NO TURKISH DECISION ON BIT RENEGOTIATION THIS YEAR

C O N F I D E N T I A L ANKARA 001450

SIPDIS

DEPT PLEASE PASS USTR FOR KIMBERLY CLAMAN AND MARK MOWREY
EEB/IFD/OIA FOR MICHAEL TRACTON
EUR/SE FOR PAUL MALIK

E.O. 12958: DECL: 08/13/2018
TAGS: ECON EINV TU
SUBJECT: NO TURKISH DECISION ON BIT RENEGOTIATION THIS YEAR

REF: A. A) ANKARA 894

B. B) STATE 45743

Classified By: Economic Counselor Dale Eppler for reasons 1.4
(b) and (d).


1. (C) SUMMARY. Turkey continues to tie prospects for
renegotiation of its Bilateral Investment Treaty (BIT) to its
EU accession process and views a wholesale renegotiation as
unlikely. Turkish Treasury DDG for Foreign Investment Murat
Alici described the 2004 Model BIT as an overly long, overly
complicated document which &goes far beyond the principles
of goodwill.8 He reiterated his earlier statement (ref A)
that Turkey would follow the EC,s recommendations on a new
BIT, which he predicted would not be finalized until next
year. He expected the EC to suggest that the BIT be updated
with a Regional Economic Integration Organization (REIO)
clause, but not that the treaty itself be renegotiated. He
observed that no &major8 country has signed the new model
BIT and that Turkey would need to see how the BIT functions
in a European context before it could consider entering into
renegotiations. END SUMMARY.


2. (C) As described in Ref A, Econoffs delivered the demarche
on renegotiating the BIT in Ref B to Turkish Treasury DDG for
Foreign Investment Murat Alici on May 8. In a follow-up
meeting on August 11, Alici noted that he had reviewed the
2004 Model BIT and that he was even more pessimistic than
before on the likelihood that the GOT would renegotiate.

3. (C) Alici reiterated that the GOT would take no decision
on a new BIT until after the EC had completed its analysis of
Turkey,s existing treaties, which is part of the EU
accession chapter on capital movements. He noted that this
analysis would include an evaluation of the model BIT as
well, but that he did not expect a final result until
sometime in 2009. He also did not expect that the EC experts
would recommend in favor of a new BIT, but rather would
suggest that the existing BIT be updated to include a REIO
clause, as was the case with Romania and the Czech Republic.

4. (C) Alici described the 2004 Model BIT as a &highly
unusual model treaty,8 noting that it was four times the
length of the existing BIT. He was also surprised by the
detailed provisions relating to sectors that he felt were not
directly related to investment, such as the environment and
labor (although he had no specific objection to any of the
provisions themselves). He observed that the existing BIT
seemed to be working well, and that while Turkey remains
committed to creating a welcome investment environment, the
model BIT &goes far beyond the principles of goodwill.8

5. (C) Finally, Alici noted that Turkey would like to see the
model BIT in practice in an EU context before committing
itself to a renegotiation, as it does not want to endanger
the EU accession talks. He mentioned that the only countries
he knew of who had signed the model BIT were Uruguay and
Rwanda, and pointed out that these were hardly economic
powerhouses.

6. (C) Comment: Turkey clearly is signaling that it will
follow the EC,s lead on the BIT and that, in any case, it
isn,t excited by the new model BIT text. A full-scale
renegotiation thus appears very unlikely. If the EC does
recommend next year that Turkey seek to amend the existing
BIT to include a REIO clause, we may want to propose amending
a few other individual sections of the existing BIT. Even in
that case, we probably will need to show that similar
provisions have been accepted by an EU-member country. End
comment.

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SILLIMAN