Turkey Finally Getting Some U.S. and European Respect

By James M. Dorsey

Two events in the first quarter of 1995 are likely to shape Turkey's future for generations to come. First and foremost, the European Union and Turkey finally are on the verge of creating a customs union which should enormously strengthen Turkey's European ties.

Second, but perhaps no less important, the United States has decided to back Turkish efforts to become the outlet for a significant share of the Central Asian and Caucasian oil that soon will be flowing to international markets. The decision, coupled with U.S. rejection of Iranian involvement in transport of Caucasian oil, considerably enhances Turkey's chances of success.

Both moves are designed to promote a prosperous, democratic Turkey that could become a 21st century model for other modernizing Islamic nations. The customs union provides Turkey with a political, social and economic anchor in the West that would serve as one more wall against further militant Islamic encroachment. This anchor is all the more important now that Turkey's other Western anchor—NATO—is losing relevance with the collapse of the Soviet Union.

For Turkey to maintain the current momentum of Western support, however, it will have to begin tackling not only its economic but also its political problems. Already, EU officials are warning that the customs union still could be blocked by the 626-seat European Parliament, which has threatened to vote it down unless Turkey improves its human rights record.

Meanwhile, human rights violations seem to be mounting, with the government stepping up its campaign to rein in Kurdish separatists. An estimated 14,000 people have been killed in the 10-year Kurdish insurgency in southeastern Turkey. International criticism focuses on the government's campaign to limit domestic freedom of expression on the issue, despite Prime Minister Tansu Ciller's promises to bring Turkish law in line with Article 10 of the European Convention on Human Rights, which guarantees freedom of thought and expression.

Turkey's world-renowned writer Yasar Kemal, author of the acclaimed novel Memed, My Hawk, is under attack for his assertion that Turkey has launched "a campaign of lies" regarding the Kurds who, he says, have the right to self-determination. Twice in February he was questioned in court by a public prosecutor and charged with separatism.

The customs union could provide a stimulus for Turkish political reform. A strong Turkish economy might embolden the government to take politically risky steps to liberalize its policy toward its Kurdish citizens and improve its human rights record.

Domestically, Prime Minister Ciller is seeking to reach agreement with her former foreign minister, Hikmet Cetin, now leader of the re-created Republican People's Party (CHP). The CHP last month merged with the Social Democrat People's Party (SHP), which is part of Ciller's ruling government coalition.

The customs union could provide a stimulus for Turkish political reform.

Cetin, an economist by training like Ciller, is demanding a significant say in economic policy, development of social and economic policies to improve conditions of the Kurds, and accelerated democratization, all of which would help Turkey resolve some of its human rights problems. Ciller's opponents, including President Suleyman Demirel and Parliament Speaker Husamettin Cindoruk, hope that differences between Cetin and Ciller will be sufficient to force the prime minister to resign. Even though Cetin will prove to be a much tougher negotiating partner than his predecessor, SHP leader and current Deputy Prime Minister and Foreign Minister Murat Karayalcin, it is more likely that Cetin and Ciller will compromise on issues such as wages and labor policy toward public sector employees.

Nonetheless, there is room for tension within the coalition. For example, Ciller drafted last month's Letter of Intent to the International Monetary Fund (IMF) without even consulting Cetin. Although the letter, expected to be endorsed by the IMF this month, is fueling optimism because it will give Turkey a second chance to tackle its structural problems, Cetin is believed to oppose some of its provisions. The letter will serve as the basis for a renewed IMF stand-by arrangement for Turkey and is likely to pave the road for Turkey's return to international financial markets.

In the letter, according to Turkish press reports, the government pledges to adopt fiscal and monetary policies that will finally guide Turkey out of its current crisis. Turkey also agrees to continued IMF inspections of its progress in meeting the targets spelled out in the letter. In exchange, the IMF will release the $110 million third tranche of its stand-by loan to Turkey.

Easier Said Than Done

Achieving the government's targets of 3 percent economic growth and reduction of inflation may be easier said than done. It also remains to be seen how quickly the government will move on structural reforms. They involve such unpopular measures as drawing Turkey's off-the-books economy into the tax system and slashing a variety of subsidies.

Many Turks see the customs union as the final step to EU membership. Before this happens, however, Turkey must begin to meet the economic criteria for membership. That means controlling inflation, now at historic highs of around 150 percent, and controlling domestic debt, which is growing exponentially. Government expenditures exceed agreed targets by one-third and the lack of tax reform means that up to 50 percent of the potential tax base remains off the books.

Like the customs union, if Turkey gets the oil pipeline it is likely to shape events for years to come. Turkey's Ceyhan oil terminal on the Mediterranean coast, initially built to accommodate Iraqi petroleum, could become one of the world's most important oil terminals. Although sheep graze and deer meander in the shade of Ceyhan's near-empty oil storage tanks, once the United Nations lifts its sanctions against Iraq, a Ceyhan blend of Iraqi and former Soviet crude could become a name to rival benchmarks such as Brent, West Texas Intermediate and Arab Light.

With Kazakhstan and Azerbaijan likely to produce 80 million tons of oil within the next 10 years, Turkey proposes that half of that crude flow to Ceyhan. The other half would be accommodated through Russia's existing pipeline system. Ciller predicts that the emergence of Ceyhan as a major oil center could spark creation of a new organization of oil producers separate from OPEC.

Attempts by Iran to muscle its way into the Azerbaijan International Operating Company (AIOC), a consortium of international oil companies that last year concluded a $7.3 billion agreement to produce Azerbaijani oil, have persuaded the United States to support Turkish pipeline proposals. AIOC members include Socar, the State Oil Co. of the Republic of Azerbaijan, with about 25 percent; British Petroleum and Amoco Corp. with 17 percent each; Russia's Lukoil with 10 percent; Pennzoil Co., Unocal Corp. and Ramco Oil Services Inc. with about 9 percent each; the Turkish Petroleum Corp. (TPAO) with 1.75 percent; and Delta International, a Saudi Arabian group, with 2 percent.

U.S. support for Turkey's port consti-tutes a shift away from earlier policies in favor of proposals developed by the Caspian Pipeline Consortium (CPC) to pump Kazakh and Azerbaijani oil through Russia. Established by Kazakhstan, Russia and Oman, CPC initially enjoyed U.S. support because of Chevron Corp.'s $20 billion agreement to exploit Kazakhstan's Tengiz oil field.

Possible Derailment

Russia, with or without Iran, could as yet easily derail U.S.-Turkish plans. Twice last year, Russia warned the newly independent states on the Caspian that a 1946 treaty between the Soviet Union and Iran dividing the territorial waters of the sea between them would remain valid as long as a new agreement had not been negotiated.

Prompted nonetheless by the growing momentum, AIOC hopes to conclude agreement on an early production option by June of this year. Following the war in Chechnya and U.S. opposition to involvement of Iran, AIOC is focusing on exporting early production of up to 100,000 barrels a day through Georgia. The project would involve building a $250 million pipeline with a diameter of twelve inches from Baku to Tblisi that would hook up with an already existing pipeline from the Georgian capital to the Black Sea port of Poti.

Turkey has indicated that it would agree to an increase in oil transported from Poti to international markets through the Bosphorous on the condition that simultaneous agreement is achieved on the principle of a much larger pipeline at a later stage from Azerbaijani and eventually Kazakh oil fields to Ceyhan.

Nudged along by the Clinton administration, Turkey would like to see the final pipeline traverse not only Georgia but also neighboring Armenia. "Getting it through Armenia was always Turkey's priority," says Ciller's chief economic adviser, Emre Gonensay.

As a result, Turkey is seeking to normalize relations with Armenia. Intended to coax Armenia to begin withdrawing its troops from occupied Azerbaijani territory, Turkey is reopening air corridor H-50 from Ankara to Yerevan. The corridor, which shortens approaches to Yerevan, was closed last year to pressure Armenia to seek a peaceful solution to the seven-year-old war in Nagorno-Karabakh, an ethnic Armenian enclave demanding independence from Azerbaijan.

James Dorsey is an American freelance writer based in Istanbul.