VZCZCXRO9174
RR RUEHAST
DE RUEHAK #4462/01 2151101
ZNR UUUUU ZZH
R 031101Z AUG 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 7647
INFO RUEHRC/USDA FAS WASHDC
RUCNRAQ/IRAQ COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHZN/EST COLLECTIVE

UNCLAS SECTION 01 OF 03 ANKARA 004462 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:N/A 
TAGS: ENGR SENV EAGR TU IZ SY
SUBJECT: TURKEY DETERMINED TO BUILD CONTROVERSIAL ILISU DAM 
 
REF: A) ANKARA 4379 
B) ANKARA 3691 
C) ANKARA 3324 
 
ANKARA 00004462  001.2 OF 003 
 
 
¶1.  (SBU) Summary: The Ilisu dam project on the Tigris River has 
been one of the most widely criticized hydropower dam projects of 
the Southeast Anatolia Project (GAP).  Despite the continued 
controversy, Turkey remains doggedly committed to building the dam. 
The Turkish press announced recently that Prime Minister Recep 
Tayyip Erdogan will lay the first foundations for the Ilisu Dam on 
August 5, but Ilisu's financing is still not assured. 
Environmental, archaeological, human, and political impacts have 
fueled international pressure against the dam and have deterred an 
earlier consortium.  An Austrian-Swiss-German group is working on 
securing financing.  End Summary. 
 
----------- 
Crown Jewel 
----------- 
 
¶2.  (SBU) The Ilisu Dam marks the last of the major dam projects to 
be completed under the GAP project, the huge integrated power, 
irrigation, and rural development initiative in southeast Turkey. 
The 1200 MW Ilisu project, which will generate 3800 GWh of 
hydroelectric power per year, will be one of the largest hydropower 
projects in Turkey.  This aspect is particularly enticing to Turkey 
which faces a looming electricity shortage (Ref A).  One MFA 
official, Esen Altug, expressed the view that Ilisu Dam would be the 
last jewel in the GAP crown, referring to the importance of Ilisu in 
marking the "completion" of the GAP initiatives. 
 
------------------- 
Hydropower benefits 
------------------- 
 
¶3.  (SBU) The Ilisu Dam is expected to help generate power for much 
needed regional development in and around the Hasankeyf/Batman area 
of undeveloped southeast Turkey, in addition to bolstering Turkey's 
shortfall in energy supplies.  Currently, hydropower accounts for 
approximately 15-20% of the Turkish energy market.  Ilisu dam output 
would equate to 55% of the electricity generated by the largest GAP 
dam, the Ataturk Dam on the Euphrates, which represents in turn 5% 
of Turkey's total energy production. 
 
------------------- 
Local Economy Boost 
------------------- 
 
¶4.  (SBU) In addition to the hydropower production, Ilisu is also 
expected to bring jobs, irrigation capacity, and agricultural 
development into the impoverished, ethnically Kurdish region. 
According to GAP, over 4,000 people are expected to be directly 
employed throughout the dam construction period (4-7 years).  GAP 
estimates this figure as representing about 11% of all construction 
workers in the immediately surrounding region.  The resulting total 
incremental investment in the region as a result of construction and 
power plant operation is estimated at 300 million Euros ($380 
million).  Associated activities like relocation and improvement of 
the infrastructure, new roads, settlements, bridges, railroads, 
electrical transmission lines and public buildings are expected to 
generate approximately $200 million for the local economy. 
 
-------------------- 
Financial Challenges 
-------------------- 
 
¶5.  (SBU) Turkey's State Planning Organization (SPO), which has the 
lead role in managing public investment, has allocated 321 million 
YTL (about $214 million) from the 2006 budget for the launching of 
construction on Ilisu dam.  However, the GOT Treasury must first 
complete negotiations and secure the finance package before the 
allocated budgetary funds can be spent.  Gaining the foreign credit 
needed has been elusive.  The World Bank declined involvement in the 
project early on, citing that the project violates the UN approved 
"Convention on the Non-Navigational Uses of Trans-boundary 
Waterways".  Other agencies, such as EBRD and ADF, have all agreed 
that any projects financed by them must comply with highest EU 
environmental requirements. 
 
¶6.  (SBU) The initial construction contract (without tender) was 
awarded to Swiss companies: Sulzer Hydro and ABB Power.  The 
construction was then subcontracted to a consortium of firms, 
including the British civil engineering firm Balfour Beatty PLC and 
Impregilo (Italy).  Financing was being arranged by the Union Bank 
of Switzerland (UBS) and  export credit guarantees were being sought 
from the export credit agencies of Austria, Germany, Italy, and 
Switzerland.  However, in 2000, Balfour Beatty and Impregilo pulled 
out of the project, under pressure from environmental watchdogs and 
growing concerns over the quality of the environmental impact 
 
ANKARA 00004462  002.2 OF 003 
 
 
assessment.  Shortly thereafter, UBS ended its financial backing 
following continuing pressure from environmental and human rights 
groups. 
 
¶7.  (SBU) The construction contract is currently assigned to the 
Austrian company, VA Tech Group, which is part of the remaining 
German (Siemens)-Austrian-Swiss consortium.  Financing for the 
project is still awaiting necessary joint approval by the three 
countries' export credit agencies.  Gurdogar Sarigul, Manager of the 
Environmental and Sustainable Development Sector Office at the EU 
Commission Office in Ankara, confirmed that VA Tech was still 
planning on financing the Ilisu Dam project, but that they were also 
under pressure from the EU on Austrian compliance on environmental 
matters.  Currently, direct negotiations have not begun on the 
approximately $1 billion dollar loan package proposed by the 
consortium in May 2005.  Treasury has publicly complained about the 
high insurance premiums contemplated in the prospective package. 
DSI has called for domestic financing of the dam in the event of 
further delays or unreasonable cost in securing foreign financing. 
 
 
----------------------------- 
Environmental Impact of Ilisu 
----------------------------- 
 
¶8.  (SBU) The GOT insists that Ilisu would have a positive impact on 
the regional environment.  In addition to regulating the flow rate 
of the downstream Tigris, the dam would create some 300 square 
kilometers of water surface, which the GOT says would create a 
favorable habit for many types of flora and fauna. 
 
¶9.  (SBU) Critics point out, however, that the Environmental Impact 
Assessment Report (EIAR) prepared for the Ilisu Dam site falls short 
of international standards.  Concerns about solid waste and 
wastewater from the local cities have been voiced.  Some critics 
fear that the reservoir would reduce the self-purification capacity 
of the river and affect the local fauna in the area.  A local 
Birdlife International rep shared his organization's criticism of 
the EIAR and the treatment of endangered waterfowl from the project. 
 Additionally, health concerns over the reservoir have also been 
raised, suggesting that the standing water in the reservoir would 
facilitate the spread of malaria in the region.  VA Tech is 
currently conducting its own EIAR, and as an Austrian firm, is under 
pressure and obligation to conform to EU standards. 
 
------------------- 
Human Rights Issues 
------------------ 
 
¶10.  (SBU) One of the most controversial aspects of the Ilisu Dam 
project is its impact on the local inhabitants of the rgion.  The 
Ilisu dam would flood some 52 villages and is estimated to 
potentially affect 15,000 to 20,000 people.  Other sources place 
this number much higher (~78,000).  Although the GOT has promised 
adequate compensation for displacement, and it has prepared a robust 
resettlement plan, critics are not satisfied that it will indeed be 
appropriately implemented.  Critics have cited past resettlement 
projects in Turkey as a basis for their current concerns with the 
Ilisu dam project. 
 
----------------------------------- 
Ilisu's Impact on Cultural Heritage 
----------------------------------- 
 
¶11.  (SBU) The town most affected by the Ilisu dam will be 
Hasankeyf, with a current population of 5000 (mostly Kurdish). 
Remnants of buildings dating back to the early part of the last 
millennium are still standing in the town and the area has been 
touted as an important stop along the ancient Silk Road.  In 1978, 
the town was awarded archaeological protection by the Turkish 
Ministry of Culture.  In 1998, a protocol was signed between the 
Ministry of Culture, DSI and the Middle East Technical University 
(METU) for the execution of archaeological investigations in the 
Ilisu area.  The institute TACDAM (Centre for Research and 
Assessment of Historic Environment) at METU has been acting as 
coordinator for the archaeological research.  There are current 
plans to move the 22 historic sites out of the path of the reservoir 
and relocate them in a newly established "culture park" which will 
be situated along the banks of the reservoir.  The plan is that the 
sites would enjoy enhanced protection and be more accessible to 
tourism. 
 
¶12.  (SBU) However, many critics have expressed their concerns over 
the viability of relocating the sites.  The current condition of the 
various buildings is poor and there is concern that moving them 
might destroy them even further.  One critic claimed that only 15% 
of the relics could be safely evacuated, leaving the remainder to be 
submerged by the reservoir.  Others speculate that the monuments may 
not be able to be moved at all. 
 
ANKARA 00004462  003.2 OF 003 
 
 
 
-------------------------- 
Regional Political Impacts 
-------------------------- 
 
¶13.  (SBU) The use of the Tigris and Euphrates Rivers by Turkey has 
long been contested by its downstream neighbors, Syria and Iraq. 
Both countries have repeatedly raised concerns that Turkey's GAP 
project has negatively affected downstream river flows, leaving the 
two countries captive to Turkey for an ensured water supply.  There 
is no current agreement among the three countries as to how the 
trans-boundary water resources should be shared and exploited by 
each country (Refs B and C), and dialogue and information exchange 
is sporadic. 
 
¶14.  (SBU) The Turkish position is that the Ilisu dam project would 
lead to both cleaner and more regular downstream water flows.  For 
example, DSI Planning Department head Yalcin Dikmen explained to us 
that Turkey's storage of water is of great benefit to Iraq and Syria 
as it regulates the flow of the Euphrates River.  Before the dam 
building spree, flows on the Euphrates could drop as low as 150 cms 
(cubic meters per second) during the summer months.  Now the flow is 
stabilized at 550-1,500 cms year-round.  He also pointed out that by 
having water stored in Turkey, Iraq would not have to build its own 
storage facilities and dams. 
 
¶15.  (SBU) Dikman also stated that Turkey has a more suitable 
topography for dam building than either of its downstream neighbors. 
 Iraq's geology is more prone to evaporation problems and the use of 
dams would be an inefficient means of water management for Iraq, he 
asserted.  As an example of how extreme evaporation effects are in 
Iraq, Dikmen pointed out that to rehydrate 1 million hectares of 
marshland would take 15 billion cubic meters of water.  Despite 
these assurances from Turkey, Syria and Iraq remain skeptical that 
downstream flows will be unaffected. 
 
---------------------------- 
Domestic Political Dimension 
---------------------------- 
 
¶16.  (SBU) A key motivation for the GOT is that the Ilisu Dam is one 
of the few high-profile projects it could undertake any time soon to 
show the economic development component of its Kurdish/southeast 
Turkey policy.  This is particularly relevant for Prime Minister 
Erdogan, who is a parliamentarian from nearby Siirt, his wife's 
hometown, and whose governing party, edging toward elections, has 
little to boast of in the southeast.  Also, DSI is a powerful 
independent agency which prides itself on its engineering prowess 
and it is determined to build the GAP capstone dam. 
 
------- 
Comment 
------- 
 
¶17.  (SBU) Turkey's adamant position that it will build the Ilisu 
Dam will likely hurt the already weak dialogue with Iraq and lack of 
dialogue with Syria (Refs B and C).  There may be merit in the 
position expressed to us by the Austrian Commercial Counselor that 
Austrian-German-Swiss financing (assuming unanimous support from the 
three credit agencies) would assure that environment, historical, 
and human rights issues would be addressed at highest 
international/EU standards.  Failing delivery of this financing 
source, it appears unlikely that Turkey could finance this project 
on its own without drastic cuts in other, badly needed public 
investment projects.  Turkey might find Russian, Chinese or other 
funding that would not assure these standards.  A responsible Ilisu 
project would bring some benefits to the region for jobs and 
tourism.  The emphasis on the hydropower benefits are relevant, but 
reflect that Turkey needs to develop a more comprehensive energy 
policy that assures a welcoming and unchanging foreign investment 
environment and provides for diversified sources of energy. 
Turkey's stubborn commitment to build this dam - at least as much 
political as economic - is symbolized by the announcement that Prime 
Minister Erdogan will lay the ceremonial first foundation on August 
5 in advance of arranging financing. 
 
McEldowney