U.S. to Lend Turkey Up to $8.5 Billion

The United States will provide Turkey with as much as $8.5 billion in loans to ease economic hardship caused by the war in neighboring Iraq and won’t make the money contingent on the Turks sending troops to help the postwar effort, Treasury Secretary John W. Snow said Monday.

Although the loan package is linked to overall Turkish cooperation in Iraq, “the contribution of Turkish troops for peacekeeping and stability operations in Iraq is not a necessary condition,” according to a joint statement released by U.S. and Turkish officials attending an annual conference here of the International Monetary Fund and the World Bank.

The agreement, which was signed Monday, also will be tied to Turkey’s performance in meeting conditions of its existing loans from the IMF, particularly with regard to banking reforms, U.S. and Turkish officials said.

Turkey is weighing a request from the United States that it provide up to 10,000 troops to serve under American command in Iraq.

Snow called Turkey a key U.S. ally in the region, a partner in the global war on terrorism “and a valuable example of a strong and economically stable democracy in the Islamic world.” But he said that “this assistance package offered by the U.S. to Turkey and the deployment of Turkish troops in Iraq are two separate issues.”

The loan will allow Turkey to continue its economic reform efforts, as well as “mitigate the economic impact on Turkey related to Operation Iraqi Freedom,” Snow said, appearing alongside Ali Babacan, the Turkish economy minister.

Babacan, who spoke after Snow did, said the agreement would greatly help move along reforms that the Turks say have yielded positive results, including reducing their country’s overall debt.

The U.S. loan will be administered by the Treasury Department and used to service Turkey’s external and domestic debts.

The loan will have a 10-year maturity with a four-year grace period for repayment of principal, and the last two disbursements can be converted into grants if Turkey so chooses, the officials said.

The loan will be paid out in four equal disbursements over 18 months, according to the joint statement.

U.S. officials acknowledged that Turkey has not always met the conditions of its accord with the IMF, a requirement of the American loan.

Officials with the international agency have complained that Turkey hasn’t moved fast enough to institute reforms as stipulated in its $18-billion loan program.

President Bush offered the $8.5-billion loan in March, even though Turkey had refused to let U.S. troops use its territory to attack Iraq from the north during the war.

Final terms of the agreement took six months of negotiating, with Snow himself closing the deal with Turkish officials in a session that U.S. officials said lasted well into Monday morning.