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Cablegate: Turkey: Us Steel Interested in Privatization

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

151436Z Dec 04

UNCLAS ANKARA 006963

SIPDIS

SENSITIVE

USDOC FOR ADVOCACY CENTER

E.O. 12958: N/A
TAGS: EINV BEXP EIND TU
SUBJECT: TURKEY: US STEEL INTERESTED IN PRIVATIZATION

Ref: Ankara 3677

SENSITIVE BUT UNCLASSIFIED. BUSINESS INFORMATION.

1. (SBU) Three Pittsburgh based US Steel executives called
on Ambassador Edelman December 14 to discuss United States
Steel's interest in purchasing the Turkish government's 46%
stake in Erdemir, Turkey's largest steel company. Led by
Senior VP John Connelly, the group noted that the pending
sale, which the Turkish government now says will begin in
the first quarter of 2005, had attracted significant
interest from US Steel and other global steel companies,
including French-Belgian Arcelor and the Indian-UK Lakhsmi
group, in the context of the ongoing consolidation of the
global steel industry. US Steel has longstanding business
relationships with Erdemir and believes its acquisition
would create synergies with US Steel facilities in Slovakia
and Serbia.

2. (SBU) The executives highlighted the success of US
Steel's acquisitions of steel plants in Slovakia and Serbia
and the attention the company had paid to working with the
government and labor unions. These plants have generated
both new production and employment. US Steel has retained
the Istanbul offices of Goldman Sachs and Raymond James as
financial consultants as well as a local law firm. The
group met Finance Minister Unakitan December 13 and is
meeting with Privatization Authority chief Metin Kilci
December 14. The executives said that they would want to
purchase a controlling share in the company (which is also
traded on the Istanbul stock exchange) and were concerned
about the potential scope of any "golden share" retained by
the government.

3. (SBU) Comment: A rough estimate of the dollar size of
the investment was $2 billion, which would make an important
contribution to the Turkish economy -- especially given the
paltry FDI inflows Turkey currently receives. It would also
be an important asset in the U.S.-Turkey economic
relationship. The Ambassador cautioned the executives that
the company should go into this process with its eyes open
to the pitfalls of Turkey's opaque legal and regulatory
systems, which have plagued some other U.S. investors.
There will also be political sensitivity on both the right
and left of Turkey's political spectrum to the acquisition
of what is seen as a successful Turkish company by a foreign
firm. (Erdemir earned a $260 million profit last year --
reftel describes Econoff's visit to Erdemir and notes the
company's historical ties to the U.S.) The US Steel
executives expected that their biggest competitor would be
Arcelor, which would no doubt attempt to leverage Turkey's
expected EU accession process. US Steel will file the
standard advocacy request forms with the Department of
Commerce.
EDELMAN

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