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Cablegate: Swiss Against a Six-Month Strategic Review:

VZCZCXYZ0003
OO RUEHWEB

DE RUEHSW #0196/01 1151457
ZNR UUUUU ZZH
O 241457Z APR 08
FM AMEMBASSY BERN
TO RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 5019

UNCLAS BERN 000196

SIPDIS

SENSITIVE
SIPDIS

EEB/IFD/ODF;
TREASURY/DO/IA/IDP

E.O. 12958: N/A
TAGS: EAID PREL ECON TU SZ
SUBJECT: SWISS AGAINST A SIX-MONTH STRATEGIC REVIEW:
SUPPORT TURKEY'S CHANGE OF STATUS AT THE EBRD

REF: SECSTATE 41999

1. (SBU) SUMMARY. During an April 24 meeting with Swiss
State Secretariat for Economic Affairs (SECO), Economic
Cooperation and Development officials Raimond Furrer and
Nathalie Floras told Emboff that Switzerland is "favorably
inclined" to support Turkey's request to change membership
status from a donor country to a country of operation at the
European bank for Reconstruction and Development (EBRD).
Furrer and Floras said Turkey has been discussing this move
with the EBRD directors in London since 2005, and
Switzerland, following the November 2007 EBRD report on the
legality of a change, believes the EBRD can accommodate
Turkey's request through a change in interpretation of the
EBRD's articles of incorporation. SECO does not support the
USG's proposal for a six-month strategic review because this
would effectively end the current EBRD Capital Resources
Review (CRR-3) and negatively impact the 2010 adoption of
CRR-4. Furrer added that Turkey must make a decision by the
end of April to submit a request for change of status, and he
hoped, if Turkey submits its request, that the USG will help
the EBRD membership reach a consensus during the May 18-19
meetings. END SUMMARY.

--------------------------------------
TURKEY BEGAN SOUNDING OUT EBRD IN 2005
--------------------------------------

2. (SBU) During an April 24 meeting with SECO officials to
encourage the Swiss Government to support the USG's plan of
organizing a six-month strategic review to consider, among
other items, Turkey's request to become a borrower at the
EBRD, Furrer stated that Turkey's request was originally
floated in 2005. The Turkish EBRD alternate governor in
London has raised this issue on several occasions since then
and the discussions resulted in a November 2007 EBRD paper
reviewing the two paths the bank could pursue to accommodate
Turkey: (a) a new interpretation of the articles of
incorporation -- easy; and (b) changing the articles of
incorporation -- difficult. Furrer stated that the Swiss
Government will support Turkey's application to become a
borrower if Ankara submits its request for a change of
status. Furthermore, SECO believes Turkey will only launch
its bid if it is certain to "win", which Floras interprets to
mean consensus support in London.

3. (SBU) Switzerland is in favor of the change because SECO
economists place Turkey in the "transitional economy" group
and believe the EBRD can assist Turkish economic development.
Turkey still has market rigidities that enable the EBRD to
fill the void where market failures result and Turkey will
benefit from EBRD expertise and advice.

----------------------------------------
SIX-MONTH STRATEGIC REVIEW INAPPROPRIATE
----------------------------------------

4. (SBU) Floras stressed that Switzerland believes a
six-month strategic review would be inappropriate for two
reasons: (a) the government already supports Turkey's plan;
and (b) an out of cycle review would weaken the CRR process.
Introduction of a special six-month strategic review could
weaken the current CRR-3, which is already "off track" in a
positive sense in that the EBRD is ahead of where it
projected itself to be in 2005, according to SECO.
Furthermore, a strategic review, a little more than a year
before the CRR-4 is to begin, would not help the bank
redefine itself now that a major number of countries have
moved out of the program. Furrer commented that the bank
needs to develop a plan for the next 10 to 20 years and must
illustrate to the member nations that it continues to provide
a service and is not duplicating World Bank or other
international financial institutions' work. He stressed that
the taxpayers must also see that their money is not being
wasted. A review between CRR-3 and CRR-4 would not help the
bank achieve these objectives; therefore, Furrer said SECO
can't support the USG's proposal.

--------------------------------------------- ---------------
SWISS WANT TO AVOID "DISUNITY", BUT MOVE IS ANKARA'S TO MAKE
--------------------------------------------- ---------------

5. (SBU) While SECO does not support the USG's proposal,
Furrer stressed that Switzerland does not want the May
meetings to devolve into a public spat among members over
Turkey's request to change status. The consensus nature of
the EBRD makes it important that the permanent executive
directors are in agreement on this matter should Turkey make

the decision to submit its request. Furrer added that the
Turkish alternate director in London has spoken with the
Swiss permanent executive director about their plans and
Furrer was encouraged that the USG is speaking with Ankara
and officials in London. In the end, Furrer stated, it is
Ankara's decision to make and they need to make their request
by the end of April for it to be considered during the May
18-19 meetings.

-------
COMMENT
-------

6. (SBU) SECO confided that the Swiss EBRD permanent
executive director in London is driving Swiss policy on this
issue. The Swiss and Turkish representatives have spoken on
this subject, but there have been no recent conversations or
efforts to coordinate positions. The Swiss Government's main
concern appears to be the potential bad publicity of a split
vote in London, not that the EBRD could be irreparably harmed
by Turkey's move to borrower status. END COMMENT.
CONEWAY

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