other writers and
intellectuals for statements purportedly undermining the
Turkish identity, and unresolved issues with Turkey's Kurdish
population which are exacerbating the PKK problem, give
ammunition to those who want to prevent Turkey's accession.
But the lack of a settlement of the Cyprus question may be
the biggest immediate threat to Turkey's EU bid. Turkey
remains bitter over the 2004 Greek Cypriot vote against UNSYG
Annan's plan for a comprehensive settlement and, in
particular, the EU's failure to produce the promised aid and
trade package to reward Turkish Cypriots for their "yes"
vote. Under its EU customs agreement, amended in 2005 to
include all new EU members -- including Cyprus, Turkey must
open its sea and airports to Greek Cypriot vessels. Turkey
is unwilling to do so in absence of some EU measure to end
the isolation of the Turkish Cypriots. This issue could
stall Turkey's EU negotiations.

ECONOMY RECOVERING STRONGLY, BUT VULNERABLE
--------------


16. (SBU) The AK Party government has implemented key

ISTANBUL 00001504 004.6 OF 004


economic and structural reforms that have supported the
economic recovery from the deep 2001 financial crisis. An
average GDP growth rate of nearly 8% over the
past three years is one of the highest in the world, foreign
investment has strengthened, and inflation has been subdued.
The IMF is currently overseeing a $11.8 billion stand-by
program and the World Bank's loan portfolio of $6 billion is
one of the largest for any country. Reforms and optimism
engendered by the EU accession process have also bolstered
economic performance. Yet, despite these achievements, the
current account deficit is large (about 7% of GDP this year)
and the government remains heavily indebted. This leaves the
economy vulnerable to market swings that could threaten
economic and political stability. Unemployment and poverty
also remain serious problems. These vulnerabilities were
highlighted since mid-May by a global market pullback that
coincided with increased political uncertainty in Turkey,
leading to a 16% fall in the exchange rate, an 18% drop in
the stock market and a sharp increase in domestic interest
rates. The central bank's and government's strong economic
policy response, which included a 4% hike in official
interest rates, seem to have allowed the economy to weather
the turbulence and markets have nearly returned to their
pre-May level.

DEFENSE INDUSTRY COOPERATION DECLINING
--------------


17. (SBU) Defense industry cooperation, once the strongest
aspect of our military-to-military relationship, is in
decline. No US firm has won a direct commercial sale since
Boeing was awarded a contract for an Airborne Early Warning
and Control (AEW&C) aircraft in 2002. In 2004, three tenders
(UAVs, Main Battle Tanks, and attack helicopters) were
canceled. Two US firms, Boeing and Bell, were interested in
a second attack helicopter tender, but declined to
participate due to onerous liability and technology transfer
requirements. (Several non-US firms did submit bids.)
Raytheon bowed out of contention for an aircraft trainer
tender, and Sikorsky may choose not to participate in a
tender for 54 utility helicopters for the Turkish Armed
Forces and Forestry Service for the same
reason. Both in Ankara and in Washington, US firms and the
USG have raised the technology transfer and liability
concerns with Turkey's Ministry of Defense and Defense
Industry Undersecretariat (SSM). Despite both Turkish
military and government insistence that it wants US
competition in these tenders, SSM has resisted making the
necessary changes to the tenders to ensure it.

AGGRESSIVE COUNTER-NARCOTICS PROGRAM
--------------


18. (SBU) Turkey remains a significant transit country for
Southwest Asian heroin destined for European markets.
Turkish law enforcement vigorously pursues opiate traffickers
and have made extensive opiate seizures. Arrests resulting
from large seizures are prosecuted and generally result in
lengthy sentences. Over eight metric tons of heroin were
seized in Turkey in 2005, while nearly ten metric tons were
seized in 2004. Several of the
world's largest verified opiate seizures have been made in
Turkey in recent years, including 7.5 metric tons of morphine
base that were captured in a single seizure in 2002. In
2004, 4.4 metric tons of morphine base were seized and in
2005 there were two heroin seizures of over 1,000 kilograms
each. Turkish law enforcement is actively participating in
DEA's Operation Containment, a regional plan for combating
Afghan opiates.
WILSON