Cablegate: Iraqi Debt to Turkey

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A

REF: STATE 26336

1. (Sbu) Summary: In meetings with Central Bank and MFA
officials, econoffs gathered preliminary information on Iraqi
debt to Turkey. These officials put the debt at USD 1.3
billion, almost entirely owed by the Central Bank of Iraq to
its Turkish counterpart. Based on these meetings, Turkey
does not yet appear to have a position on a future debt
treatment. End Summary.

2. (Sbu) Econoffs met February 11 with the Suha Mirahur,
Director General of the Foreign Relations at the Turkish
Central Bank. Also in the meeting were his deputy, Y. Bora
Enhos and three other Central Bank officials, including one
from the accounting department. Mirahur presented econoffs
with a small file on Iraqi debt held by the Turkish Central
Bank. Mirahur specified that the Central Bank was not
responsible for the Government of Turkey's overall policy on
Iraqi debt to Turkey, but that this debt was a special case,
being mostly Central Bank to Central Bank. Though Turkey has
participated in Paris Club debt negotiations, Turkish
Treasury, and possibly Foreign Ministry officials
participated, not the Central Bank. Mirahur even referred to
the relevance of the Central Bank's autonomous status.

3. (Sbu) The file (post is faxing to EB/OMA) shows a total of
USD 1.291 billion USD in claims, arising from two facilities:
a) claims arising from Turkish Central Bank endorsement of
promissory notes from the Iraqi government authority
responsible for dam construction, and b) a 1980's-era
agreement between the two central banks covering payment for
Turkish exports to Iraq. On the first facility, the CB shows
about USD 92.574 million of principal outstanding and about
USD 17.7 million of interest. These notes were guaranteed by
Rafidain Bank and covered work on the Bekhme dam by the
Turkish firm Enka. The second facility, arising from Turkish
exports, was a 1989 rescheduling of instalments due between
1986 and 1989. On this facility the Central Bank shows
approximately USD 1.181 billion in outstanding principal
(though some of this derives from interest capitalized in the
1980's) and about 1.14 million of outstanding interest.
Mirahur and Enhos explained that, on the Turkish export
facility, the two central banks worked out an arrangement in
the 1980's whereby Iraq would ship oil to Turkish state
refiner Tupras to pay for Turkish exports, after which Tupras
would remit the proceeds of the oil sale to the Turkish
central bank. Mirahur specified this had nothing to do with
the Iraqi-Turkish "border trade" arrangement. According to
Mirahur and Enhos, all trade and payments under this facility
ceased in 1990 when UN sanctions were imposed.

4. (Sbu) The Central Bank officials are hopeful the Iraqis
will not dispute the authenticity of the debt, since they
have had correpondence as recently as 2001 from the Iraqi
central bank disputing minor interest charges, and the same
official who signed the Central Bank-to-Central Bank
agreement, Hassan Al-Haidary, was still signing
correspondence from the Iraqi Central Bank in October, 2003.

5. (Sbu) In a meeting late last year with econoffs, Akif
Ayhan, an MFA official responsible for Iraqi issues, also
referred to this roughly USD 1.3 billion in Iraqi debt as
being Iraq's only debt to Turkey, except for a USD 10 million
claim from the Turkish Ministry of Forests arising from
pollution caused by Iraq. Comment: Post understands the IMF
has reported a total of USD 1.6 billion of Iraqi debt to
Turkey but post cannot account for the difference with
Central Bank and MFA figures. End Comment.


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