VZCZCXRO5616
RR RUEHDA
DE RUEHAK #0455/01 0341651
ZNR UUUUU ZZH
R 031651Z FEB 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 2935
INFO RUEHTA/AMEMBASSY ALMATY 2131
RUEHTH/AMEMBASSY ATHENS 6926
RUEHKB/AMEMBASSY BAKU 1317
RUEHBM/AMEMBASSY BUCHAREST 0815
RUEHMO/AMEMBASSY MOSCOW 5332
RUEHSF/AMEMBASSY SOFIA 0987
RUEHSI/AMEMBASSY TBILISI 2969
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEHIT/AMCONSUL ISTANBUL 9749
RUEHDA/AMCONSUL ADANA 0365

UNCLAS SECTION 01 OF 02 ANKARA 000455 
 
SIPDIS 
 
TREASURY FOR CPLANTIER AND MNUGENT 
USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK 
DOE FOR CHUCK WASHINGTON 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET ENRG EINV KTDB TU
SUBJECT:  Turkish Council of State Rules Against Tupras 
Privatization, but It May Be Too Late 
 
REF: a) 05 Ankara 269, b) 05 Ankara 3258 
 
This cable has been coordinated with Congen Istanbul. 
 
¶1. (SBU) Summary: On February 2, the Council of State 
(Danistay) Administrative Court suspended the $4.1 
billion sale of a 51% share of state-owned oil refiner 
Tupras to a Koc Holding-Shell consortium, dealing a 
potential blow to Turkey's privatization program. 
Because the formal transfer of ownership was completed 
on January 26. It is unclear what, if any, practical 
impact the court's ruling will have.  However, to some 
extent, the damage to Turkey's privatization process 
and future privatization revenues is likely already 
done. End Summary. 
 
---------------------------------------- 
Administrative Court Rules Against Tupras Privatization 
---------------------------------------- 
 
¶2. (SBU) In response to a lawsuit initiated by the 
Petrol-Is labor union, Turkey's administrative court, 
the Danistay, on February 2 issued an injunction 
against the privatization of Tupras, Turkey's sole oil 
refining company, which was announced with great 
fanfare in September.  Although the written ruling has 
not yet been made public, rumored reasons for the 
decision include the exclusive supply agreement between 
Shell and Koc and the fact that the contract did not 
include the required investment and employment 
components. 
 
-------------------- 
Too Little Too Late? 
-------------------- 
 
¶3. (SBU) The practical impact of the injunction is 
unclear since the transfer of the 51% stake to the Koc- 
Shell group was completed on January 26, and the 
proceeds from the sale have already been deposited in 
Treasury accounts.  Legal experts, PA officials, and a 
Koc spokesperson have told the press that the transfer 
is practically irreversible.  A source close to Koc 
told us the group's lawyers were astounded by the 
ruling and cannot imagine what "legal defects" the 
Danistay could have found in the transfer contract. 
There is precedent, including some privatization cases, 
for Danistay rulings to have no practical effect 
because the administrative actions were deemed 
irreversible.  Furthermore, the Danistay chamber that 
issued the injunction is not the specialized chamber 
with jurisdiction over privatization cases. 
 
¶4. (SBU) According to press reports, the PA has 30 days 
from the date it receives the official Court ruling to 
implement the decision.  PA sources told us they have 
not yet received the official Court decision.  The PA 
TUPRAS privatization group head pointed out that the 
court decision would, however, deter future investors 
in privatizations and thereby reduce GOT privatization 
revenues.  The PA can appeal for another review by the 
Danistay. 
 
------- 
Comment 
------- 
 
¶5. (SBU) Trading in Tupras shares on the Istanbul stock 
exchange has been suspended since Thursday, but the 
broader exchange indices have taken the news in stride 
with only small corrections Thursday and Friday.  The 
press, on the other hand, is playing up the story - 
several mainstream, non-financial newspapers featured 
the story on the front page.   Whatever the final 
outcome, this Danistay ruling is a blow to the overall 
 
ANKARA 00000455  002 OF 002 
 
 
privatization process, as it could deter potential 
investors on Turkish privatizations. 
 
WILSON