TURKEY: SCENESETTER FOR CODEL SPECTER, AUGUST

UNCLAS SECTION 01 OF 04 ANKARA 002120 SIPDIS SENSITIVE SIPDIS PLEASE PASS TO SENATOR SPECTER E.O. 12958: N/A TAGS: AM ECON ENRG IZ OREP PGOV PINS PTER TU SUBJECT: TURKEY: SCENESETTER FOR CODEL SPECTER, AUGUST 24-26, 2007 REF: A. STATE 113788 ¶B. STATE 104534 ¶1. (SBU) Summary: The new parliament is in the midst of electing Turkey,s next president, following general elections in July. The ruling Justice and Development Party (AKP) scored a significant victory, returning with a mandate to pursue its economic and political reform policies. On Iraq, Turkey continues to be an essential partner, supporting coalition forces by allowing use of its territory as logistical hub. The single biggest obstacle to bilateral relations is PKK terrorism. Turkey has repeatedly expressed impatience at the lack of U.S. action against PKK terrorists in northern Iraq and has threatened to strike at PKK targets across the border if the U.S. or Iraq does not act. Senior officials are also concerned that a U.S. Congressional Armenian genocide resolution (AGR) could spark a negative response among the Turkish public, which would likely complicate the bilateral relationship, affect U.S. national security interests, and work against those seeking a collaborative approach to the events of 1915. Turkey has achieved five years of GDP growth averaging over 7% -- the highest rate of any OECD country. Because of its strategic location, Turkey aspires to increase its role as an energy transit country by piping natural gas to meet Europe's growing needs, and will soon begin transporting gas from Azerbaijan to Greece. End summary. NEW PARLIAMENT, NEW PRESIDENT ¶2. (U) Turkey's new parliament is expected to elect the country's eleventh president on August 28, on the third round of voting. FM Abdullah Gul formally declared his candidacy on August 14 and is widely expected to win. It has been a contentious process, with many preferring a consensus candidate rather than Gul. The new parliament convened on August 4 and MPs elected a widely respected moderate conservative as Speaker. AKP,s strong showing in the July elections, with 46.6% of the vote, surprised many Turks. Two other parties crossed the ten percent election threshold required to enter parliament, along with 27 independent candidates, creating a fractious if more representative legislature. AKP, with 341 of parliament's 550 seats, holds a reduced majority, short of the 367 seats needed to amend Turkey's military-drafted 1982 constitution. The nominally-left opposition Republican People's Party (CHP), with 21% of the vote, lost a substantial number of seats (98, down from 152 in 2002),in part due to a third party, the right-wing Nationalist Action Party (MHP),entering parliament with 70 seats. Twenty of the 27 independents are affiliated with the pro-Kurdish Democratic Society Party (DTP). Commentators view the results as the opposition's failure as much as AKP's success, but the results gave AKP the opportunity to pursue its economic development and modernization policies, EU membership process and political reform for another term. IRAQ/PKK ¶3. (SBU) For over 20 years, the PKK has conducted a terrorist campaign that has resulted in the deaths of over 35,000 Turks. Since the end of its self-imposed five-year cease-fire in 2004, the PKK has conducted attacks against Turkey from strongholds in northern Iraq, killing over 600 Turks (civilians and military) and foreigners in 2006 alone, and over 100 so far in 2007. The increased violence prompted the government and military to warn of possible cross-border operations into Iraq. The USG has strongly discouraged this, citing Iraqi sovereignty and the risk of increased instability. The United States has been Turkey's closest ally in the fight against the PKK, securing EU agreement to place the PKK on its list of terrorist organizations; spear-heading a Europe-wide effort to close PKK financial, logistical, and media support outlets there; and leading a trilateral (U.S./Turkey/Iraq) process to stop the threat emanating from northern Iraq. ¶4. (SBU) Iraq remains a major concern for Turkey. Turkey ANKARA 00002120 002 OF 004 worries about increasing instability in Iraq, growing Iranian influence in the region, and the potential for Iraq to splinter along sectarian or ethnic lines. The GOT is also concerned about Iraqi Kurdish ambitions to expand their territory to include oil-rich Kirkuk. The prospect of a referendum later this year on the future status of Kirkuk exacerbates Turkish fears that a Kurdish annexation of the province will lead to massive inter-communal violence, and, ultimately, the dissolution of the country. Turkish political leaders have sought to reinforce Iraq's unity and territorial integrity, and have been among the most active of Iraq's neighbors in the Iraq Neighbors Process. ¶5. (SBU) Turkey's agreement to the use of its territory as a logistical hub has been a combat multiplier for our Iraq operations. Approximately three million gallons per day of gasoline and diesel fuel for the Iraqi people and 25% of sustainment fuel for coalition forces crosses into Iraq through the Ground Line of Communication at Habur Border Gate. Since May 2005, when Turkey approved the use of Incirlik Air Base as a cargo hub to support coalition operations in Iraq, over 152 million pounds of equipment have been shipped to U.S. troops. Over 50% of all air cargo into Iraq has transited the Incirlik cargo hub. EU ACCESSION ¶6. (U) A double-election year contributed to the GOT's failure to enact reform on several high-profile political issues, such as Turkish Penal Code Article 301 (insulting "Turkishness"),even while technical-level EU harmonization continued. The EU's June 26 decision to open negotiations on two chapters (Statistics and Financial Control) but not an expected third (Economic and Monetary Union) left Turkish officials frustrated and concerned that the EU's fall annual progress report could recommend suspension of additional chapters. The Turkish public, meanwhile, has grown increasingly skeptical of the EU venture, in large part as a reaction to Euro-skepticism of Turkey, reflected most notably by French President Nikolas Sarkozy's preference of a "privileged partnership" vice full membership. AKP, as historically the party most committed to Turkey's EU membership, now has the chance to use its electoral mandate to breathe new life into the process. JUDICIAL REFORM ¶7. (U) Turkey continues work to harmonize and reform its judicial system in its bid to join the EU. Turkey has improved the timeliness and efficiency of civil prosecutions, and developed more uniform sentencing guidelines in criminal cases. In the last five years, Turkey created 21 intellectual property courts in large cities countrywide for effective prosecution of IPR violators. Another planned improvement is automation of all judiciary rulings for use by law enforcement agencies, prosecutors, and judges, which is scheduled for completion in 2008. A key focus of the Embassy has been Turkey,s prosecution of terrorism financiers and adherence to United Nations Security Council Resolutions. To that end, in 2006, the Department of Justice stationed a resident Regional Legal Adviser here. The RLA works closely with Turkish judicial authorities to provide training and information. The Embassy also works to increase European law enforcement focus on the PKK as an organized crime problem. For example, in January 2007, RLA hosted a roundtable for Turkish, French, Dutch, and British prosecutors to discuss methods to investigate and prosecute terrorist organizations, particularly the PKK. HOUSE RESOLUTION ON ARMENIAN GENOCIDE ¶8. (SBU) The USG has worked hard to encourage a candid discussion in Turkey of the tragedy suffered by ethnic Armenians during World War I. The Turkish and Armenian governments have discussed establishing joint experts commissions to establish the facts, in parallel with efforts to reestablish official bilateral relations. Turkey,s public would react strongly to a Congressional resolution ANKARA 00002120 003 OF 004 labeling this tragedy a "genocide", which would also work against those calling for a comprehensive examination and normalized Turkish-Armenian relations. ¶9. (SBU) A resolution would drive increased anti-Americanism, which could have a negative impact on U.S. national interests in Iraq and elsewhere. Supply routes crucial to supporting U.S. troops, military overflights and use of Turkish bases that support U.S. military operations in Iraq and Afghanistan could be jeopardized. Major defense procurement contracts with U.S. manufacturers (with expected and potential sales exceeding $10 billion) could be scrapped. Agricultural purchases might also be canceled and consumer boycotts could ensue. Anti-Americanism in Turkey would likely intensify, with a negative impact on U.S. citizens and USG personnel living and working in Turkey. MACRO-ECONOMIC PICTURE ¶10. (SBU) The Turkish economy has recovered strongly from the 2001 financial crisis, having achieved five years of GDP growth averaging over 7% -- the highest rate of any OECD country. In dollar terms, per capita GDP doubled to $5,482 in ¶2006. Since 2004, for the first time since the early 1970's, inflation has been in single digits. At the same time, Turkey has stabilized its economy and reduced its vulnerability to financial problems, with net public sector debt to GDP falling from 90% in 2001 to 45% in 2006. Turkey achieved this through its IMF-sponsored economic program, including a 6.5% primary surplus target for the public sector and orthodox, pro-investor, pro-market policies. Despite this improved situation, Turkey remains somewhat vulnerable to negative global market sentiment because of Turkey's large current account deficit (8% of GDP in 2006),the public sector's continued reliance on foreign portfolio investors rolling over mostly short-term debt, and risks of political or regional instability. ENERGY ISSUES ¶11. (U) Turkey imports nearly all of its oil and natural gas. However, Turkey's strategic location, between Europe and the Middle East and Caspian regions, makes Turkey an important energy transit country. More than three million bbl of Caspian oil pass every day through the Bosphorus Straits, and nearly one million bbl/d of oil pass through the Baku-Tbilisi-Ceyhan (BTC) pipeline, the first pipeline for Caspian oil that does not cross Russian soil. Turkey aspires to increase its role as an energy transit country by piping natural gas to meet Europe's growing needs. It will soon begin transporting gas from Azerbaijan to Greece -- the first time Europe will receive Caspian gas via a non-Russian route. Turkey also aspires to construct the larger Nabucco pipeline to deliver natural gas across Turkey to Austria. The USG supports Nabucco, but only if it is filled with non-Iranian gas from Azerbaijan, Turkmenistan, Kazakhstan and possibly Iraq. Recent Russian announcements that reinforce its hold on Turkmen gas and bypass Turkey to sell gas to Italy spurred Turkey to announce a preliminary MOU with Iran on a future gas deal, which we have protested. TRADE ¶12. (SBU) With two-way bilateral trade around $10 billion, roughly in balance between exports and imports, the U.S. is an important trading partner for Turkey. However, about half of Turkey's trade is with the EU, and Turkish trade with the Middle East, African and Former Soviet Union countries is growing. As Turkey's total trade volume -- both exports and imports -- grows, the U.S. share in Turkey's trade is declining. ¶13. (SBU) Deepening bilateral economic and business ties is a key priority of the Shared Vision and Structured Dialogue announced by Secretary Rice and Foreign Minister Gul in July ¶2006. To help catalyze closer economic ties, the U.S. and Turkey held a meeting of the bilateral Economic Partnership Commission (EPC) in February, 2007, co-chaired by the Under ANKARA 00002120 004 OF 004 Secretary of the Turkish Foreign Ministry and State SIPDIS Department Assistant Secretary for Economic, Energy and Business Affairs Daniel Sullivan. The EPC laid out an action plan that both sides are working to implement. MISSION TURKEY ¶14. (SBU) Mission Turkey consists of four posts: Embassy Ankara, Consulate General Istanbul, Consulate Adana, and a two-person Consular Agency in Izmir. Country-wide, there are currently about 300 American positions and almost 700 locally employed staff (LES) working for over 20 agencies throughout the Mission. The Mission's FY 2007 operating budget was $30 million. Mission Turkey is scheduled for a New Embassy Compound (NEC),with construction set to begin in 2010. Visit Ankara's Classified Web Site at http://www.state.sgov.gov/p/eur/ankara/ MCELDOWNEY