Easing Tensions over Turkey

Worries that Turkey may be sucked into the conflict with Iraq look to be exaggerated. Although Turkish troops have been present for the past decade in the rough no-man's land along the 220-mile-long Turkish-Iraqi border, recent declarations that Ankara would be sending in thousands more soldiers to establish a 12-mile buffer zone reignited fears that it would soon be combating Kurdish forces there -- or even rushing to occupy the rich oil fields of northern Iraq.

But General Hilmi Ozkok, the respected head of the powerful Turkish military, held a televised press conference on Mar. 26 to calm such fears. He said Turkey would enter Iraq only in the event of an attack on its forces or a refugee crisis -- and would do so only in cooperation with the U.S.

Although the Istanbul stock market and the battered Turkish currency rallied on the news, the country's economic situation remains dire. President Bush's request for as much as $8.5 billion in loan guarantees for Turkey is far from a done deal -- and is much less than the $24 billion put on the table as recently as late February. More American or European aid is unlikely, since Ankara has little capital left with either the U.S. or the European Union.

Even limited loan guarantees would help to close a large government financing gap this year. But policy zig-zags and incompetence of the new conservative government in Ankara are battering the confidence of investors. The next test could come with a huge redemption of Turkish debt on Apr. 9.

By John Rossant in Paris

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