Cablegate: Will Turkey Really Boycott French Companies in the Wake Of

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FM AMEMBASSY ANKARA
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TAGS: ETRD TU
SUBJECT: WILL TURKEY REALLY BOYCOTT FRENCH COMPANIES IN THE WAKE OF
ARMENIAN GENOCIDE VOTE?

Ref: Ankara 5891

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1. (SBU) Summary: The lower house of the French parliament's
October 12 decision to make denial of the Armenian "genocide"
illegal elicited strong reactions from Turkey's business leaders and
politicians (ref A). Although most politicians, including PM
Erdogan, urged public caution until the French Senate reaches its
final decision, and while business leaders cautioned Turkish
consumers to remain calm and consider the negative effects such
actions might have on the Turkish economy, the Turkish Consumers'
Rights Union called for the boycott of one French company per week,
starting this week with Total petroleum products. Turkish
bureaucrats are still assessing the situation, and the Parliament
and Defense Industry Executive Committee met on October 17 to
discuss the GOT's official response. While we expect the matter
will quickly die down if the legislation is not approved by the
French Senate, we anticipate continued strong rhetoric from public
and private officials as the debate continues and severe political
retaliation should it become law. End summary.

Business'sReaction
-------------------

2. (SBU) Turkish business and government representatives were mostly
cautious over the weekend in their statements about the vote by the
lower house of the French parliament October 12 to make a denial of
the 1915 Armenian "genocide" illegal. The Turkish Consumers' Rights
Union has called for a boycott of one French product every week,
beginning this week with the petrol company Total, which currently
has 500 gas stations in Turkey. The Aegean Garment Industrialists
Association also announced their decision to withdraw in protest
from four upcoming French trade fairs.

3. (SBU) In a public statement, the Vice Chairman of Turkey's big
business association, the Turkish Industrialists' and Businessmen's
Association (TUSIAD) Vice Chairman, Pekin Baran, said that Turkey's
best response to this decision would be to expedite political
reforms and move in the direction of the EU. On the other hand, he
added that the association would focus on how the French legislation
violated human rights and possibly even the authority of the
parliament.

4. (SBU) The leading business federation, the Turkish Union of
Chambers and Commodity Exchanges (TOBB) President, Rifat
Hisarciklioglu, criticized the GOT for its inability to play the
state tender "trump card." He said the GOT could have used its
nuclear plant or defense tenders as a tool for France not to bring
this legislation to the agenda. He noted that the effectiveness of
a boycott against one country's products depended on the trade
volume with that country and warned that boycotts of French goods
could actually bring more harm to Turkey, whereas blocking French
companies' access to big state tenders would send strong messages.
TOBB's Director for EU and bilateral economic relations told us that
while NGOs and Chambers of Commerce are pressuring TOBB to call for
a boycott, it cannot do so. He added that TOBB recognizes the thin
line between French imports and products produced and sold in Turkey
by French companies. It is this second category, TOBB believes,
which is more prevalent and therefore a nationwide boycott could
hurt Turkey more than France.

5. (SBU) Foreign Investors Association (YASED) President Saban
Erdikler warned that the cost of starting such public campaigns
would be higher than its benefit. He argued that the first response
to this political issue should also be political, and the economic
sanctions could follow depending on the results of the first.

Government's Response
---------------------

6. (SBU) State Minister for Foreign Trade, Kursad Tuzmen, commented
that the law could not avoid having a negative impact on the
commercial relations between the two countries. However, Foreign
Trade officials in charge of bilateral trade relations with France
told us that they were still assessing the situation and had not
made any decisions regarding an official course of action.
According to media reports, the GOT sent a diplomatic note informing
the French Embassy of its intention, should the proposal pass the
French Senate, to take the matter to the French Constitutional Court
and, failing a solution there, to the European Court of Human
Rights.

7. (SBU) In public statements, PM Erdogan encouraged the Turkish
public to remain calm until a final decision is made by the French
Senate. He noted that Turkey's trade volume with France is only USD
10 billion or approximately 1.5 percent of France's total trade.
Based on these numbers, Erdogan questioned whether a boycott would

ANKARA 00005993 002.2 OF 002

be an effective way of dealing with the issue. Parliament and the
Defense Industry Executive Committee met on October 17 to discuss
Turkey's reaction to the bill. Specifically, the Defense Industry
Executive Committee will evaluate the GOT's purchase of 51 attack
helicopters. South Africa's Denel, which is competing with Italy's
Mangusta, is hoping to sell its Rooivalk helicopter. However, the
Rooivalk contains a significant number of French parts (between
40-60%). According to press reports, in a bid to stay in the
competition, Denel has suggested that it can get those same parts
from Sikorsky, a U.S. firm. The Executive Committee may decide
whether or not to accept one of the two bids or opt for a U.S.
Foreign Military Sales (FMS) purchase.

8. (SBU) In his speech immediately following the Parliament's
October 17 discussion of this issue, FM Gul urged France to take
into consideration the criticism coming not only from Turkey but
from all around the world regarding this legislation. He added that
the GOT continues to consider the legal steps it might take to
respond to the French legislation. Gul referred to Franch as the
"cradle of democracy and leader for freedom" and stated, "I would
like to be clear on this: if, despite all the criticism and
warnings, this law is passed, the wounds opened by this action would
be irreparable."

9. (SBU) An EU diplomat in Ankara told us that it is forbidden for
one Customs Union country to boycott another and that, if Turkey
were to do so, it could bring serious problems for its accession
process.

10. (SBU) Comment: It is obvious that the business opinion-makers
in Turkey understand the possible negative repercussions of a French
boycott. Turkey's exports to France in 2005 amounted to USD 3.8
billion, while imports amounted to USD 5.9 billion worth. There are
533 French companies doing business here. French firms invested USD
2.1 billion into Turkey in 2005 and have invested USD 330 million as
of August 2006. France's interest in the Turkish economy is
significant, and a boycott could mean lost jobs and wages for
thousands of Turkish workers. It will be difficult, if not
impossible, for a boycott of French products not to hurt Turks, such
as Total gas station franchisees, or the workers at the Renault
plants in Turkey. We believe that this crisis will quickly die down
if the matter is defeated in the Senate. However, as the debate
over the proposed legislation continues in Paris, we expect
escalated rhetoric by public officials and business leaders, and
continued demonstrations and sporadic attacks against French
businesses in Turkey. If the legislation passes the French Senate,
we anticipate a severe political retaliation from the GOT. End
comment.
WILSON

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