US May Increase The $26
Billion Promised To Turkey

By Adam Entous

WASHINGTON (Reuters) - The United States signaled a willingness on Thursday to make last-minute revisions to an economic aid package for Turkey, hoping to end an impasse with its NATO ally over the use of Turkish bases by American forces for a possible war with Iraq.
The overture, which may involve restructuring portions of the $26 billion package to provide more assistance to Turkey at the same cost to the United States, could help salvage U.S. plans to send up to 40,000 troops to Turkey for use in a possible invasion of Iraq from the north. An announcement could come as soon as Friday.
Secretary of State Colin Powell told reporters the U.S. aid offer -- which amounts to $6 billion in grants and up to $20 billion in loan guarantees -- was as high as the United States could go.
"Our position was firm with respect to the kind of assistance we could provide with respect to the level," Powell said. But he added: "There may be some other creative things we can do."
So far Turkey has balked at the offer, demanding up to $32 billion in aid, including up to $10 billion in grants and more leeway to decide how the money is spent.
It is unclear whether tinkering with the structure of the package will win Ankara over.
Turkish Prime Minister Abdullah Gul said he would make a statement on the issue on Friday. The local CNN Turk news channel reported U.S. Ambassador to Ankara Robert Pearson may be called to the Foreign Ministry ahead of the statement.
Powell said he expected to hear from Ankara before the end of the day. But a U.S. official said that didn't mean Washington expected a final response on Thursday. "We didn't set a deadline," the official added.
Senior U.S. defense officials said Washington had told Ankara it needed to know by the end of this week whether Turkey accepted the U.S. aid package in exchange for allowing up to 40,000 U.S. troops into the country.
Beyond the military advantages of mounting an attack on neighboring Iraq from Turkish soil, Ankara's active support in the campaign against Iraqi President Saddam Hussein would give Washington the comfort of a Muslim ally in a war many in the region deride as an anti-Islam crusade.
The bulk of U.S. forces being sent to the region are being gathered in the Gulf, signaling the main brunt of an attack would come from the south but opening a second northern front could shorten the war, U.S. planners believe.
Hoping to break the deadlock, sources said the United States may alter the structure of grants and loans to give Ankara more flexibility in how it uses the money and how much it can raise through private banks with U.S. backing.
"When you come to any particular amount of assistance, there are always various ways of providing it," State Department spokesman Richard Boucher said. "So a given amount of money could either provide a certain level of grants or a higher level of loans if it were used as a guarantee or subsidy for a loan."
"What we've tried to do is to work with the Turkish government to show that we can help them in a variety of ways that are not solely limited by the specific amounts," Boucher added.
Sources said one option would be to reduce the amount set aside to support the loan guarantees, thereby increasing how much Turkey can borrow without increasing the cost to U.S. taxpayers.
In addition, U.S. sources said the administration was discussing the possibility of providing oil to Turkey at a subsidized rate. The oil could come from Saudi Arabia, Kuwait or other regional allies.
Raising the stakes in negotiations with Washington, Turkey wants written guarantees of aid and Turkish military access to northern Iraq.
Since any deal would have to be approved by the U.S. Congress, Turkey will have to settle for less than a concrete guarantee from the Bush administration, officials said.
"We've been talking about how to make clear to our publics and their parliament what we might agree upon. But we're not there yet," Boucher said.
Congressional sources said the strategic importance of Turkish bases would make it difficult for lawmakers to vote against the aid package whether they like it or not.
House of Representatives Speaker Dennis Hastert, an Illinois Republican, offered verbal assurances of support during a recent visit to Ankara.
In what some in Washington took as a hopeful sign, the Turkish foreign minister signaled an agreement could still be reached in the diplomatic standoff. "I do not see a deadlock," Foreign Minister Yasar Yakis was quoted as saying by the state-run Anatolian news agency.
Turkey worries that its economy will suffer from a war in neighboring Iraq. The military wants to send troops into the Kurdish enclave in Iraq to stem a refugee flow and block any Kurdish drive for independence that could inspire Turkey's own Kurdish minority to revive demands for autonomy.
Washington, growing frustrated as the clock ticks toward possible military action, has pushed for a rapid Turkish decision and said it would deploy its troops elsewhere in the region if there was no deal by the end of the week.
"This is not a bluff. ... The United States is preparing for war in case a decision is made to go to war," White House spokesman Ari Fleischer told reporters traveling with President Bush.



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