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UNCLAS SECTION 01 OF 04 ISTANBUL 002144 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ENIV ENRG OREP PREL PTER TU
SUBJECT: ISTANBUL BUSINESS COMMUNITY DISCUSSES IRAQ WITH 
CODEL SHAYS 
 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY 
 
¶1. (SBU) Summary.  On November 28, CODEL Shays met members of 
the Istanbul business community to discuss their views on 
Iraq's future and U.S. - Turkey relations.  The business 
community sees both risks and opportunities in Iraq, but 
companies with on-going Iraq operations see potential profit 
opportunities, particularly in Northern Iraq.  There was no 
consensus on the best path forward for the U.S. with regard 
to Iraq, with business representatives arguing for everything 
from an immediate military withdrawal to a continual troop 
presence.  Likewise, views on Turkey's relations with Iraq 
differed, however most agreed that the U.S. should do more to 
support Turkey's fight against the PKK.  End Summary 
 
¶2. (SBU) CODEL Shays visited Istanbul for a day of meetings 
on November 28 to discuss business community perceptions of 
both Iraq and U.S. - Turkey relations.  The day began with a 
meeting with Levent Sever of Metis Holding, a company with 
substantial construction business in Russia, the former 
Soviet Union and Iraq as well as an active relationship with 
the Department's Overseas Building Office.  Cong. Shays then 
had a lengthy meeting with members of the Turkey-Iraq 
Business Council (TIBC) followed by a luncheon with the 
governing board of the TIBC.  Cong. Shays also discussed the 
future of Iraq with Ishak Alaton, Chairman of the Board of 
Alarko Holding, one of the largest industrial groups in 
Turkey, and met with members of the American Turkish Council. 
 
 
A View From A Defense Infrastructure Company 
-------------------------------------------- 
 
¶3. (SBU) Levent Sever, member of the Board of Directors of 
Metis Holding (and son of the founder) described doing 
business in Iraq as "difficult but possible", noting that 
security concerns were enormous and insurance costs 
commensurately high.  Metis built the Baghdad embassy interim 
facility and is currently working with OBO on several other 
construction projects, but lost the New Office Building 
contract to a Kuwaiti firm, according to Sever.  He told 
Cong. Shays that he believes the Government of Turkey (GOT) 
made a mistake on March 1, 2003 and should have permitted 
U.S. troops to transit Turkey en route to Iraq.  Sever argued 
that the Parliamentary vQ had effectively cut Turkey out of 
the decision-making process and contributed to current 
problems with the PKK in Northern Iraq.  Sever, who is of 
Kurdish descent, described Northern Iraq as the only part of 
Iraq that "seems normal" - people run businesses, children go 
to school, Turkish firms operate freely.  However, he argued 
the PKK presence "poisons" Northern Iraq by creating a push 
for independence that is unacceptable to Baghdad as well as 
Northern Iraq's neighbors.  He urged greater efforts by the 
U.S. to support the GOT's anti-PKK efforts. 
 
¶4. (SBU) Sever emphasized what he viewed as a disconnect 
between reality and the identity of Turkey represented by the 
ruling AK Party.    He told CODEL Shays that the Turkish 
General Staff represents "the real image, belief and thoughts 
of the Turkish people."  Complaining that the U.S. and the EU 
are not currently seeing "the best of us", he noted that the 
alliance with the United States is the foundation of the 
republic.  He described Turkey's NATO membership as one of 
the best things to ever happen to Turkey, but added that he 
believes European perceptions of Turkey have been tainted by 
centuries of conflict.  He asserted that the EU would 
deliberately set unattainable requirements to preclude 
Turkish membership.  Cong. Shays asked how widely held this 
belief was and Sever explained it was broadly shared by his 
friends and colleagues. 
 
Turkish-Iraqi Business Council Argues Over U.S. Future in Iraq 
--------------------------------------------- --------------- 
 
¶5. (SBU) Cong. Shays described his long-standing interest in 
U.S. policy in Iraq to members of the Turkey-Iraq Business 
 
ISTANBUL 00002144  002 OF 004 
 
 
Council (TIBC), noting that he had traveled to Iraq 14 times 
since the fall of Saddam.  The TIBC has over 100 members: 12 
attended the meeting with CODEL Shays and an additional four 
joined the luncheon that immediately followed.  He told the 
group that he supported the invasion of Iraq, but believed 
the U.S. government had made serious errors in the immediate 
aftermath of the invasion in particular by failing to prevent 
massive looting, insufficiently guarding munitions depots and 
by disbanding the Iraqi security forces as well as by 
engaging in an over aggressive de-Baathification campaign. 
He described the current Iraqi government as lacking 
political will and unable to peacefully resolve the serious 
problems facing the government. 
 
¶6. (SBU) TIBC Chairman Ercument Aksoy described Iraq as an 
important market for the Turkish business community as well 
as a neighboring country with cultural and religious 
importance.  Chambers of Commerce in Southern Turkey are 
focusing on trade with Iraq and major Turkish companies are 
investing in Northern Iraq, according to Aksoy.  He described 
the Turkey-Iraq trade relationship since the mid-1980's. 
From 1984 to 1990, trade was in balance with approximately $1 
billion in Turkish exports and $1 billion in imports, 
primarily crude oil.  From 1991 - 1996, trade entered an 
"idle period" under embargo conditions.  Turkish exports 
under the UN Oil for Food program peaked in 2001 at $1.25 
billion.  "Normal" trade re-started in April 2004.  2005 was 
a very good year for Turkish business with $7 billion in 
realized contracts divided into three basic areas:  $2.4 
billion in exports of refined petroleum products (LPG, 
gasoil, kerosene and unleaded gasoline); $1.5 billion in 
construction contracts and the remainder in goods and 
services including food products and construction materials. 
This figure includes a large number of contracts to provide 
supplies to major U.S. corporations such as KBR, he noted. 
Figures for 2006 will not be as high as 2005, in part because 
the U.S.-funded reconstruction contracts are largely 
complete, but also because attacks on oil pipelines have left 
the Government of Iraq with less money to spend on imports. 
Aksoy expects between $3.4 - 4.0 billion in Turkish exports 
in 2006. 
 
¶7. (SBU) Cong. Shays asked the group for their views on where 
the international community should go from here with regard 
to Iraq.  There was no consensus response.  Some argued that 
the U.S. needed to leave as quickly as possible, adding that 
almost anything would be better than the current situation. 
One representative of a trucking firm noted that he strongly 
opposed the invasion, but now sees no future for Iraq without 
a continuing U.S. military presence.  Others argued that a 
clear timetable for a U.S. military withdrawal would force 
the Sunni and the Shia to work out their differences.  One 
participant opined that there must be a "secret plan" since a 
country as powerful as the United States could not possibly 
have made as many mistakes as the U.S. appears to have in 
Iraq.  Over half the group agreed that the idea of creating a 
Western-style democracy in Iraq was doomed from the outset 
and argued that Iraq needed a 'charismatic leader'. 
However, none could point to a political leader with national 
appeal, particularly someone viewed as both strong and 
honest.  There was a strong belief that the ideal of 
"justice" was more important than "freedom" and that the 
Iraqi people would be willing to sacrifice considerable 
personal freedom to obtain justice.  A representative of an 
engineering firm, who lives and works in Sadr City, argued 
that the "mindless killing and chaos" had become so severe 
that the Iraqi people would welcome an imposed solution if it 
brought a basic level of security.  This is one of the 
attractions of the militias, he argued. 
 
¶8. (SBU) Cong. Shays noted that Iraq was potentially a very 
wealthy country with adequate water and immense oil reserves, 
but that the Iraqi people seemed to not recognize the 
potential of their own country.  The group agreed that Iraq 
had great potential, but described a population that had 
never enjoyed the potential wealth because Saddam did not 
 
ISTANBUL 00002144  003 OF 004 
 
 
distribute wealth evenly.  By contrast, they argued, the 
Saudi and Kuwaiti monarchies share wealth with their people. 
Several businessmen noted that the educated people who do 
recognize Iraq's potential had almost all fled the country, 
leaving a huge deficit of engineers, doctors and university 
professors.  The uneducated part of society is ignorant of 
Iraq's potential and therefore very dangerous, they added. 
 
¶9. (SBU) Cong. Shays asked whether it was still possible to 
do business in Iraq, and the group answered with an 
overwhelming "yes."  The engineer who works in Sadr City 
described his way of doing business, and noted that the U.S. 
engineers who abandoned the contract his company now holds 
seemed particularly ill-suited forQis business model. 
Despite speaking little Arabic, he spends the bulk of his day 
explaining what his company plans to do (i.e. install 
electric transformers on a certain street) to small groups of 
local residents - in mosques, in private homes, in tea 
houses.  He works with the al-Sadr local offices, militia 
members provide his security, and he hires al-Sadr adherents 
as laborers.  Gaining community support means that he can 
store valuable inventory in local warehouses and that his 
security costs are relatively low.  Representatives from 
trucking and grocery companies agreed that doing business in 
Iraq involved an inordinate amount of "tea and talking" but 
ultimately they believe that Iraq remains a profitable place 
to do business. 
 
¶10. (SBU) A representative of a steel firm currently working 
in Northern Iraq noted that companies must go through Barzani 
to succeed in Northern Iraq, yet with nationalism on the rise 
in Turkey he cannot admit that he is working with the Kurdish 
Regional Government (KRG).  This is a dilemma for businesses. 
 He asked Cong. Shays how the U.S. views Northern Iraq and 
the PKK issue.  Shays noted that diaspora Kurds and Kurds 
living in No. Iraq have different views on independence and 
autonomy.  The Kurds in No. Iraq know that it would be 
difficult to survive as an independent state, he argued. 
Cong. Shays also noted that in his view the failure of U.S. 
policy in Iraq could result in a divided Iraq.  Other 
participants noted that Iran also has a strong incentive to 
support a unitary Iraq arguing a three-state solution would 
be too problematic for Iranian Kurds and Shia Arabs.   The 
group agreed that the U.S. should support its friends in the 
region - Turkey, Israel and Jordan - and that the U.S. needs 
to guarantee a Kurdish state will not come into being as well 
as show support for Turkey's fight against the PKK. 
 
Prominent Industrialist Sees Business Opportunities in No. 
Iraq 
--------------------------------------------- --------------- 
 
¶11. (SBU) Alarko Holding Chairman of the Board Ishak Alaton 
told Cong. Shays that he was very happy that the March 1 vote 
had failed; noting that if the measure had passed the Turkish 
General Staff would have demanded a role in No. Iraq that 
would have inflamed the situation.   Cong. Shays asked what 
Alaton thought would happen if the U.S. pulled out of Iraq. 
Alaton replied Iran will automatically get bigger and Israel 
will be greatly disadvantaged.  He painted a very bleak 
picture of the future of Southern and Central Iraq, but 
explained that Northern Iraq was a completely different 
situation.  There is a fantastic opportunity for Turkey - 
both economic and social - in Northern Iraq, he claimed. 
Alaton called for the USG to provide loan guarantees instead 
of grants particularly in Northern Iraq.   Alarko Holding 
would like to invest $25 million in a 30 MW electricity 
generation plant in Irbil, but needs a loan guarantee to 
cover the financial risk.  He believes this is a safe 
investment, as Alarko intends to own the  installation and 
sell power to the local authorities.  The plant would 
initially provide 30 MW of power but could be expanded to 
provide up to 300 MW (a $300 million investment), enough to 
fully power Irbil.  Alarko hopes to purchase GE turbines and 
is seeking an OPIC guarantee.  Shays noted that GE, which is 
headquartered in his district, is very cautious about 
 
ISTANBUL 00002144  004 OF 004 
 
 
covering risk but agreed to look into the proposal. 
 
¶12. (SBU) Comment:  Cong. Shays summed up his meetings with 
the business community in three points:  Turkish companies 
can and will do business in Iraq whether or not the U.S. 
leaves; however, it would be helpful if the U.S. succeeds and 
there is an orderly transfer of power, but this is not a 
prerequisite; and finally Turkish companies are in for the 
long haul and this long-term outlook informs business 
dealings in Iraq.  Turkish companies have experience in other 
difficult situations - Russia, the former Soviet Union, 
Turkey itself during prolonged periods of economic volatility 
- and as a result have developed a flexible outlook that 
enables them to take risks firms from other countries would 
likely forego.  However Turkish businessmen remain deeply 
concerned and somewhat suspicious of U.S. motives in Iraq, 
particularly the North, and are looking for visible support 
for the GOT in its efforts to quell PKK terrorism.  End 
Comment. 
 
13 (U) CODEL Shays did not have the opportunity to clear this 
message. 
JONES