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

UNCLAS ANKARA 001861 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, EB, AND EUR/SE 
NSC FOR BRYZA AND MCKIBBEN 
TREASURY FOR OASIA - MILLS AND LEICHTER 
USDOC FOR DAVID DE FALCO - ITA/MARKET ACCESS AND COMPLIANCE 
 
 
E.O. 12958: N/A 
TAGS: EINV EPET PREL TU
SUBJECT: ANOTHER INVESTMENT PROBLEM:  THE CASE OF THE OIL 
COMPANIES 
 
¶1.   (SBU)  Lawyers representing U.S.-based Toreador 
Resources Corporation called on the Ambassador March 22 to 
seek the Mission's assistance in resolving a problem that is 
preventing Toreador from repatriating the proceeds of its $53 
million capital investment in Turkey.  They explained that 
the Turkish Petroleum Law of 1954 included a provision that 
guaranteed that foreign oil companies could repatriate their 
original investments based on the prevailing exchange rate 
when the investment was made.  Under the law, when the 
Turkish lira loses value, the Turkish Treasury was to pay the 
difference.   Although the lira was relatively stable for the 
first twenty years after the law, Turkish Treasury began 
making payments to cover the companies exchange rate losses 
when the lira started to depreciate in the early 1970s. 
Under this system, Toreador repatriated some $63 million in 
capital investments. 
 
 
¶2.  (SBU) In 1997, however, the Court of Accounts (Sanistay) 
effectively blocked further payments under the guarantee, 
arguing that Treasury had misinterpreted the 1954 law. 
Moreover, The Court held nine Treasury employees personally 
liable for the payments that already had been made.  After 
one of its capital transfer applications was denied in 2001, 
based on this 1997 ruling, Toreador's Madison subsidiary, 
along with several other U.S. oil companies, sued the 
government and won a unanimous decision in the State Council 
(Danistay).  Upon appeal, however, the higher Danistay 
reversed the ruling.  A final administrative appeal is now 
pending. 
 
 
¶3.  (SBU) Toreador's lawyers say they recognize that the USG 
cannot intervene in this judicial process.  However, they 
believe there is another way out.  The Energy Ministry is now 
drafting new petroleum legislation, which the lawyers believe 
could include a provision reaffirming the 1954 law's exchange 
rate guarantee, even if only for investments already made. 
The lawyers said that, without the exchange rate protection, 
Toreador stands to lose $40 million.  They estimated that the 
total amount at stake for all foreign oil companies was 
approximately $100 million. 
 
 
¶4.  (SBU) We discussed this issue March 24 with Treasury 
Director General for Foreign Investment Melek Us.  She 
confirmed she was well aware of the case, as nine of her 
Treasury colleagues had been held personally liable for the 
payments made prior to 1997.  Us said Minister Babacan also 
was aware of the case, and was determined to fix the problem 
to protect his employees.  We responded that fixing the 
problem meant not only protecting the employees, but 
addressing company concerns.  Failure to do so, we suggested, 
would make foreign investors even more wary of doing business 
here, and would run completely counter to the government's 
professed interest in improving the investment environment. 
Us agreed, and suggested we raise the matter with the Energy 
Ministry. 
 
 
¶5.  (SBU) Embassy requests guidance from State and Commerce 
on the suggestion of Toreador's lawyers to urge the GOT to 
include language in legislation reaffirming the exchange rate 
guarantee. 
EDELMAN