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Turkey: Loans Bring New Hope Amid Scandal

New loans for Turkey have brightened the outlook for the country's economy, but the resignation of its energy minister could mean dark times for the government. A widening corruption scandal in the nation's energy sector may also put the pipeline plans of Caucasus countries and Russia at risk.

Boston, 30 April 2001 (RFE/RL) -- Turkey found hope for economic recovery Friday with the pledge of new loans, but a cloud of corruption continued to hang over the country as its energy minister resigned.

The news was mixed for crisis-torn Turkey as markets celebrated a pending package of $10 billion in loans from the International Monetary Fund and the World Bank. The aid, which has been sought by Economy Minister Kemal Dervis, could help the country snap back from the fiscal crisis of the past two months.

Turkey's currency has plunged since February, when a row erupted between the president and prime minister over corruption in the nation's banks.

In addition to loans, the IMF has given Ankara a positive forecast in the past week, predicting that the tattered economy will rebound in 2002 with growth of 4.9 percent. But not all the news has been good.

According to several reports, the United States has opposed any bailouts by the G7 group of industrialized countries. Such aid normally accompanies large rescue plans that are led by the IMF. The New York Times quoted one unidentified person involved in negotiations as saying, "The U.S. has made clear that it's three strikes and you're out."

Turkey has also agreed to implement 15 legal reforms in order to win release of the loans. Although no link has been shown, it may be no coincidence that a scandal in the country's energy sector has also come to a head.

At a press conference Friday in Ankara, Energy Minister Cumhur Ersumer announced that he had resigned. Ersumer, who fought off a censure motion in January, was cited last week in an official bribery and kickback investigation, code named "Operation White Energy."

The probe of contracting for power plants and energy projects led to indictments of 15 individuals last week. Officials targeted by the investigation have named Ersumer, who blamed the actions of subordinates for steering contracts to favored firms.

Ersumer, who denied wrongdoing, has so far been shielded by immunity as a cabinet member. It is unclear whether prosecutors will be able to pursue him without parliamentary consent.

But the corruption allegations in the energy sector could affect countries from Russia to the Caucasus and Central Asia, all of which are depending on Turkey as a market for exports of oil and gas. Turkey's many promises to buy gas from Russia, Iran, Azerbaijan, and Turkmenistan all rely on building power plants to use the fuel.

The country is far behind schedule and likely to slip further because of the economy and the investigation. Ersumer has also been a key figure in negotiating the construction of Caspian pipelines.

Most of the lines are still in the planning stages. But Russia's controversial Blue Stream gas project has also come under scrutiny. Turkish prosecutors said in January that they were looking into tenders for work on the pipeline, which has been largely completed on land but has yet to cross the Black Sea. The underwater section would be the deepest pipeline in the world.

Last week, industry analyst Ferruh Demirmen raised a series of troubling questions about Blue Stream in a commentary for the Turkish Daily News.

Most of the suspicions are based on reports that Turkey's pipeline monopoly Botas made a $52-million advance payment to the consortium that was hired to build the line from the Turkish port of Samsun to Ankara. Demirmen said the unusual pre-payment took place six months before construction began. The OHS consortium, which has been linked to Turkey's Motherland Party, was chosen without competitive bids.

Demirmen also raised doubts about the 1997 gas purchase agreement signed by the former prime minister and Motherland Party member, Mesut Yilmaz, with Russia's Gazprom. Yilmaz is now deputy prime minister in the current coalition government.

Ersumer, who also belongs to Motherland, briefed parliament on the contract, including the gas price, last June. But the meeting took place in closed session with the records sealed for 10 years by law. Demirmen cited reports that Blue Stream gas will cost far more than fuel from either Turkmenistan or Azerbaijan.

Demirmen also argued that Blue Stream has caused Turkey to minimize purchases of cheaper Azerbaijani gas because the country is now committed to buying more gas than it can use.

It is not clear how many of the problems are due to poor planning or bad intent. But there is little doubt that Turkey's injured economy can ill afford to buy gas from the most expensive source.

At this critical point, Turkey's energy plans seem to be facing a host of problems that could threaten completion of pipeline plans. Investigations may slow the building of power plants, while fiscal discipline may force an end to the excessive commitments to buy imported gas. The government also faces the crucial test of whether it will allow investigations to proceed.

Foreign lenders seem to be coming to Turkey's aid, as they have in the past. But they could prove reluctant to keep financing a system that has created so many problems for itself.