VZCZCXRO0945
OO RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK RUEHMOS
DE RUEHAK #0775/01 0481150
ZNR UUUUU ZZH
O 171150Z FEB 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3285
INFO RUEHIT/AMCONSUL ISTANBUL 9849
RUEHDA/AMCONSUL ADANA 0422
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEUITH/ODC ANKARA TU
RHWSMRC/USCINCCENT MACDILL AFB FL//POLAD
RUEKJCS/JOINT STAFF WASHDC//J-3/J-5
RUEKJCS/SECDEF WASHDC//USDP:PDUSDP/ISA:EUR/ISA:NESA/DSCA
RHEHAAA/NSC WASHDC
RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 ANKARA 000775 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR PLANTIER 
 
E.O. 12958: N/A 
TAGS: ENRG EFIN EPET IZ TU
SUBJECT: SOMO ARREARS RESCHEDULED, LOADINGS STILL ON HOLD 
 
REF:  ANKARA 278 
 
ANKARA 00000775  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED. 
 
This message was coordinated with Consulate Adana. 
 
¶1.  (SBU)  Summary. Turkish and Iraqi negotiators have 
agreed on a repayment plan for arrears due by SOMO to 
Turkish companies and a new letter of credit-based 
mechanism to secure payments on future deliveries. 
Before shipments to SOMO can resume, SOMO and the 33 
individual Turkish trading companies will need to 
negotiate separate supply contracts covering types of 
fuels, quantities, and prices.  Those discussions are 
ongoing, but the organization representing the suppliers 
is skeptical that SOMO will adhere to the new rules.  End 
Summary. 
 
------------------------------ 
ARREARS TO BE PAID BY YEAR-END 
------------------------------ 
 
¶2.  (SBU)  On February 15, after four days of difficult 
negotiations in Ankara, the Turkish Foreign Trade 
Undersecretariat (FTU) and an Iraqi delegation signed an 
MOU covering a payment plan for late payments due by SOMO 
to Turkish oil products suppliers.  Payment of the full 
amount of approximately $640 million in agreed arrears 
will take place in nine equal monthly installments to 
which a 3% interest rate will be applied.  Payments will 
be covered by irrevocable letters of credit opened in 
favor of individual suppliers.  The two sides agreed to 
continue discussion of approximately $292 million in 
contested amounts.  In addition to SOMO, the Iraqi 
delegation included representatives of the Prime Ministry 
(Fadel Kadhum, head of del), Ministries of Oil and 
Finance, the Trade Bank of Iraq, and the Supreme Audit 
Board. 
 
-------------------------------------------- 
FUTURE DELIVERIES ONLY WITH LETTER OF CREDIT 
-------------------------------------------- 
 
¶3.  (SBU)  In the same MOU, the two delegations agreed on 
a new payments mechanism that is intended to avoid the 
renewed accumulation of arrears on future deliveries by 
requiring that such deliveries only be made on the basis 
of irrevocable letters of credit.  There was also an 
agreement to establish a mechanism for settling disputes 
by establishing a committee that will meet monthly.  The 
committee members include SOMO and the supplier 
companies, as well as representatives of FTU and the 
Trade Bank of Iraq. 
 
------------------------------------------ 
SUPPLIER LEVEL AGREEMENTS BEING NEGOTIATED 
------------------------------------------ 
 
¶4.  (SBU)  The next step before companies renew loading 
of fuel onto tanker trucks at Turkish ports is for SOMO 
to negotiate individual supply agreements with the 33 
Turkish companies covered by the agreement.  We 
understand that as of Friday, February 17 these 
negotiations are ongoing in Istanbul.  According to the 
Turkey-Iraq Business Council, to which most of the 
companies belong and which represents their interests, 
SOMO says it has a total monthly budget of $250 million 
for external fuel purchases (including from Turkey and 
other countries).  The Council says that given past 
performance, they do not have confidence that SOMO will 
respect the terms of the February 15 agreement, but that 
they are willing to give it another try. 
 
¶5.  (SBU)  Consulate Adana reports that representatives 
in Mersin port of Petrol Ofisi (PO), one of the largest 
suppliers, say discussions between SOMO and Turkish 
companies are about 70-80% complete.  Turkish companies 
are content with progress so far, but that all the 
important details are not yet agreed.  As of Friday 
 
ANKARA 00000775  002.2 OF 002 
 
 
afternoon, neither PO nor the others in the consortium 
have made arrangements to load new fuel, although there 
is a slim possibility that loadings could resume over the 
weekend. 
WILSON