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Cablegate: Istanbul Business Community Discusses Iraq With

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P 081429Z DEC 06
FM AMCONSUL ISTANBUL
TO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 6432
RUEKJCS/DIA WASHDC PRIORITY
RUEHAK/USDAO ANKARA TU PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC//USDP:PDUSDP/ISA:EUR/ISA:NESA// PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUETITH/ODC ANKARA TU PRIORITY
RUEGEVC/JOINT STAFF WASHDC//J-3/J-5// PRIORITY
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK PRIORITY
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY
RHMFIUU/HQ USCENTCOM MACDILL AFB FL PRIORITY
RUQNIZM/425ABS IZMIR TU//CC// PRIORITY
RHMFIUU/39ABG INCIRLIK AB TU PRIORITY
RUEPGAB/MNF-I C2X BAGHDAD IZ PRIORITY

UNCLAS SECTION 01 OF 04 ISTANBUL 002144

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ENIV ENRG OREP PREL PTER TU
SUBJECT: ISTANBUL BUSINESS COMMUNITY DISCUSSES IRAQ WITH
CODEL SHAYS


SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY

1. (SBU) Summary. On November 28, CODEL Shays met members of
the Istanbul business community to discuss their views on
Iraq's future and U.S. - Turkey relations. The business
community sees both risks and opportunities in Iraq, but
companies with on-going Iraq operations see potential profit
opportunities, particularly in Northern Iraq. There was no
consensus on the best path forward for the U.S. with regard
to Iraq, with business representatives arguing for everything
from an immediate military withdrawal to a continual troop
presence. Likewise, views on Turkey's relations with Iraq
differed, however most agreed that the U.S. should do more to
support Turkey's fight against the PKK. End Summary

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2. (SBU) CODEL Shays visited Istanbul for a day of meetings
on November 28 to discuss business community perceptions of
both Iraq and U.S. - Turkey relations. The day began with a
meeting with Levent Sever of Metis Holding, a company with
substantial construction business in Russia, the former
Soviet Union and Iraq as well as an active relationship with
the Department's Overseas Building Office. Cong. Shays then
had a lengthy meeting with members of the Turkey-Iraq
Business Council (TIBC) followed by a luncheon with the
governing board of the TIBC. Cong. Shays also discussed the
future of Iraq with Ishak Alaton, Chairman of the Board of
Alarko Holding, one of the largest industrial groups in
Turkey, and met with members of the American Turkish Council.


A View From A Defense Infrastructure Company
--------------------------------------------

3. (SBU) Levent Sever, member of the Board of Directors of
Metis Holding (and son of the founder) described doing
business in Iraq as "difficult but possible", noting that
security concerns were enormous and insurance costs
commensurately high. Metis built the Baghdad embassy interim
facility and is currently working with OBO on several other
construction projects, but lost the New Office Building
contract to a Kuwaiti firm, according to Sever. He told
Cong. Shays that he believes the Government of Turkey (GOT)
made a mistake on March 1, 2003 and should have permitted
U.S. troops to transit Turkey en route to Iraq. Sever argued
that the Parliamentary vQ had effectively cut Turkey out of
the decision-making process and contributed to current
problems with the PKK in Northern Iraq. Sever, who is of
Kurdish descent, described Northern Iraq as the only part of
Iraq that "seems normal" - people run businesses, children go
to school, Turkish firms operate freely. However, he argued
the PKK presence "poisons" Northern Iraq by creating a push
for independence that is unacceptable to Baghdad as well as
Northern Iraq's neighbors. He urged greater efforts by the
U.S. to support the GOT's anti-PKK efforts.

4. (SBU) Sever emphasized what he viewed as a disconnect
between reality and the identity of Turkey represented by the
ruling AK Party. He told CODEL Shays that the Turkish
General Staff represents "the real image, belief and thoughts
of the Turkish people." Complaining that the U.S. and the EU
are not currently seeing "the best of us", he noted that the
alliance with the United States is the foundation of the
republic. He described Turkey's NATO membership as one of
the best things to ever happen to Turkey, but added that he
believes European perceptions of Turkey have been tainted by
centuries of conflict. He asserted that the EU would
deliberately set unattainable requirements to preclude
Turkish membership. Cong. Shays asked how widely held this
belief was and Sever explained it was broadly shared by his
friends and colleagues.

Turkish-Iraqi Business Council Argues Over U.S. Future in Iraq
--------------------------------------------- ---------------

5. (SBU) Cong. Shays described his long-standing interest in
U.S. policy in Iraq to members of the Turkey-Iraq Business

ISTANBUL 00002144 002 OF 004


Council (TIBC), noting that he had traveled to Iraq 14 times
since the fall of Saddam. The TIBC has over 100 members: 12
attended the meeting with CODEL Shays and an additional four
joined the luncheon that immediately followed. He told the
group that he supported the invasion of Iraq, but believed
the U.S. government had made serious errors in the immediate
aftermath of the invasion in particular by failing to prevent
massive looting, insufficiently guarding munitions depots and
by disbanding the Iraqi security forces as well as by
engaging in an over aggressive de-Baathification campaign.
He described the current Iraqi government as lacking
political will and unable to peacefully resolve the serious
problems facing the government.

6. (SBU) TIBC Chairman Ercument Aksoy described Iraq as an
important market for the Turkish business community as well
as a neighboring country with cultural and religious
importance. Chambers of Commerce in Southern Turkey are
focusing on trade with Iraq and major Turkish companies are
investing in Northern Iraq, according to Aksoy. He described
the Turkey-Iraq trade relationship since the mid-1980's.
From 1984 to 1990, trade was in balance with approximately $1
billion in Turkish exports and $1 billion in imports,
primarily crude oil. From 1991 - 1996, trade entered an
"idle period" under embargo conditions. Turkish exports
under the UN Oil for Food program peaked in 2001 at $1.25
billion. "Normal" trade re-started in April 2004. 2005 was
a very good year for Turkish business with $7 billion in
realized contracts divided into three basic areas: $2.4
billion in exports of refined petroleum products (LPG,
gasoil, kerosene and unleaded gasoline); $1.5 billion in
construction contracts and the remainder in goods and
services including food products and construction materials.
This figure includes a large number of contracts to provide
supplies to major U.S. corporations such as KBR, he noted.
Figures for 2006 will not be as high as 2005, in part because
the U.S.-funded reconstruction contracts are largely
complete, but also because attacks on oil pipelines have left
the Government of Iraq with less money to spend on imports.
Aksoy expects between $3.4 - 4.0 billion in Turkish exports
in 2006.

7. (SBU) Cong. Shays asked the group for their views on where
the international community should go from here with regard
to Iraq. There was no consensus response. Some argued that
the U.S. needed to leave as quickly as possible, adding that
almost anything would be better than the current situation.
One representative of a trucking firm noted that he strongly
opposed the invasion, but now sees no future for Iraq without
a continuing U.S. military presence. Others argued that a
clear timetable for a U.S. military withdrawal would force
the Sunni and the Shia to work out their differences. One
participant opined that there must be a "secret plan" since a
country as powerful as the United States could not possibly
have made as many mistakes as the U.S. appears to have in
Iraq. Over half the group agreed that the idea of creating a
Western-style democracy in Iraq was doomed from the outset
and argued that Iraq needed a 'charismatic leader'.
However, none could point to a political leader with national
appeal, particularly someone viewed as both strong and
honest. There was a strong belief that the ideal of
"justice" was more important than "freedom" and that the
Iraqi people would be willing to sacrifice considerable
personal freedom to obtain justice. A representative of an
engineering firm, who lives and works in Sadr City, argued
that the "mindless killing and chaos" had become so severe
that the Iraqi people would welcome an imposed solution if it
brought a basic level of security. This is one of the
attractions of the militias, he argued.

8. (SBU) Cong. Shays noted that Iraq was potentially a very
wealthy country with adequate water and immense oil reserves,
but that the Iraqi people seemed to not recognize the
potential of their own country. The group agreed that Iraq
had great potential, but described a population that had
never enjoyed the potential wealth because Saddam did not

ISTANBUL 00002144 003 OF 004


distribute wealth evenly. By contrast, they argued, the
Saudi and Kuwaiti monarchies share wealth with their people.
Several businessmen noted that the educated people who do
recognize Iraq's potential had almost all fled the country,
leaving a huge deficit of engineers, doctors and university
professors. The uneducated part of society is ignorant of
Iraq's potential and therefore very dangerous, they added.

9. (SBU) Cong. Shays asked whether it was still possible to
do business in Iraq, and the group answered with an
overwhelming "yes." The engineer who works in Sadr City
described his way of doing business, and noted that the U.S.
engineers who abandoned the contract his company now holds
seemed particularly ill-suited forQis business model.
Despite speaking little Arabic, he spends the bulk of his day
explaining what his company plans to do (i.e. install
electric transformers on a certain street) to small groups of
local residents - in mosques, in private homes, in tea
houses. He works with the al-Sadr local offices, militia
members provide his security, and he hires al-Sadr adherents
as laborers. Gaining community support means that he can
store valuable inventory in local warehouses and that his
security costs are relatively low. Representatives from
trucking and grocery companies agreed that doing business in
Iraq involved an inordinate amount of "tea and talking" but
ultimately they believe that Iraq remains a profitable place
to do business.

10. (SBU) A representative of a steel firm currently working
in Northern Iraq noted that companies must go through Barzani
to succeed in Northern Iraq, yet with nationalism on the rise
in Turkey he cannot admit that he is working with the Kurdish
Regional Government (KRG). This is a dilemma for businesses.
He asked Cong. Shays how the U.S. views Northern Iraq and
the PKK issue. Shays noted that diaspora Kurds and Kurds
living in No. Iraq have different views on independence and
autonomy. The Kurds in No. Iraq know that it would be
difficult to survive as an independent state, he argued.
Cong. Shays also noted that in his view the failure of U.S.
policy in Iraq could result in a divided Iraq. Other
participants noted that Iran also has a strong incentive to
support a unitary Iraq arguing a three-state solution would
be too problematic for Iranian Kurds and Shia Arabs. The
group agreed that the U.S. should support its friends in the
region - Turkey, Israel and Jordan - and that the U.S. needs
to guarantee a Kurdish state will not come into being as well
as show support for Turkey's fight against the PKK.

Prominent Industrialist Sees Business Opportunities in No.
Iraq
--------------------------------------------- ---------------

11. (SBU) Alarko Holding Chairman of the Board Ishak Alaton
told Cong. Shays that he was very happy that the March 1 vote
had failed; noting that if the measure had passed the Turkish
General Staff would have demanded a role in No. Iraq that
would have inflamed the situation. Cong. Shays asked what
Alaton thought would happen if the U.S. pulled out of Iraq.
Alaton replied Iran will automatically get bigger and Israel
will be greatly disadvantaged. He painted a very bleak
picture of the future of Southern and Central Iraq, but
explained that Northern Iraq was a completely different
situation. There is a fantastic opportunity for Turkey -
both economic and social - in Northern Iraq, he claimed.
Alaton called for the USG to provide loan guarantees instead
of grants particularly in Northern Iraq. Alarko Holding
would like to invest $25 million in a 30 MW electricity
generation plant in Irbil, but needs a loan guarantee to
cover the financial risk. He believes this is a safe
investment, as Alarko intends to own the installation and
sell power to the local authorities. The plant would
initially provide 30 MW of power but could be expanded to
provide up to 300 MW (a $300 million investment), enough to
fully power Irbil. Alarko hopes to purchase GE turbines and
is seeking an OPIC guarantee. Shays noted that GE, which is
headquartered in his district, is very cautious about

ISTANBUL 00002144 004 OF 004


covering risk but agreed to look into the proposal.

12. (SBU) Comment: Cong. Shays summed up his meetings with
the business community in three points: Turkish companies
can and will do business in Iraq whether or not the U.S.
leaves; however, it would be helpful if the U.S. succeeds and
there is an orderly transfer of power, but this is not a
prerequisite; and finally Turkish companies are in for the
long haul and this long-term outlook informs business
dealings in Iraq. Turkish companies have experience in other
difficult situations - Russia, the former Soviet Union,
Turkey itself during prolonged periods of economic volatility
- and as a result have developed a flexible outlook that
enables them to take risks firms from other countries would
likely forego. However Turkish businessmen remain deeply
concerned and somewhat suspicious of U.S. motives in Iraq,
particularly the North, and are looking for visible support
for the GOT in its efforts to quell PKK terrorism. End
Comment.

13 (U) CODEL Shays did not have the opportunity to clear this
message.
JONES

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