A/S SULLIVAN MEETING WITH TURKISH FONMIN GUL

CONFIDENTIAL C O N F I D E N T I A L ANKARA 004301 SIPDIS SIPDIS E.O. 12958: DECL: 07/25/2016 TAGS: PREL, ECON, ENRG, EFIN, EINV, TU SUBJECT: A/S SULLIVAN MEETING WITH TURKISH FONMIN GUL REF: A. ANKARA 4133 (NOTAL) B. ANKARA 4132 (NOTAL) Classified By: Ambassador Ross Wilson for reasons 1.4(b) and (d). 1. (C) Summary: In a meeting with Assistant Secretary Daniel Sullivan on July 14, Deputy Prime Minister and FonMin Abdullah Gul discussed the Middle East situation (reported septel) and a range of economic issues. On the southern corridor for gas, Gul said U.S. support was necessary but that Turkey had to be very careful about Russian sensitivities. Gul strongly supported the need for more bilateral economic cooperation, emphasized Turkey,s potential as an investment destination and recognized the need for the GOT to stay the course on economic reform. End Summary. ------ Energy ------ 2. (C) A/S Sullivan congratulated Turkey on the BTC completion and inauguration and Gul responded that project could not have been realized without the U.S. Sullivan asked how the Turkish Government sees next steps on energy, saying the U.S. would support a southern corridor with Shah Deniz supplying southern Europe. Saying U.S. support had been crucial with Azerbaijan and Kazakhstan in the past, Gul said &your support is again necessary.8 He stressed, however, that Turkey would have to be very careful, citing Russian sensitivities. He said President Putin personally follows these issues very closely and asks Turkish leaders about them at every meeting. 3. (C) Gul said Russia cannot continue to take other countries, gas and sell at a much higher price because it,s not &logical.8 At the beginning, Russia had opposed BTC but eventually accepted it. Gul went on to describe a similar pattern with the proposed Samsun-Ceyhan bypass pipeline, which was very important to Turkey. &Now they are looking at it.8 He laughed that Putin will come soon to Istanbul and see for himself the danger of tankers passing by on the Bosphorus. Gul noted other projects under consideration to bring gas to or through Turkey: from Egypt, and from Iraq, following the oil pipeline from Kirkuk. 4. (C) With regard to Russia, A/S Sulilvan said the U.S. view is that commercial viability is important but we view the gas issues much as we did BTC. Russian involvement should not go so far as to block other opportunities. Open competition and diversity of supply are the best ways to preserve security of supply. ----------------------------------- Bilateral Economic Cooperation, EPC ----------------------------------- 5. (C) A/S Sullivan underscored U.S.-Turkish economic cooperation and noted that the Shared Vision and Structured Dialogue paper specifically called from more economic cooperation. Sullivan also recalled that after Gul,s dinner speech in Washington, Sullivan had thanked Gul for his leadership, since Gul had cited the &unrealized potential8 in the economic relationship. Sullivan pointed out that a stronger economic relationship helps maintain the political relationship, citing the example of strong economic trade and investment between the U.S. and EU countries mitigating occasional political frictions. 6. (SBU) Gul said that he and Secretary Rice had very consciously included economic cooperation in the Shared Vision document. He said Turkey,s trade volume with the U.S. is growing slowly given the growth in Turkey,s overall trade. Sullivan said he is interested in ways to broaden and deepen the involvement of economic agencies and the private sector on both sides. Gul agreed the private sector is very important. He said many large Turkish groups started out with U.S. partners but now other countries are more active. 7. (SBU) Gul also alluded to the potential for U.S.-Turkish business cooperation relating to third countries, such as in Iraq or Afghanistan, saying in Afghanistan 95% of the construction is being done by Turkish companies. On tourism, Gul said he himself had made the decision to reduce visa fees for Americans from $100 to $20. He linked the fee reduction to an increase in American tourists coming to Turkey, from 200,000 to 400,000 per annum. ------------------------ Foreign Direct Investment ------------------------- 8. (C) Gul said he was very pleased to see the GE Capital investment in Garanti bank, saying Garanti had &consulted us.8 Gul felt that privatization is going well and pointed out that Turkey had received $8 billion in Foreign Direct Investment in the first 5 months of 2006 and expected to receive $15 to 20 billion for the full year. 9. (C) The Ambassador commended the Government for its efforts to fix existing company problems since that gives confidence to new investors. He specifically thanked Gul for the Government,s efforts on the Cargill case, despite domestic criticism. Gul said &we were criticized but we thought it was an example for others.8 ------------------------------------ Staying the Course on Economic Reform ------------------------------------- 10. (C) On the broader macroeconomic situation, Gul stressed the need for the GOT to &maintain what we have achieved8 on monetary and fiscal policy and said it will not be easy. &There may be outside shocks.8 He mentioned the political situation and suspicions that some people have that the Government will not be careful. 11. (C) When asked about the status of Turkey,s social security reform, Gul said he was proud of it, noting how difficult this kind of reform has been in other countries, such as Germany and the U.S. He admitted Turkey had promised to pass it two years ago but &at least we passed it.8 Regarding the court challenge to the reform, he said the Government is now briefing the Constitutional Court on the reform, since &they are not experts.8 Assistant Secretary Sullivan has cleared this cable. Visit Ankara's Classified Web Site at http://www.state.sgov.gov/p/eur/ankara/ WILSON