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

041534Z Nov 03

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 006886 
 
SIPDIS 
 
 
STATE FOR E, EB/IFD, AND EUR/SE 
TREASURY FOR OASIA - JLEICHTER AND MMILLS 
NSC FOR MCKIBBEN AND BRYZA 
 
 
E.O. 12958: DECL: 11/03/2005 
TAGS: EAID EFIN PREL PGOV TU
SUBJECT: MEETING WITH TREASURY UNDERSECRETARY 
 
 
REF: A. STATE 295374 
     ¶B. ANKARA 6574 
 
 
 Classified by Acting Economic Counselor Andrew Snow for 
reasons 1.5 (b) and (d). 
 
 
¶1. (C) Summary: Econoff conveyed to Treasury Undersecretary 
Ibrahim Canakci that the U.S. would not revisit the political 
conditionality in the FA.  Canakci explained that, although 
the Treasury had originally intended merely to seek approval 
from the Council of Ministers, the GOT is now debating 
whether parliamentary approval is necessary.  Even if it is 
not, the President will have to sign off on ratification. 
Meanwhile, the political controversy has engendered the GOT's 
current wait-and-see approach.  Canakci asserted that the 
required actions for IMF Board approval of the Sixth Review 
were on track, and that the GOT had committed to re-energize 
its efforts on World Bank-sponsored structural reforms. End 
Summary. 
 
 
State of Play on the U.S. Financial Agreement: 
--------------------------------------------- 
 
 
¶2. (C) On November 4, Econoff met with Turkish Treasury 
Undersecretary Ibrahim Canakci and Director General for 
External Finance Melih Nemli.  Econoff requested the meeting 
to follow up on Minister Babacan's comments to Secretary Snow 
in Mexico to the effect that the Foreign Ministry awaited the 
Embassy's reply to the GOT's request for help on the 
political conditionality in the FA.  Econoff explained that 
the Ambassador had checked with Washington and had reported 
back to MFA Undersecretary Ziyal that the U.S. could not 
repeat not revisit the political conditionality for the 
reasons cited in ref A.  Canakci did not seem to know this, 
and undertook to pass the message to Babacan. 
 
 
¶3. (C) Canakci shed a bit of light on the state of play 
within the GOT and on the ratification process.  Whereas the 
Treasury had originally intended merely to seek Council of 
Ministers approval, there is now a debate within the GOT 
about whether parliamentary approval is required.  Canakci 
said the Foreign Ministry believes that the Financial 
Agreement falls under law number 244--a framework law 
governing international agreements--and therefore the FA 
requires parliamentary approval.  Canakci was careful to say 
that the Treasury has not yet agreed with the Foreign 
Ministry-- Treasury's experts are studying the issue. 
Canakci and Melih said Treasury has concluded other 
international financial agreements outside the purview of law 
244 and has not obtained parliamentary approval. With the 
U.S. Financial Agreement, however, the long-term nature and 
the political content may mean that parliamentary approval is 
necessary.  Treasury is also consulting with the Prime 
Ministry. 
 
 
¶4. (SBU) Even if the GOT decides that parliamentary approval 
is unnecessary, Canakci confirmed that the President has to 
sign off on the decision by the Council of Ministers. 
 
 
¶5. (C) Canakci would not be drawn on whether the GOT 
currently had a strategy, except to say that given the 
political controversy, the thinking is to hold off a bit 
before presenting the FA to the Council of Ministers. 
Canakci agreed  that the USG should not expect a disbursement 
request in the next couple of weeks. 
 
 
IFI issues: 
---------- 
 
 
¶6. (C) On the IMF's Sixth Review, Canakci expected the 
Council of Ministers to approve the Second Phase of the 
Direct Tax Reform next week.  The Public Financial Management 
and Control Law and the law to strengthen the BRSA's hand in 
judicial proceedings should be passed by Parliament by 
mid-Novmember.  Canakci said the board date might be delayed 
slightly by the Parliament's busy calendar.  Though there was 
no serious controversy about the Public Financial Management 
and Control Law, it was a long text and would require some 
time for consideration in Parliament.  The BRSA law has 
elicited objections from the Bankers' Association, according 
to Canakci, who feel that it is an overreaction to the Imar 
Bank case.  He chuckled as he pointed out the the bankers 
cannot criticize the law publicly. 
 
 
¶7. (SBU) With the World Bank Country Assistance Strategy 
coming to the Bank Board on November 6, Canakci confirmed 
that the GOT had re-committed to focus on Bank-sponsored 
structural reforms.  According to Canakci, later this month, 
when the new World Bank Resident Representative, Andrew 
Vorkink, permanently moves to Ankara, the senior GOT 
officials will sit down with Vorkink and elaborate an agenda 
and road map to resolve outstanding obstacles.  The areas of 
greatest difficulty have been energy and agricultural sector 
reforms.  Canakci agreed that, with the recent spate of good 
macroeconomic news, now is the time for the GOT to push 
forward on structural reforms. Canakci claimed that senior 
GOT officials understood this. 
 
 
¶8. (SBU) Comment: With the FA stalled, and the IMF less 
focused on structural reforms than the Bank, the CAS board 
discussion is an ideal opportunity for the U.S. to urge 
renewed GOT attention to structural reforms.  Though Canakci 
claims the GOT will be re-energized on these issues, the 
track record suggests it would be desirable for the U.S. to 
signal our vigilance on the structural front. End Comment. 
 
 
 
 
 
 
EDELMAN