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June 2000 Prepared for FOREIGN POLICY REVIEW, CALIFORNIA - page 4 / 17

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  • First, to strengthen the independence and prosperity of the new Caspian states and to encourage political and economic reform;

  • Second, to mitigate regional conflicts by building economic linkages among the states of the region;

  • Third, to enhance commercial opportunities for Turkish, U.S. and other companies; and

  • Fourth, to bolster the energy security of Turkey, the U.S. and other IEA Member countries, and the energy independence of the Caspian region by ensuring the free flow of oil and gas to the world market place.

Each of these objectives is closely inter-related. Enhancing commercial opportunities means increasing foreign investment in the region. Higher levels of investment by foreign companies supports sustained economic growth in the Caspian states. Establishment of free- market economic institutions reinforces the development of democratic institutions. That, coupled with economic growth, will strengthen the Caspian states as independent and sovereign countries. Turkish-U.S. policy in the Caspian does not see building oil and gas pipelines as ends in themselves. Rather, the objective is to use those pipelines as means for building a political and economic framework that will strengthen regional co-operation, enhance stability and stimulate further reforms for decades to come.

Another important component of the Turkish-U.S. energy co-operation is Washington’s persistent efforts to take a substantial share for American businesses in the Turkish power project tenders. The passage of the arbitration amendment, and related legislation in summer 1999 has been warmly welcomed within the American investment community. This is something that Turkey been talking about for many years, and was a major obstacle to foreign investors' actually coming to Turkey. Now that Turkey is over that primary constitutional hurdle, the foreign companies want to see what the implementing legislation will look like.

Particularly important will be what kind of a regulatory scheme would be set up in Turkey’s energy sector, how would it be administered, what kind of reporting requirements there would be. With the passing of the constitutional amendment, as many as 20 major projects representing $5 billion in new investment, and now stalled due to inability to obtain financing, are expected to move forward. Movement on this first tranche of projects will establish a momentum that will help meet Turkey’s power needs well into this century. The power plants and the other energy projects that were signed or initialed during President Clinton’s November 1999 visit, amount to almost $ 1.5 billion, which is obviously very important both in terms of Turkey's long term energy requirements and in terms of the bilateral commercial relations and American investment in Turkey.

Yet, one should bear in mind that Turkey’s energy and regional geopolitical interests also need to be satisfied if a long-term balance of interests will be maintained between Ankara and Washington. The US policy vis-à-vis Iran and Russia over the next few years will be closely watched by Turkish strategists.

2.

Expanding and Diversifying Economic and Trade Ties

The bilateral trade volume has more than tripled since 1980 – indeed, from $1.6 billion in 1985 to the $6.4 billion in 1999 -- due to the growing awareness of American businesses of the economic opportunities in the Turkish market. However, current trade and investment trends between the two countries clearly disfavour Turkey. The U.S. has gained a significant foothold in almost every sector of the Turkish economy, while the Turkish investors and

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