United States | Wire to Turkey

[Odinson]

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OFFICE OF THE UNDER SECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS​

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ENCRYPTED MESSAGE​

TO: Azmi Ekinci, Minister of Finance of The Republic of Türkiye ( Jay )

CC: Hafize Gate Erkan, Governor of The Central Bank of The Republic of Türkiye

FROM: Bob Pinkman, Under Secretary of The Treasury For International Affairs of the United States of America

Minister Ekinci,

The Treasury Secretary and Secretary of State are both aware that we are engaged in this communication.

In October of 2006, representatives from the United States, Poland, and Sweden met in New York City for a closed-door meeting - this meeting taking place was not, and still is not, public knowledge. In the meeting, the United States departments of State and the Treasury composed a presentation to Swedish and Polish representatives which outlined the concerning state of the Turkish economy. I was one of the two primary American representatives at the meeting.

In truth, your economic situation was dire. We were all deeply concerned that the Turkish state would be crippled beyond the point of recovery. However, through what I understand to be strict austerity measures, your government has managed to climb out from having over $100-billion in debt to $66.5-billion in debt. While Türkiye still has a very high debt to GDP ratio, I can tell you directly that this is shows Treasury and the Federal Reserve System that your government is willing to make tough decisions to turn things around. As I am sure you know, most countries in history have not been able to do what you are doing, which is remarkable. I can only imagine that one day someone is going to write a great book about those of you who have managed to turn the ship from hitting the iceberg.

With that being said, I understand that while the right course is being taken, this is still exceptionally straining on the Turkish people, economy, and government, and that continued pains can put a government back on an ill-fated trajectory. At the meeting in New York that I mentioned previously, a loan of $30-billion to Turkey was discussed. This would be a true loan split between the United States (likely via the Federal Reserve System), Poland, and Sweden, with each contributing $10-billion. The United States is still committed to going through with this and I believe that Poland and Sweden will as well, but I know that they need certain assurances.

First, we will need to know how much can be paid back to each country per (tax period). Is there a solid number which you can give to me that I can present to them?

Secondly, the Polish and Swedish representatives mentioned the possibility of collateral in the event that Turkey fails to make good on payments. Is there any kind of significant collateral that your government can offer?

I know that the White House, Treasury, and the Federal Reserve have had many meetings about how this would exactly work from our side. I am confident that we will be able to pull this off. If Poland and Sweden are willing to move forward with a $10-billion commitment, there is a possibility that the United States may be able to increase its loan offer. However, I cannot make any guarantees on that at the moment.

If your government and central bank want to move forward with this option, I ask that you get back to me at your earliest convenience. In the meantime, Treasury will begin drafting a binding financial agreement for the four of us.​

Best regards,

Bob Pinkman
Under Secretary of The Treasury For International Affairs
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[Jay]

Dışişleri Bakanlığı Ministry of Foreign Affairs​

AUTHENTIC COMMUNIQUE OF THE OFFICE OF FOREIGN AFFAIRS Security Clearance: Secure and Encrypted ŞİFRELEME KORUMASI: KAPLUĞA​

[Recipient]: Under Secretary Treasury < Odinson > [Sender]: Minister of Finance, Türkiye < AEkinciHMB@tr.gov > [Subject]: Confidential // Loan Collateral

Dear Under Secretary Pinkman, Thank you for the letter, Under Secretary Pinkman. I have been informed of the proposed bailout and its skeletal outline from a readout provided by the Ministry of Foreign Affairs. We welcome the news that the U.S. is moving ahead with the proposed bailout, and I look forward to working with you on this. Since our government assumed office, the Turkish economy has experienced considerable stabilization and renewed growth momentum. We expect our July report to show remaining debt obligations of approximately $55.035 billion, marking a significant improvement following a highly volatile start to the year. It is a fair achievement that in half a year of governance, we've managed to halve the debt obligations of the country. We hope this success will continue into quarter four of this year. We are focused on achieving a stable economic outlook for 2008. The fight is just beginning and we hope to deliver on the expectations of the Turkish people. Regarding the proposed $30 billion bailout facility, which we recognize as a substantial commitment, the Turkish Government is in conversations with the Polish Government on the matter of appropriate collateral for their prospective participation. At this stage, we have not received any engagement from Sweden, and we would value your guidance on whether the U.S. envisions these discussions developing in a multilateral or bilateral framework. This information is highly confidential and should be treated as such, including with respect to the other prospective consortium partners. Under the current proposed budget, Türkiye projects a government surplus of approximately $27 billion for fiscal year 2007–2008. While a portion of this surplus must necessarily be reserved for emergency and discretionary expenditures, our parliamentary budget proposal anticipates the capacity to allocate $2.25 billion per month toward repayment to the loan consortium. However, the proposed budget must pass parliament before we can make any hard commitments on our expected surplus. In realistic terms, this would translate to a repayment schedule of roughly $1.25 billion per month over a two-year horizon. With respect to collateral, the scope of fungible assets available for security interests is limited. While we would consider collateralizing $1 billion in an interest-bearing account with the Federal Reserve, we are mindful that such an arrangement could unduly constrain fiscal space for essential growth-oriented investments. Regarding appropriate collateral, there are clear limits on the fungible assets that the consortium could reasonably secure. We would be prepared to collateralize $1 billion of the monthly surplus, allowing the parties to take a security interest in this uncommitted portion, which could be deposited into an interest-bearing account maintained with the Federal Reserve Bank. Compounded monthly, this mechanism would ensure approximately $24 billion in accessible funds over the repayment period. However, we view such an arrangement as overly restrictive. It would significantly constrain the Turkish Government’s ability to allocate resources toward essential economic priorities. Türkiye must continue to invest in its economy, restore employment, and provide critical public services, as these measures are important for boosting productivity and ensuring long-term growth. As part of our budget framework, we have proposed a portfolio of infrastructure projects valued at approximately $30 billion, spanning carbon and nuclear energy, public works, major transit systems, Olympic Games preparation, and other strategic initiatives. We would be prepared to allow the consortium to take a security interest in these underlying projects, thereby granting access to the future revenue streams of these assets, which we expect to generate strong and stable returns. Lastly, we look forward to reviewing the financial agreement and would appreciate a courtesy draft before submitting one to the consortium to allow us to exchange views and provide a working draft. Sincerely, Azmi Ekinci Minister of Finance Republic of Türkiye