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Monday, 17 September, 2001, 12:23 GMT 13:23 UK
Turkey rattled by conflict fears
Turkish newspaper headlines
Turkey has offered the US the use of its military bases
Turkey has warned it may delay loan repayments to the IMF, and has hinted it might seek compensation for use of military bases, as it struggles to counteract implications of last week's attack on the US.

Foreign investors have pulled out of Turkey, a member of Nato, over fears of its potential involvement in US-led retaliatory strikes.

Turkey's strategic importance for the European Union and NATO is increasing and within this strategic framework Western allies should consider the cost that Turkey will have to bear

Kemal Dervis
Turkish Economy Minister

Turkey's stock market fell more than 10% on Monday, bring the total fall since the attacks on the US to 25%.

The Turkish lira reached a new record low of 1,540,000 against the dollar, which has itself weakened against other major currencies.

"The market is very volatile," said Gamze Sermet, a broker with Alfa Securities.

"The prospects of a long war is forcing the investors to leave."

Ms Sermet added that investors' morale had been depressed by warnings by Turkish Economy Minister Kemal Dervis that tourism and exports, the only revenue-making sectors in the country, could be affected by US retaliation.

Depressing brief

Mr Dervis told journalists that Turkey, as a country which had greatly suffered from insurgent attacks, must support the international fight against terrorism.

But he hinted that there may be a price.

"Turkey's strategic importance for the European Union and Nato is increasing and within this strategic framework Western allies should consider the cost that Turkey will have to bear," Mr Dervis said.

Since the Gulf War, sanctions against Iraq, once a major trading partner, have cost Turkey an estimate $35bn and officials feel Ankara has had little compensation for its support.

Economy Minister Kemal Dervis
Dervis: The (IMF) programme will continue

But he stressed that despite the turmoil, implementation of the $15.7bn IMF rescue package was on course and no more loans would be requested.

"The thing that has to be done right now is we have to state clearly that the programme will continue," Mr Dervis said.

He also postponed eurobond issue scheduled for September, and said Turkey had discussed delaying the part repayment of a $5bn IMF loan due next year.

He did not say whether the IMF had agreed to a postponement.

The fund last week indicated such a move should not be a problem.

Turkey's currency has lost more than half of its value since February's financial crisis and more than 600,000 people have lost their jobs since the failure of a previous IMF plan.

Military might

Bordering the Caucasus, Iraq, Syria and Iran, Nato-ally Turkey has a large US military presence and commands the biggest standing army in NATO's European theatre.

F-16 based at Incirlik, Turkey
Incirlik was used by the US during the Gulf War

Washington sees Turkey as a key ally in a region.

Prime Minister Bulent Ecevit said on Sunday that Turkey would allow the use of Incirlik Air Base in southern Turkey for US retaliation.

Incirlik already hosts US and British warplanes enforcing a no-fly zone over northern Iraq and was a key staging post for US attacks on Iraq during the 1991 Persian Gulf War.

See also:

16 Sep 01 | Business
IMF loan to secure Brazil
14 Sep 01 | Business
Developing states face credit fears
31 Aug 01 | Business
Turkey's economy shrinks
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