Archive for the ‘Wikileaks Cables that matter in Switzerland’ Category

SWISS REACTION TO CALL FOR FREEZING NON-HUMANITARIAN ASSISTANCE TO NICARAGUA FOLLOWING FRAUDULENT ELECTIONS

Wednesday, June 1st, 2011
ID
08BERN655
SUBJECT
SWISS REACTION TO CALL FOR FREEZING
DATE
2008-12-23 16:30:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Bern
TEXT
C O N F I D E N T I A L BERN 000655 

SIPDIS

DEPT FOR WHA/CEN (A.KRAAIMOORE) AND EUR/CE (Y.SAINT-ANDRE)

E.O. 12958: DECL: 12/23/2018
TAGS: EAID PGOV PREL NU SZ
SUBJECT: SWISS REACTION TO CALL FOR FREEZING NON-HUMANITARIAN ASSISTANCE TO NICARAGUA FOLLOWING FRAUDULENT ELECTIONS

REF: SECSTATE 132044

Classified By: Acting POL/E Counselor Chris Buck; reasons 1.4(b) and (d
).

¶1. (SBU) Poloff shared reftel talking points with Nora Kronig, Regional Coordinator for Central and South America at the SWISS Federal Department of Foreign Affairs (EDA), and Mathias Domenig, South American Desk Officer for EDA, on December 22. In response to the USG call to freeze non-humanitarian assistance to Nicaragua following the fraudulent municipal elections of November 9, Kronig said that Switzerland had been concerned about the elections and that the GON should have allowed international observers to monitor them. She added that, because Switzerland now holds the rotating presidency of the Donors Group of Nicaragua, the GOS had sought dialogue with the GON regarding this issue. She did not offer results of this attempt for dialogue.

¶2. (SBU) Kronig stated that the allocation of SWISS budget support to foreign countries, including Nicaragua, was decided at the Federal Council (Executive Cabinet) level, and that policy recommendations in this regard were prepared by the EDA in collaboration with the SWISS State Secretariat for Economic Affairs (SECO).

¶3. (C) Given the high-level at which budget support decisions are made, Kronig was therefore unable to give a definitive answer regarding whether the GOS would freeze non-humanitarian assistance to Nicaragua. Off the record, however, Kronig said that she saw this step as unlikely, noting that the GOS prefers to address such problems through direct dialogue with the recipient country. Kronig added that the SWISS Agency for Development and Cooperation (SDC) also has a program focused on Nicaragua, and that she did not personally think that assistance would be halted by SDC either.

¶4. (U) Kronig said that she would advise poloff of the coordinated GOS response to reftel demarche once available, noting that she would not likely have an answer before January 2009. CARTER

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http://www.wikileaks.ch/cable/2008/12/08BERN655.html

Confrontation with the FARC Rattles GOP

Wednesday, May 25th, 2011

ID     10PANAMA41
SUBJECT     Confrontation with the FARC Rattles GOP

DATE     2010-02-01 00:00:00
CLASSIFICATION     SECRET//NOFORN
ORIGIN     Embassy Panama
TEXT     S E C R E T PANAMA 000041

NOFORN
SIPDIS

E.O. 12958: DECL: 2035/02/01
TAGS: PTER, SNAR, PGOV, PREL, PM, CO
SUBJECT: Confrontation with the FARC Rattles GOP

CLASSIFIED BY: Stephenson, AMB, State, FO; REASON: 1.4(B), (D)

Summary

1. (S//NF) Three members of the FARC were killed in Panama’s Darien province and two were captured on January 27, apparently after a Panamanian National Frontier Service (SENAFRONT) patrol stumbled upon the guerrillas traveling in a boat on the Tuira river. Reports indicate the guerrillas opened fire after being ordered to stop. One of those killed was mid-level commander Gaspar Gonzalez, alias “Rene” or “Orejas”, reportedly close to 57th Front commander alias “Becerro.” Some in the GOP appear to be rattled by the encounter. Minister of the Presidency Demetrio “Jimmy” Papadimitriu told the DCM January 28 that he did not have details on what had happened, and played down the request for helicopter
support he had made the night before . Reinforcements are being sent into the area, apparently in fear of a possible retaliatory strike by the FARC. The GOP has strenuously denied reports in the Colombian press that the GOP bombed a camp. Mitchel Doens, Secretary General of the opposition Democratic Revolutionary Party (PRD) told reporters January 28 that he was afraid the incident was part of a “hidden agenda” involving a pact with the Government of Colombia that might compromise Panama’s security. End Summary

Halt, who goes there!

2. (S//NF)) The incident took place on the Tuira River that runs through the Darien National Forest near the border with Colombia. The FARC 57th Front’s Wilson Cordoba company, led by 57th Front Commander alias “Becerro” has long been based in this area.
SENAFRONT has been carrying out a strategy for the last year, with Embassy support, to cut off FARC supply routes, restricting the amount of food that enters the area, and increasing patrols in choke points to make it more difficult for the FARC to operate. [Comment: It is the consensus view of Post Country Team that SENAFRONT does not have enough men, training, equipment or logistical capability to militarily confront the FARC, and that the “harassment” strategy is the most forward leaning strategy that SENAFRONT can maintain. End Comment.]

Reports indicate this was a routine patrol of approximately 30 men, who were following up on an intelligence report on a nearby FARC camp. Reportedly the patrol saw a boat on the river with six or seven armed persons on board, and ordered the vessel to stop. When the FARC members opened fire SENAFRONT returned fire, killing two and wounding three. One of the wounded eventually died. There are reports that one person escaped. The prisoners are being questioned by Panamanian authorities. The SENAFRONT personnel involved in the incident had received SOUTHCOM funded training by the Joint Planning and Assistance Team (JPAT), including marksmanship training.

3. (S//NF) Rene, a very active mid-level commander, was very close to Becerro, who played a key role in calming down members of the FARC that called for revenge after a similar incident last year in the Darien village of Manene. He has traditionally argued that the FARC should not confront Panamanian security forces, and has ordered the 57th Front to respect civilians and their property. It remains to be seen if the death of Rene leads him to take a different view of retaliation this time.

We were wondering . . .

4. (S//NF) The incident occurred at approximately 7:30 am. Over twelve hours later Minister of the Presidency Jimmy Papadimitriu called Post’s ODC Chief to ask for helicopter lift support to bring reinforcements into the Darien. When DCM called the next day and asked for a readout on what had happened and exactly what kind of support the GOP was requesting, Papadimitriu said he had “no idea” what had happened, and minimized the previous day’s request, saying he had, “just been wondering if you had some helicopters.” DCM explained that all USG assets were tied up in Haiti, and pressed the need for the GOP to put some real effort into security planning. Papadimitriu said that it was time for the GOP to take security seriously, and realize that it was expensive and they would have to pay for it.

5. (S//NF) On February 1, SENAFRONT Deputy Director Christian Hayer told Emboff that SENAFRONT had 800 men in the area, and that they would begin pulling them back in one week. Embassy personnel traveled to SENAFRONT HQ in Meteti, Darien on January 28 and reported that SENAFRONT had cancelled all leaves, and the SEAL-trained RECOM unit was seen mustering for deployment, while buses of other SENAFRONT units headed east towards the border. However, there was no sign of a logistics mobilization that would allow the units to remain deployed for much more than a week. Newspaper reports are stressing the fear of a retaliatory strike by the FARC as the reason for the mobilization. The GOP has forbidden land or air travel over the border region until Saturday, January 30.

Colombian angle

6. (U) Shortly after the incident Colombian President Alvaro Uribe issued a statement from Davos, SWITZERLAND thanking Panama and President Martinelli for the “military” operation that killed the three guerrillas. This was followed by a piece in the Colombian newspaper El Espectador that said Panama had “bombed” a FARC camp, citing Colombian Minister of Defense Gabriel Silva. Minister of Government and Justice Jose Raul Mulino made several public comments over the course of the day insisting that the encounter had been fortuitous, and denying that Panama had planned the operation ahead of time in any way with Colombia.

7. (U) PRDSecGen Mitchel Doens told reporters January 28 that the incident was part of a secret agreement between Panama and Colombia that could compromise Panama’s security. He pointed to the contradictory statements by leaders of the two countries, and called them “suspicious,” noting that Martinelli and Uribe had recently met. He also highlighted Silva’s reported statement that Colombia would, “continue offering our cooperation . . . in the campaign against the FARC.”

Comment

8. (S//NF) All indications so far are that this incident was a result of happenstance, and that SENAFRONT is not actively seeking to engage the FARC. There does not appear to have been any change in strategy or tactics with regard to the FARC by the GOP. The President and many ministers are not in the country right now, and senior government leaders seem to have been caught off guard by the crisis. The major mobilization of SENAFRONT forces does not appear to be well planned. While a FARC retaliation is possible, it would be a major change in the FARC’s modus operandi in Panama, and would entail serious strategic risks. Any attack would likely be against one of the many small isolated outposts throughout the Darien.

9. (S//NF) Post has been pushing the GOP since Martinelli took office to focus on security before the linked problems of the FARC, narco-trafficking, growing gangs, and a rising murder rate began to seriously damage Panama’s reputation as a safe place to invest, and eventually its stability itself. The solution is not just money: it’s organization and will to find competent leaders to begin to reform and build solid security institution in the country.

STEPHENSON

=======================CABLE ENDS============================
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ADDED     2011-05-25 12:30:00
STAMP     2011-05-26 12:33:06
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AMBASSADOR’S MEETING WITH BENAZIR BHUTTO ON SECURITY AND INVESTIGATION OF KARACHI ATTACK

Sunday, May 22nd, 2011
ID
07KARACHI756
SUBJECT
AMBASSADOR’S MEETING WITH BENAZIR BHUTTO ON SECURITY AND INVESTIGATION OF KARACHI ATTACK
DATE
2007-10-29 10:36:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Consulate Karachi
TEXT
C O N F I D E N T I A L SECTION 01 OF 02 KARACHI 000756

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/28/2017
TAGS: ASEC PGOV PINR PREL PTER PK

SUBJECT: AMBASSADOR’S MEETING WITH BENAZIR BHUTTO ON SECURITY AND INVESTIGATION OF KARACHI ATTACK

REF: ISLAMABAD 4599

Classified By: Ambassador Anne W. Patterson, Reasons 1.4 (b), (d).

¶1. (C) Summary: During an October 23 meeting in Karachi, Pakistan People,s Party Chairman Benazir Bhutto told the Ambassador that she was dissatisfied with the government’s investigation of the October 19 bombing that targeted her motorcade. The Ambassador noted we had absolutely no evidence anyone in the government was involved and that we believed such accusations were not constructive. The Ambassador added that we are working with the GoP through longstanding channels.

¶2. (C) Bhutto also discussed her concerns about her personal security. She expressed frustration at not being consulted in the formation of the North West Frontier Province interim government and the loopholes in the National Reconciliation Ordinance. Regarding the upcoming general elections, Bhutto made it clear that she did not trust the voter,s list or the independence of the Election Commission. Ambassador told her the international community, and particularly the U.S., had robust observation and education measures planned. End Summary.

————————————
BHUTTO FRUSTRATED WITH INVESTIGATION
————————————

¶2. (C) On October 23, Ambassador called on Pakistan People,s Party Chairman Benazir Bhutto at her home in Karachi to convey condolences. Bhutto opened the meeting by expressing her dissatisfaction with the government,s investigation of the October 19 bombing that targeted her homecoming procession in Karachi. Bhutto insisted that government officials were responsible for the attack and could not be trusted to conduct an independent investigation. Bhutto complained that the government had not shared any of the details of the investigation with her.

¶3. (C) Bhutto reiterated her public request for U.S. assistance and asked to receive satellite imagery and &chatter8 intelligence. The Ambassador noted that USG agencies were involved in the investigation. The Ambassador continued that all evidence thus far pointed to an al Qaeda-related – or another extremist group – attack and that blaming the government was not productive.

¶4. (C) Bhutto countered that a number of government officials supported the Taliban and al Qaeda, and that her blame is focused on them. Bhutto added that she would like rapprochement with the government, but does not see how it would be possible, as she believes that some government officials were involved in the bombing.

—————–
BHUTTO,S SECURITY
—————–

¶5. (C) Bhutto said that she was still receiving threat information. She claimed that the Sindh Government had informed her that if she goes to Larkhana (her ancestral home), she would be attacked. A &brotherly8 government (unnamed) had informed her that there would be snipers in Islamabad. Bhutto repeated that she felt the federal government was involved.

¶6. (C) According to Bhutto, Pakistan,s Inter-Services Intelligence Agency (ISI) is complaining to the Sindh Government about the high level of security that the Government is providing to Bhutto. Still, Bhutto said, the government should relax the law to allow her own guards, &her boys8, to be armed, especially as some of them had died in the October 19 attack.

———————–
U.S. PROVIDED SECURITY?
———————–

¶7. (C) Bhutto asked the Ambassador if it would be possible for the USG to provide her with a security detail. The Ambassador responded that she was aware of two cases,

KARACHI 00000756 002 OF 002

President Karzai of Afghanistan and President Aristide of Haiti, in which the USG provided personal security and both were heads of state. She added that American security would not be consistent with the movements of a political campaign. On the other hand, the USG did provide long-term training on personal protection through existing government-to-government programs. Finally, the Ambassador offered to have Embassy RSO meet with individuals Bhutto designated to discuss security issues (reftel).

————————–
UPCOMING ELECTION CAMPAIGN
————————–

¶8. (C) Bhutto complained that the government did not want any political rallies in the upcoming election campaign. The government was doing this, she said, to deny or hide the fact that she had support.

¶9. (C) In Bhutto,s opinion, the Election Commission was not independent and the voter list was not accurate. She was thankful for the National Democratic Institute pre-election assessment delegation suggestions regarding election reforms. The Ambassador informed Bhutto that the international community would provide election observers and the USG had already identified 47 districts likely to be hotly contested. Bhutto expressed concern that the observers could become targets of attacks.

——————–
CARETAKER GOVERNMENT AND NRO LOOPHOLES
——————–

¶10. (C) Bhutto complained that she was not consulted on the North West Frontier Province caretaker government. She insisted that she should be consulted on the composition of the federal caretaker government and said that her party should occupy 1/3 of the positions.

¶11. (C) Bhutto also lamented that the recently promulgated National Reconciliation Ordinance (NRO) has loopholes. Ambassador said we were familiar with the drafting process of the NRO and did not believe it had been drafted with any loopholes in mind. Bhutto noted that the corruption cases outside Pakistan (such as in SWITZERLAND) had not been withdrawn because the government had not written letters to stop them.

—————————–
BHUTTO,S INTERNATIONAL TRAVEL
—————————–

¶12. (C) When asked if she would stay in Pakistan, Bhutto responded that she would stay for a while but then would start to travel and give lectures. Some of the countries to which she would travel included the UAE (Dubai), the United Kingdom, and the U.S. However, she would be based in Pakistan.

ANSKE

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http://www.wikileaks.ch/cable/2007/10/07KARACHI756.html

IPSC PD IMO RES ECON DCM DAO AMB AID ADM RSO

Thursday, May 19th, 2011
ID
06TELAVIV4604
SUBJECT
IPSC PD IMO RES ECON DCM DAO AMB AID ADM RSO
DATE
2006-11-24 13:02:00
CLASSIFICATION
SECRET
ORIGIN
Embassy Tel Aviv
TEXT
S E C R E T TEL AVIV 04604

SIPDIS
CXTelA:
ACTION: POL
INFO: IPSC PD IMO RES ECON DCM DAO AMB AID ADM RSO
CONS

DISSEMINATION: POL
CHARGE: PROG

APPROVED: CHG:GCRETZ
DRAFTED: POL:MCKEAYS
CLEARED: POL/C:MJSIEVERS, POL/RES:PHUSSEY

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07/t Text/Tags: TAGS: PTER ECON OVIP AMGT ASEC SY LE IR IS
07/s Text/Subject: SUBJECT: APHSCT TOWNSEND’S NOVEMBER 12 MEETING WITH
07/r Text/Ref:
07 Text: *** Maschinell erstellte Kleinschreibung, nur Satzanfaenge gross. ***

S e c r e t section 01 of 04 tel aviv 004604

Sipdis

The white house for aphsct frances fragos townsend
treasury for under secretary stuart levey

nsc for malvesti
state for nea, nea/ipa (maher), s/ct (ambassador crumpton)
joint staff for j-5
hq useucom for ecj-5 (klothe)
pentagon for osd desk (anderson)

E.o. 12958: dng: co 11/24/2026
Tags: pter, econ, ovip, amgt, asec, sy, le, ir, is
Subject: aphsct townsend’s november 12 meeting with
chief focuses on lebanon, syria and iran

Classified By: Classified by Charge Gene Cretz. Reasons: 1.4 (b) (d).

——-
summary
——-

¶1. (S) During a November 12 meeting, Chief MeirDagan told Assistant to the President for Homeland Securityand Counterterrorism (APHSCT) Frances Fragos Townsend thatUSG efforts to designate Iranian banking facilities haveproven effective and are forcing the Iranians to move theirfunds to banks in the Gulf States and the Far East. Daganurged the U.S. to continue activity in this direction,noting that SWISS and Japanese banks are forgoing businesswith Iran. Dagan warned that Iran and the Hizballah aretrying to bring the Siniora government down in Lebanon, andthat Hizballah’s next step is to rally Shiites in thestreets to put more pressure on the GOL. Dagan said heanticipates that this current effort will ultimately leadto violence and the murder of some of Siniora’s politicalallies. On Syria, Dagan said that Asad is comfortable withthe current situation and has no intent of breaking fromhis strategic alliance with Iran, or stopping his supportof Hizballah and Hamas. Dagan expressed frustration withEuropean attempts to engage Asad with the hope of bringinghim around, predicting that these attempts will fail, andonly encourage Asad to engage in more bad behavior. Dagansaid that the best way to change Asad’s behavior is tothreaten force. He encouraged the U.S. to ratchet uppressure on Syria by designating its Commercial Bank, andasking the Saudis to put pressure on banks in Europe andDubai. Dagan expressed frustration with Europeanreluctance to designate Hizballah as a terrorist group.End summary.

———————————————

-dagan: keep up the financial pressure on iran

——————————————— –

¶2. (S) Dagan said that Treasury Department designation ofIranian banking facilities has succeeded in its aims andhas proven very effective. The Iranians are nowpreoccupied with this problem and trying to move funds tobanks in the Gulf States and Far East, specifically India,China ((MLM: Dagan specifically noted Hong Kong)), Taiwan,and Singapore. He added that the Iraniansare also encountering difficulties with European banks.Dagan urged the U.S. to continue to move in thisdirection. He noted that the has sent some of itsown people to Europe to keep up the bank pressure on Iran.He said that Iran’s economic situation is weak, and thatthis is causing bankers and the Iranian middle class toincrease their criticism of Ahmadinejad and his regime. Hesaid that they are increasingly concerned thatAhmadinejad’s policies are going to lead Iran into”financial disaster.” Dagan added that Credit Suisse, UBSand a number of Japanese banks have asked Iran not to dobusiness with them anymore.

¶3. (S) Dagan said that is still having some problemswith banks in the UK, and noted that the Iranians aretrying to buy a Turkish bank there. The Iranians aretrying to move their foreign currency reserves from Europeto the Far East. At the same time, they are also thinkingabout how to do more work with the Euro, even while theyrecognize that they need U.S. dollars. Dagan said that theIranians are finding it difficult now to transfer fundsfrom Sadarat Bank to Hizballah through Lebanon. They arenow transferring the money in cash using couriers thatcarry it by suitcase from Iran to Hizballah recipients.Dagan stressed that Treasury Under Secretary Stuart Levey’sdirect discussions with bankers appears to yield betterresults than when governments deal with one another.

——————————————-

“we are on the edge of a crisis in lebanon”

——————————————-¶

4. (S) Dagan warned that and the U.S. are on “theedge of a crisis” in Lebanon as Syria, Iran and Hizballahare trying to bring down the Siniora government “in stages”through various tactical moves. The Hizballah ministers inPM Siniora’s government had resigned, and Hizballah isplanning to bring Lebanon’s Shiites into the streets toincrease pressure on the GOL. Dagan said that Hizballah’splan has been coordinated well with the Syrians, and thatIran is aware of this plan and has had a part informulating the strategy.

¶5. (S) Dagan said that this effort has two aims:
A) To form a unity government and bring others into it inorder to overwhelm Siniora. Hizballah needs to do thisbefore Lebanese President Lahoud finishes his term. Dagansaid that Michel Aoun is trying to get elected president,and is getting support from the Saudis to this end. Daganclaimed that Aoun is trying to mediate between Siniora,Samir Geagea and the West.
B) To increase Shia representation in the parliament bychanging the electoral law.
Dagan warned that and the U.S. are now witnessingthe beginning of a crisis in Lebanon. He said he would notbe surprised if the end involves violence and the murder ofpeople just below Siniora (“second echelon types”) beforethe UN finishes its investigation into the ofPM Hariri. Dagan said that he does not believe thatHizballah would try to kill Walid Jumblat or Siniora, butmight try to kill Marwan Hamedi and others like him. “Thisis the typical Lebanese way to solve problems,” Daganadded.

———————————————

–syria: asad continues to back terrorist groups–

———————————————

¶6. (S) Dagan said that based on the intelligence he hascollected, he would estimate that Syrian President Asad issatisfied with the current situation in the region, and hasno intention of stopping his support for Hizballah, Hamasand PIJ. Asad views his alliance with Hizballah and Iranas strategic, a view that justifies allowing PalestinianIslamic Jihad (PIJ) and Hamas to continue to operate fromDamascus, and to send radical Islamic fighters across theborder into Iraq. Dagan claimed that Asad is “happy to seeU.S. soldiers killed in Iraq.”

¶7. (S) Dagan noted that a British delegation led by formerUK FM Douglas Hurd and former MI6 Chief John Scarlett hadvisited Syria to talk with Asad. According to Dagan, Asadmade no concessions to the delegation, and instead assertedthat Lebanon is Syria’s number one priority. Dagan notedthat Asad occasionally calls for peace negotiations with, but then sets unrealistic conditions for startingthem. He explained that this pattern of behavior is doneto ease international pressure on Syria, and expressed hisview that he does not believe that Syria is willing to makepeace with . Instead, Dagan said, the Syrians arenow looking at different ways to engage by force.Dagan acknowledged that is not aware of any Syrianplans to attack in any way at this time, butcautioned that, in comparison with the past, more of Asad’sadvisors are talking about fighting , and usingterrorists in the fight. Dagan claimed that Asad hasappointed “ex-reservists” from the Golan Heights — who arein their eighties — as “resistance fighters.”

¶8. (S) Dagan said that Asad’s new policy and guidelinestowards drive his relations with the Palestinians aswell. He is now encouraging Hamas to “behave” vis-a-visPalestinian President Mahmud Abbas in his drive to form anational unity government. At the same time, Asad isencouraging Khaled Meshal to adopt more radical positions.

¶9. (S) Dagan claimed that Syrian-Iranian intelligencecooperation is enhancing, and pointed to “joint commandposts” staffed by Syrian and Iranian intelligence officers,including personnel from the Iranian Revolutionary GuardCorps (IRGC) and Hizballah.

¶10. (S) Dagan said that Asad is also allowing weapons to betransferred from Iran to Turkey and then to Syria, withtheir ultimate destination being Hizballah. Heacknowledged that suspects this only, and has no”smoking gun” or hard evidence to prove it.

———————————————

-dagan: talking with syria rewards bad behavior

———————————————
¶11. (S) Dagan said the GOI shares the USG’s frustrationwith the hesitation of European governments to designateHizballah as a terrorist organization. He noted recentvisits by European foreign ministers to Damascus, and saidthey reflect a view — held by Spanish Foreign MinisterMoratinos, as well as the Germans — that dialogue withAsad is the key to luring him away from Iran’s influence.He added that the Egyptians are trying to convince otherArabs to reach out to Asad. Dagan said that he isconvinced they are doomed to failure. He praised the GulfStates for understanding the threat posed by the”Iran-Hizballah-Syria” axis: “They see it as a threat, andas a sign of an oncoming Shia-Sunni conflict. It is notreally a religious war, but that is how they see it, andthey are right to view it as a threat.” Dagan credited theFrench for being less sympathetic to Syria than otherEuropeans, but added that they do not want to cooperate onHizballah as their troops are deployed in Lebanon.

¶12. (S) Dagan cautioned that engaging with Asad innegotiations on the Golan Heights or a Free Trade Agreementwith Europe would only reward aggression. He asserted thatall previous attempts to open dialogue with the Syrianswere misread and viewed by the ruling regime as a rewardfor behaving badly. , he stressed, has engaged withthe Syrians for the past fifty years: “The only thing theSyrians understand is force and pressure.” As an example,he pointed to Syria’s withdrawal from Lebanon, assertingthat it happened only because Asad feared that theinternational community would attack Syria in the wake ofthe Hariri . “Retreat was not due todialogue, but due to fear of brute force,” Dagan said.Dagan added that Syria dropped its support for the PKK whenTurkey threatened to go to war over it.

——————————————–

dagan urges striking at syrians’ pocketbooks

——————————————–

¶13. (S) Dagan said that even though the Syrian economy iscollapsing, he does not envision a real change in Syria anytime soon. Townsend commented that we must continue to workwith financial institutions to create problems for the Syrianbanking system similar to those now facing Iran. In responseto a question, Dagan said it wouldhelp if the U.S. would increase pressure on the CommercialBank of Syria, and that he would recommend this himself toTreasury Under Secretary Stuart Levey when they next meet.Clamping down on the Commercial Bank of Syria would beeffective especially as key Syrian government ministers aretrying to invest outside of Syria. Dagan added that thetiming of this effort is very important, and said heexpects that the results of the UN’s investigation into theHariri will implicate Syria.

¶14. (S) Dagan suggested the U.S. could also bring morepressure to bear on Syria by encouraging the Saudis topressure Europe. Noting that the Saudis are consideringbuying 70 Tornado fighter-bombers from the UK, he wonderedaloud if the USG could encourage the Saudis to buy theirarms from the U.S. instead of from the Europeans. Townsendsaid that the USG will encourage the Saudis to put pressureon banks in Dubai, as they are clearinghouses forproliferation activity. Dagan agreed that pressuring Dubaiwould be helpful, especially as the Iranians are trying tobuy up property there. He cautioned, however, that not allSaudis would be inclined to help — securing KingAbdullah’s support would be vital: “If you can get theKing to support you, others will follow. If he threatensto take his money somewhere else, that would be a seriousthreat.” Dagan asked Townsend to have the USG put morebanking pressure on the Syrians: “By hitting Syrian banks,you also hit Hizballah and Iran. It is a very effectivetool that has proven itself.”

¶15. (S) Dagan concluded the meeting by noting thatcooperation between his staff and POL/RES is excellent.

¶16. (U) APHSCT Frances Fragos Townsend cleared on thiscable.

*********************************************

HEADER
null
Carol X Weakley 11/27/2006 02:28:49 PM From DB/Inbox: Carol X Weakley

Cable
Text:

S E C R E T TEL AVIV 04604

SIPDIS
CXTelA:
ACTION: POL
INFO: IPSC PD IMO RES ECON DCM DAO AMB AID ADM RSO
CONS

DISSEMINATION: POL
CHARGE: PROG

APPROVED: CHG:GCRETZ
DRAFTED: POL:MCKEAYS
CLEARED: POL/C:MJSIEVERS, POL/RES:PHUSSEY

VZCZCTVI112
PP RUEHC RUEHXK RUEATRS RHEFDIA RUEAIIA RUEKJCS
RHEHNSC RHMFISS RHEHAAA RUEKJCS
DE RUEHTV #4604/01 3281302
ZNY SSSSS ZZH
P 241302Z NOV 06
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 7788
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

XTAGS: XTAGPTER, XTAGECON, XTAGOVIP, XTAGAMGT, XTAGASEC, XTAGSY, XTAGLE, XTAGIR, XTAGIS 06TELAVIV4604

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http://www.wikileaks.ch/cable/2006/11/06TELAVIV4604.html

SWISS FIRM QUARTZCOM COLLUDING WITH IRANIAN FRONT COMPANY IN ATTEMPT TO SKIRT EXPORT CONTROLS (S): SWISS RESPONSE

Wednesday, May 18th, 2011

2010-01-19 16:31:00

10BERN21

Embassy Bern

SECRET

10STATE996

R 191631Z JAN 10
FM AMEMBASSY BERN
TO SECSTATE WASHDC 6268

S E C R E T BERN 000021

E.O. 12958: DECL: 12/31/2025
TAGS: SZ, IR, KSCA, PARM, PREL, MNUC, ETTC
SUBJECT: SWISS FIRM QUARTZCOM COLLUDING WITH IRANIAN FRONT COMPANY IN ATTEMPT TO SKIRT EXPORT CONTROLS (S): SWISS RESPONSE

REF: STATE 996

Classified By: Pol-Econ couns. R. Rorvig for reasons 1.4(b) and (d).

1. Pol-Econ Couns. was called in by Swiss Economics Department Industrial Export Control chief Juergen Boehler on January 15 to discuss reftel case. (Reftel points were previously provided to the Economics Department.) Boehler stated that Swiss authorities are grateful for the U.S. information on Quartzcom and, after deliberation, now plan to follow up aggressively with the firm. Boehler said that he understands that Quartzcom is a one-man “mom and pop”, import-export firm. The best of his knowledge, Quartzcom has no employees other than the principal, who may be assisted by one or two family members. Based on the U.S.-provided information, the Swiss Economics Department has requested that the Swiss federal police pay a call “in uniform” on Quartzcom’s owner to notify him – on the record – of Swiss law and the criminal penalties for violating export control laws. Boehler said that such a visit usually is sufficient to frighten 99 percent of small operators away from such business.

CARTER

http://www.letemps.ch/cables?id=10BERN21

EMBASSY RAISES PAMUKBANK CASE WITH AK VICE CHAIRMAN

Tuesday, May 17th, 2011
ID
02ANKARA8728
SUBJECT
EMBASSY RAISES PAMUKBANK CASE WITH AK VICE CHAIRMAN
DATE
2002-11-29 12:09:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Ankara
TEXT
C O N F I D E N T I A L ANKARA 008728 

SIPDIS

TREASURY FOR OASIA – MILLS

E.O. 12958: DECL: 11/29/2007
TAGS: EFIN ECON PGOV TU
SUBJECT: EMBASSY RAISES PAMUKBANK CASE WITH AK VICE CHAIRMAN

REF: ANKARA 8596

Classified by Economic Counselor Scot Marciel. Reasons: 1.5 (d).

¶1. (C) We met November 29 with AK Vice Chairman and MP Murat Mercan to highlight the risks resulting from the Danistay’s November 22 injunction against BRSA’s takeover of insolvent Pamukbank. We said the decision, although taken by an independent judicial body, undermined the BRSA’s credibility and added to the fragility of Turkey’s already-weak banking sector — problems the government would have to address. Moreover, it coincided with AK criticisms of the BRSA, a proposal by 20 AK MPs that Parliament investigate BRSA’s takeover of Pamukbank, and senior-level AK meetings with Mehmet KARAMEHMET, owner (through Cukurova Group) of Pamukbank and of 45 percent of Yapi Kredi Bank. As a result, markets were voicing concern about the new government’s commitment to further bank reform.

¶2. (C) Mercan, who is close to Prime Minister Gul, listened carefully but evinced some skepticism about the legitimacy of the Pamukbank takeover. For example, he asked why BRSA did not take over other weak banks, such as Isbank. We responded that he would hear mixed views from the markets on other banks, but that there was a consensus in the financial community that KARAMEHMET had managed Pamukbank into insolvency and that the BRSA was right to take it over. We also noted strong support for the new government’s pledge to combat corruption, and suggested that cleaning up the banking system was an integal part of that effort.

¶3. (C) Mercan asked what we thought the government should do. We said that was up to the GOT to decide, but we thought the markets would welcome — as a first step — a strong public statement making clear that the government was committed to further bank reform, would not bail out poorly-managed banks, and fully supported an independent BRSA. The GOT would also need to consider steps to address the short-term threat to the banking system posed by the return of insolvent Pamukbank and nearly-insolvent Yapi Kredi Bank to the Cukurova Group’s control.

¶4. (C) Comment: Key players in AK Party have met a number of times with KARAMEHMET (Mercan said Party Chairman Erdogan had met with him three times), but have not spoken with BRSA officials. They have bought KARAMEHMET’s allegations that BRSA’s takeover of Pamukbank was politically-inspired and unjust. That belief is behind AK’s sharp criticism’s of BRSA over the past few months, and probably explains the government’s weak response to last Friday’s Danistay decision. Now that the financial community and the press — notably the Financial Times in its November 18 editorial — have begun to express concerns about the Danistay decision and about AK’s commitment to banking reform, we hope the government will re-think its views. One positive note: Deputy Prime Minister Abdullatif Sener (who oversees BRSA and intially responded to the Danistay decision by telling BRSA that it was “their problem”) and State Minister Ali Babacan have called BRSA President Engin Akcakoca in to brief them for the first time.

DEUTSCH

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available. 

XTAGS: XTAGEFIN, XTAGECON, XTAGPGOV, XTAGTU 02ANKARA8728

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EFIN ECON PGOV TU
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2011-05-17 19:00:00
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http://www.wikileaks.ch/cable/2002/11/02ANKARA8728.html

TURKISH MARKETS AWAIT IMF REACTION TO COURT DECISION ON PAMUKBANK

Tuesday, May 17th, 2011
ID
02ANKARA8596
SUBJECT
TURKISH MARKETS AWAIT IMF REACTION TO COURT
DATE
2002-11-25 15:47:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Ankara
TEXT
C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 008596

SIPDIS

STATE FOR EUR/SE, EB/IFD/OMA AND E
TREASURY FOR OASIA – MILLS AND LEICHTER
STATE PASS USTR – NOVELLI AND BIRDSEY

E.O. 12958: DECL: 09/02/2006
TAGS: ECON EFIN PREL TU
SUBJECT: TURKISH MARKETS AWAIT IMF REACTION TO COURT DECISION ON PAMUKBANK

REF: ANKARA 8545

Classified by Economic Counselor Scot Marciel for reasons 1.5
(b,d).

¶1. (C) Summary: Turkish markets are awaiting IMF and GOT reaction to the administrative court decision of November 22, which suspended the take-over of Pamukbank by the Banking Regulation and Supervision Agency (BRSA). At the heart of this legal battle lie about $5 billion in loans made by Pamuk and Yapi Kredi to their owner Cukurova Holding. Cukurova’s legal challenge to the Pamuk take-over is part of the bargaining over the repayment of these loans. Failure to reach agreement on repayment terms poses systemic risks to the banking sector, given that Pamuk and Yapi Kredi have $12 billion in deposits or about 15 percent of all deposits in the Turkish banking system. Markets will watch closely on both this issue and the primary surplus issue during next week’s visit of IMF Europe Director Deppler, and the December 9 IMF Mission to Turkey. End Summary.

¶2. (C) On November 22, BRSA Vice Presidents Ceyla Pazarbasioglu and Teoman Kerman called us in to discuss the court decision on Pamukbank (reftel). They summed up the situation as follows:

— The administrative court (“Danistay” or Council of State), sitting in general assembly, suspended the BRSA’s June 18 take-over of Pamukbank. According to press reports, the reason for the suspension was that BRSA didn’t sufficiently consider Cukurova’s recapitalization plan, which would have merged the insolvent Pamuk into sister bank Yapi Kredi. BRSA will have 30 days (from the date of delivery of the court’s opinion, which hasn’t yet occurred) to return Pamuk to Cukurova, pending a final court decision on the merits of the case. The BRSA plans to continue defending in court the merits of its take-over of Pamuk, though given this interim court decision to suspend its action, the final outcome doesn’t look favorable to BRSA.

— Since its take-over of Pamuk, BRSA has injected cash and T-bills of about $2 billion into Pamuk (about TL 2.7 quadrillion in bills and TL 800 trillion in cash). Local media have publicized this injection of public funds, and question whether Cukurova Holding will repay the BRSA. Cukurova, according to press sources, plans to counter-claim against the BRSA for damages, claiming that the BRSA’s take-over damaged the bank (the bank has lost over $1.5 billion in deposits since the BRSA’s June declaration of insolvency and take-over).

— BRSA staff, and financial market analysts, expect that Cukurova Holding will be unable to sufficiently recapitalize Pamuk, and that this insolvent bank will eventually revert to the BRSA. Cukurova’s legal challenge is seen as part of the bargaining process with the BRSA over the repayment terms for Cukurova’s outstanding loans to both Pamuk and Yapi (totaling nearly $5 billion). Thus, while Cukurova may eventually be forced to give up Pamuk, it may be able to bargain down with the BRSA the amount of debt it owes its banks.

¶3. (C) Pamuk’s and Yapi Kredi’s $5 billion in loans to owner Cukurova Holding lie at the heart of the problem. The Pamuk/Yapi Kredi merger plan, presented last June by Cukurova, involved large-scale forgiveness of these loans. The BRSA rejected this plan. Cukurova’s subsequent failure to make payments to these banks is gradually leading to the insolvency of Yapi Kredi Bank. In June, after the triple audit under the recap plan, Yapi Kredi had positive equity of about TL one quadrillion ($600 million), barely meeting the 8 percent capital adequacy standard. But its third quarter results, to be released November 29, will show further losses, bringing it under the 8 percent standard. Furthermore, in light of Cukurova’s continued failure to pay, the BRSA should apply prudential standards that require Yapi Kredi to increase its provisioning of capital for these loans. The general concern in the markets and in BRSA is that, without an agreement with Cukurova over repaying the loans, Yapi Kredi could well be insolvent by year-end.

¶4. (C) Yapi Kredi treasurer Huseyin Imece told us November 25 that the banks’ international creditors are worried, but no one has cut credit lines to the bank yet. Yapi Kredi will repay a $225 million syndication loan to international banks in early December. The Turkish man in the street does not appear worried as yet, and there is no run to withdraw deposits. But Imece doesn’t know if the situation can hold until year-end.

Comment ——-

¶5. (C) The outcome of BRSA’s legal battle with Cukurova Holding (and its owner Mehmet Emin KARAMEHMET) poses systemic risks to the financial system. First, if the BRSA’s take-over of Pamuk is rolled back, the credibility of the newly created BRSA as an effective bank regulator is in question. Second, Yapi Kredi and Pamuk together account for $12 billion in deposits or 15 percent of all deposits in Turkish banks. Yapi Kredi holds billions of dollars of T-bills as assets. Giving Cukurova Holding back the banks, without effectively recapitalizing them, leaves two large sick players in the system relying most probably on overnight funding from other local banks and/or the Central Bank. Banks’ failures to make payments in the overnight market was the proximate cause of both the November 2000 and February 2001 financial crises.

¶6. (C) The IMF’s Deppler will arrive in Turkey next Monday, December 2, to begin discussions with the new GOT. Market participants await IMF reaction to two issues: this banking reform problem; and the GOT’s commitment to maintaining a 6.5 percent primary surplus in 2003. Per IMF resrep, IMF Deputy Managing Director Krueger raised the Pamuk issue with State Minister Babacan in a bilateral in New Delhi November 23l; her talking point was that this is an urgent priority for the GOT to fix. In the meantime, locals markets remain optimistic, based primarily on Turkey’s chances of getting an EU accession talks date in Copenhagen. As JP Morgan/Chase Treasurer told us, “my horizon is one week, and this week is still optimistic. Not sure about next week.”

PEARSON

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available.

XTAGS: XTAGECON, XTAGEFIN, XTAGPREL, XTAGTU 02ANKARA8596

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http://www.wikileaks.ch/cable/2002/11/02ANKARA8596.html

TURKEY’S ECONOMY: IS THE DEAL ON PAMUK AND YAPI KREDI A SHOW STOPPER FOR THE IMF?

Tuesday, May 17th, 2011
ID
03ANKARA887
SUBJECT
TURKEY’S ECONOMY: IS THE DEAL ON PAMUK AND YAPI KREDI A SHOW STOPPER FOR THE IMF?
DATE
2003-02-04 17:46:00
CLASSIFICATION
UNCLASSIFIED//FOR OFFICIAL USE ONLY
ORIGIN
Embassy Ankara
TEXT
UNCLAS SECTION 01 OF 02 ANKARA 000887 

SIPDIS

SENSITIVE

STATE FOR E, EB/IFD/OMA AND EUR/SE
TREASURY FOR OASIA – MILLS AND LEICHTER
STATE PASS USTR – NOVELLI AND BIRDSEY

E.O. 12958: N/A
TAGS: ECON EFIN PREL TU
SUBJECT: TURKEY’S ECONOMY: IS THE DEAL ON PAMUK AND YAPI KREDI A SHOW STOPPER FOR THE IMF?

REF: ANKARA 676

Sensitive but unclassified. Not for internet distribution.

¶1. (SBU) Summary: As details of the Banking Board’s January 31 deal with Cukurova Group emerge, it looks like bail-out of the group. The deal reschedules Cukurova’s $5 billion debt to two banks (Pamuk and Yapi Kredi) on favorable terms, without requiring the group to put any cash upfront. Furthermore, the two banks sell their 20 percent of Turkcell (Turkey’s largest cellphone operator) back to the group in exchange for more debt. IMF management has complained about the deal to the government. IMF staff is not yet addressing whether this deal prevents them from completing the Fourth Review, given other issues left to resolve (especially on the budget), but this is a likely conclusion, per the IMF resrep. End Summary.

Where’s the Money? ——————

¶2. (SBU) On January 31, the Banking Regulation and Supervision Board (BRSA) signed an agreement with the Cukurova Group to resolve Cukurova’s $5 billion debt to two banks previously owned by Cukurova – Pamuk and Yapi Kredi. These two banks together represent about 20 percent of Turkish bank assets.

¶3. (SBU) On February 2, BRSA released the broad outlines of the deal to the public, which we reported last week (reftel): Cukurova will repay a $3 billion debt to Pamukbank over 15 years, with 3 years grace period on principal, at LIBOR plus 0.5 percent; Cukurova will repay a $2 billion debt to Yapi Kredi over 9 years, 3 years grace on principal, at LIBOR plus 3.5 percent. Cukurova will pledge as collateral other group assets, most importantly its shares in Turkcell (Turkey’s largest cellphone operator). Cukurova will not give cash up front, but will give Yapi Kredi Bank 50 percent of the shares of ATEL (a prepaid phone card business) in exchange for forgiving about $300 million of its debt to Yapi (bringing that debt down to $2 billion). Finally, Cukurova drops its legal challenge to BRSA’s take-over of the insolvent Pamukbank, and agrees to sell its 45 percent stake in Yapi Kredi in two years (down from an initial three years under the draft protocol agreement in reftel).

¶4. (SBU) On February 3, BRSA Vice President Ceyla Pazarbasioglu provided us additional information about the deal:

— The payment schedule for the $5 billion debt: Cukurova will make payments twice a year, with annual payments of only $145 million in the first two years (during the grace period on principal payments), rising to $460 million in year 3 and peaking at $887 million in year 8.

— Collateral pledged to secure the $5 billion debt, most importantly Cukurova’s 42 percent stake in Turkcell: This 42 percent of Turkcell includes nearly 20 percent that was owned by the two bank subsidiaries of Cukurova Pamuk and Yapi Kredi. (Note: Turkcell’s market valuation is currently about $4 billion, down from a high of about $17 billion in 2000.) The two banks agreed as part of this rescheduling to sell their shares back to Cukurova, and add the sales price to the existing debt owed by the holding company. The theory is that Cukurova is best situated to maximize the income stream from Turkcell, and thus use this income to pay back its bank debts. (Comment; In effect, this constitutes another loan from the banks to Cukurova. End Comment.)

— Yapi Kredi’s cash position: Rescheduling the $2 billion debt improves Yapi’s balance sheet (from insolvent to nearly 13 percent capital adequacy), but doesn’t change its cash position. Giving Yapi non-marketable shares in ATEL also doesn’t translate into cash. If Yapi’s capital adequacy falls below 10 percent, the deal calls for BRSA to inject capital into the bank and dilute Cukurova’s 45 percent interest.

— Management of Yapi Kredi. Though Cukurova will continue owning its Yapi Kredi shares for two years (down from an initial three years in the draft protocol agreement), BRSA will have complete management control, and will select a consulting firm to recommend replacements to both Yapi’s board and senior management. The goal is to replace the Cukurova people who approved the lending to the holding company. — Criminal prosecution option. BRSA waives its right to take Cukurova to bankruptcy court, but doesn’t waive its rights to prosecute Cukurova or owner KARAMEHMET for criminal fraud.

— Asked if BRSA had looked at the option of taking over Yapi Kredi Bank, Pazarbasioglu made the point that Cukurova would block such a move in court, just as he had with Pamukbank. Noone would buy either bank with Cukurova’s legal claim outstanding. The weakness of Turkey’s legal system dictated this kind of negotiated deal with Cukurova, according to Pazarbasioglu.

¶5. (SBU) Comment: Pazarbasioglu is right about the Turkish legal system, but that still doesn’t explain why Cukurova wasn’t required to put any money into either bank upfront (and why it acquires the two banks’ shares of Turkcell in a new loan), while its existing loan is rescheduled on favorable terms. The deal requires two leaps of faith: first, that Cukurova will gain the capacity to service $450 million plus in debt service within two years (which assumes its telecom and high tech businesses recover); second, that Cukurova’s owner KARAMEHMET has the intention to repaying this debt even if he does gain the capacity to do so (he hasn’t shown this intention previously). End Comment.

The IMF Reaction, and Press Leak ——————————–

¶6. (SBU) IMF resrep and resident banking expert tell us this deal presents serious problems, but they need to see the complete details before reaching a conclusion. Given the lack of progress over other issues (agreement on the 2003 budget and draft amendments to the Public Procurement Law which would gut this reform), the Fund staff are not yet taking the position that this deal would prevent a completion of the Fourth Review. But they might well reach this conclusion, per IMF resrep. IMF Europe Director Deppler called BRSA Chairman Akcakoca to warn the BRSA on January 30 not to sign the Cukurova deal until the Fund had the chance to study the details. IMF Managing Director Koehler followed up with a letter to PM Gul, also faxed to Treasury and BRSA, and then an angry phone call to Gul, asking the GOT to tell BRSA not to sign the agreement.

¶7. (SBU) The Koehler letter was leaked to the press, and AK Chairman Erdogan commented to the press that the IMF was finally agreeing with AK that there were problems with the independent regulatory boards, and that they need more central government supervision. (Comment: This exchange has further reduced the credibility and independence of the BRSA.) End Comment.

Comment ——-

¶8. (SBU) The Pamuk and Yapi Kredi deal is signed. Unlike the budget and Public Procurement Law amendment impasses, it would be difficult if not impossible for the GOT to walk it back. The deal at a minimum is highly favorable to Cukurova, and looks like a partial bail-out of the group (injection of $2.7 billion of GOT paper into Pamuk, regulatory forbearance and possible future injection into Yapi Kredi).

PEARSON

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available. 

XTAGS: XTAGECON, XTAGEFIN, XTAGPREL, XTAGTU 03ANKARA887

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http://www.wikileaks.ch/cable/2003/02/03ANKARA887.html

EX-BRSA CHAIR AKCAKOCA COMMENTS ON BANKING SECTOR, INVESTIGATIONS

Tuesday, May 17th, 2011
ID
03ANKARA7918
SUBJECT
EX-BRSA CHAIR AKCAKOCA COMMENTS ON BANKING SECTOR, INVESTIGATIONS
DATE
2003-12-24 08:52:00
CLASSIFICATION
CONFIDENTIAL
ORIGIN
Embassy Ankara
TEXT
C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 007918 

SIPDIS

STATE FOR E, EB/IFD AND EUR/SE
TREASURY FOR OASIA – MILLS AND LEICHTER
NSC FOR BRYZA AND MCKIBBEN

E.O. 12958: DECL: 12/23/2013
TAGS: EFIN PGOV TU
SUBJECT: EX-BRSA CHAIR AKCAKOCA COMMENTS ON BANKING SECTOR, INVESTIGATIONS

(u) Classified by Economic Counselor Scot Marciel. Reasons:
1.5 (b,d)

¶1. (C) Summary: Ex-BRSA Chairman Engin Akcakoca complained to us recently that the police raid on his house, which uncovered confidential documents he had kept from BRSA, was a politically-motivated set-up. Numerous current and former officials, he said, had called offering support and confiding that they also keep such documents to protect themselves from accusations and investigations. Akcakoca warned that the banking sector remains vulnerable, and will have difficulty remaining profitable in a low-interest rate environment. He reported that Cukurova Group owner Mehmet KARAMEHMET was negotiating with BRSA to reduce his Pamuk Bank-related debt to the state from just over $3 billion to $2 billion, and was also pressing to regain bank ownership rights. On a positive note, Akcakoca expressed support for the proposed merger of Pamuk Bank and Halk Bank, and said new BRSA Chair Tevfik Bilgin appeared well qualified — if perhaps a bit young — to take over the job. End Summary.

¶2. (C) During a recent lunch in Istanbul, ex-BRSA Chairman Engin Akcakoca offered us his thoughts on the investigation into his activities and on the broader banking sector. He began by saying that he had resigned because Deputy Prime Minister Sener — through an emissary — had explicitly asked for his resignation in the wake of the Imar Bank scandal. He complained that authorities had raided his house only three days after his resignation, while they had taken weeks to conduct raids on the Uzan family members, who clearly had engaged in massive fraud. Akcakoca said the raids were prompted by an “anonymous tip” claiming that authorities would find Imar Bank records at various addresses, including at his house. They had not found any such documents, but had instead uncovered a number of confidential BRSA documents.

¶3. (C) Akcakoca claimed the raids were a “set up,” since “everyone” keeps such records to protect themselves. He noted that former President Demirel, at least one Supreme Court Justice, and other current and senior officials had called him to express support and had acknowledged that they too keep such records. Even Deputy PM Sener, he added, had publicly defended him for keeping official documents. Akcakokca further complained that the prosecutor assigned to the case was someone he had worked with on the Imar Bank case; unfortunately, Akcakoca had publicly criticized the prosecutor a few weeks earlier for failing to act more assertively against the Uzans.

¶4. (C) Turning to the banking sector as a whole, Akcakokca warned about continuing vulnerabilities, particularly in the context of rapidly declining interest rates. He argued — as have others — that, in the absence of significant corporate lending, banks remain overly reliant for profits on returns from their huge investments in government securities. They will book significant capital gains from these holdings this year, but will be unable to do so next year, given the sharp drop in real interest rates. Noting that many banks already barely meet required capital-adequacy ratios, he warned that any slide into the red could bring serious problems for the sector.

¶5. (C) Akcakoca noted that the current government now had a majority of its people on the BRSA board and also would appoint supporters to the newly independent SDIF board. As a result, he said, the government will have unprecedented power to “squeeze” bank owners if it so chooses. The GOT already has indicated it will review all loan workouts done through the Istanbul approach, and could — per Akcakoca — also review and even cancel existing agreements between SDIF and the owners of failed banks. He noted that Justice Minister Cicek has made clear that he wants to go after at least some of the owners.

¶6. (C) At the same time, Akcakoca complained, Cukurova Group owner Mehmet KARAMEHMET — former owner of Pamuk Bank and Yapi Kredi Bank — is negotiating with SDIF to reduce his debt obligations. Under the arrangement worked out following BRSA’s mid-June 2002 intervention, KARAMEHMET committed to repaying more than $3.1 billion over 15 years to SDIF to fill the hole he created in Pamuk Bank’s balance sheet. Now, he is proposing paying $1.9 billion over two years, and also asking to regain his right to own banks (Turkish law prohibits owners of failed banks from owning other banks). Akcakoca acknowledged that SDIF sometimes agreed to 30 percent reductions in debts owed by failed bank owners in return for immediate payment, but pointed out that KARAMEHMET’s proposed deal involved a 42 percent discount without full upfront payment. (Comment; IMF ResRep and others say they also have heard about this proposed deal, but we have not yet been able to verify the details with SDIF. End Comment)

¶7. (C) On a more positive note, Akcakoca said he thought Tevfik Bilgin, his successor, was qualified, if a bit young. He also expressed support for the proposed Pamuk Bank – Halk Bank merger, saying the two banks would complement each other and that it would be very difficult for SDIF to sell Pamuk Bank to a private buyer.

EDELMAN

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available. 

XTAGS: XTAGEFIN, XTAGPGOV, XTAGTU 03ANKARA7918

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http://www.wikileaks.ch/cable/2003/12/03ANKARA7918.html

CUKUROVA FAILS TO COME THROUGH AGAIN

Tuesday, May 17th, 2011
ID
04ISTANBUL1558
SUBJECT
CUKUROVA FAILS TO COME THROUGH AGAIN
DATE
2004-10-15 06:17:00
CLASSIFICATION
UNCLASSIFIED//FOR OFFICIAL USE ONLY
ORIGIN
Consulate Istanbul
TEXT
UNCLAS SECTION 01 OF 02 ISTANBUL 001558

SIPDIS

SENSITIVE

STATE FOR E, EUR/SE AND EB/IFD
TREASURY FOR OASIA – MILLS
NSC FOR MBRYZA AND TMCKIBBEN

E.O. 12958: N/A
TAGS: ECON EINV EFIN TU
SUBJECT: CUKUROVA FAILS TO COME THROUGH AGAIN

Sensitive but Unclassified – not for internet distribution.
This cable was coordinated with Embassy Ankara.

¶1. (SBU) Summary: Turkey’s stock market was shaken Tuesday as it absorbed news that the Cukurova Group had again missed the deadline for completion of the first payment under its early payment plan with the Turkish Savings Deposit Fund (SDIF). The ISE-100 dropped 2.15 percent Tuesday as a result, with Yapi Kredi Bank, which was slated to receive the bulk of the 130 million USD payment, falling 9.5 percent before trading in its shares was suspended. The apparent failure of the high profile deal not only complicates the future of Yapi Kredi Bank, which is owed 2 billion USD by the group, but also that of Turkey’s largest GSM operator, Turkcell, whose shares are held in trust by the bank as collateral for the loan. End Summary.

¶2. (SBU) Early Repayment: Pursuant to an early repayment agreement concluded in July between the Cukurova group, Banking Regulatory Board (BRSA), the SDIF, and Yapi Kredi Bank, the group received a “haircut” of nearly 2 billion USD in its outstanding debt to the bank and the SDIF (the latter debt stems largely from the failure of Pamukbank, which the group also owned) by shortening the repayment period from 2011 to 2006. From the outset much speculation surrounded the identity of the mysterious foreign investors who were providing the capital that would enable the Cukurova Group to meet its 4 billion USD in outstanding obligations, with press speculation earlier this month focusing on Central Asian and other unspecified middlemen. Officially, the source of the funds was the Northway Petroleum Corporation, an apparent paper entity whose General Manager was added to the Turkcell and Yapi Kredi boards earlier this fall.

¶3. (SBU) Jewel in the Crown: For Cukurova, the key enticement to the deal was the ability to hold onto the 13 percent of Turkcell shares that the bank holds in trust against the group’s outstanding debts. Under its original payment protocol, the group can only hold onto the shares by paying 1 billion USD in cash by the end of January 2005. The new protocol lengthened the deadline and provided for gradual release of shares as Cukurova made its debt payments. The company, which once made Mehmet KARAMEHMET(who controls Cukurova) the wealthiest man in Turkey, is the group’s centerpiece, and with a leading position in Turkey and growing interests throughout the region (including its recent success in a GSM license tender in Iran, albeit one now subject to review by the Iranian parliament), Turkcell appears poised to maintain its market dominance and continue to grow its overall valuation.

¶4. (SBU) Missed Deadline: Despite the doubts about the fund providers, most brokerages hailed the deal this summer. One typical comment, from HC Istanbul, characterized the outcome as “positive for all the parties directly involved.” Given Cukurova’s previously spotty record in loan repayment, however, this endorsement came with the important caveat that confidence in the plan would “gradually increase once investors see a couple of regular monthly payments by Cukurova.” To date, however, no payments have been registered. Instead, the payment deadline was first moved from early September to late September, and ultimately to October 11. The Group briefly claimed on October 11 that it had made the necessary payment in the United States, but that the Columbus Day holiday had prevented transfer of funds to Turkey. That claim swiftly disappeared, however, as the group proved unable to produce a deposit receipt and as the funds failed to appear again on October 12.

¶5. (SBU) Next Steps: Still unclear is what the next step in the process will be. The SDIF, which has less at stake, has indicated that Cukurova can combine the first and second payment, together with interest, and maintain the revised protocol. Both Yapi Kredi Bank and the BRSA, however, have said that failure to produce the money on October 12 rendered the revised protocol null and void. Most critically for Cukurova, that would enable Yapi Kredi to sell the Turkcell shares it holds as early as the end of January. Already a number of companies have expressed interest, including Telia-Sonera, the company’s minority Finnish partner, which could assume majority control of the company by buying the pledged shares.

¶6. (SBU) What Went Wrong: Cukurova Chairman KARAMEHMET is notoriously tightlipped, but already there is speculation that the group’s unidentified fund providers balked at contributing once they realized that the collateral they had been promised fell short of the amount they were being asked to provide. As evidence, some note that the fund providers had asked that bank shares be provided to them as collateral as well, something explicitly prohibited by the early repayment agreement, since their eligibility to run a bank in Turkey was open to question. In a statement late Thursday, Cukurova claimed that the delay in payment was entirely the fault of its lenders, as though this somehow absolved it of responsibility.

¶7. (SBU) Yapi Kredi Still Healthy: Both the Chief Sworn Auditor (bank inspector) of BRSA and Yapi Kredi executives told econoffs that, despite the market concerns, Yapi Kredi is still a sound institution. One YKB executive told us the Turkcell shares held by YKB have appreciated in value from $1.5 billion to $7-8 billion over the past 2.5 years. Moreover, he opined that some groups such as Koc, Sabanci or Telia Sonera would be very interested in paying a substantial premium for these shares. The Sworn Auditor said YKB is adequately capitalized and has a good image. A second YKB executive worried about the effect of the uncertainty could have on YKB’s image, a concern similar to that voiced by BRSA Chairman Bilgin in a meeting this summer.

¶8. (SBU) How the Cukurova-Yapi Kredi end game plays out is important for several reasons. First and foremost, as BRSA Chairman Bilgin has told us privately, Yapi Kredi is one of Turkey’s major banks, and problems at Yapi Kredi have implications for the entire banking sector. YKB executives have told us that BRSA stays in close, solicitous touch with YKB management. This case is also important for the credibility of the relatively new leadership of BRSA and SDIF. Cukurova is only one of the owners of failed banks that the regulators–backed by the GOT–have been pressuring into finalizing deals to honor intervened banks’ loans to these owners’ other companies. But Cukurova is the most important of the remaining cases because of the large amounts involved and Yapi Kredi’s size and importance. If SDIF and BRSA are perceived as insufficiently tough on Cukurova, this could hamper the regulators’ ability to enforce other deals with failed bank owners. Finally, the Cukurova arrangement raises questions about the source of the funds the group is bringing in to make its payments. Though markets and even regulators seem to be mainly focused on whether Cukurova can come up with the money, if the source of the funding is not clear, it would raise doubts about possible tax evasion or money laundering. End Comment.

ARNETT

HEADER
This record is a partial extract of the original cable. The full text of the original cable is not available.

XTAGS: XTAGECON, XTAGEINV, XTAGEFIN, XTAGTU 04ISTANBUL1558

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http://www.wikileaks.ch/cable/2004/10/04ISTANBUL1558.html