Court Halts TUPRAS Privatization

As part of Turkey’s privatization effort, Tupras was sold earlier this year to a consortium consisting of the Zorlu Group and the Tatarstan petroleum company Tatneft; however, the Petroleum Workers Union appealed the sale. It was recorded that the Court reached its decision last Friday and it would notify the Privatization Board (OIB) today.

The Court issued its injunction to halt the turnover citing the following reasons: "It is contrary to the Public’s benefit and to the Competition Institution Law because the proposal was accepted without condition and without going to public auction."

OIB authorities say they will appeal the case to the Regional Administration Court. Sources disclose that the Court has two weeks to conclude the appeal. It is indicated that the date for the Tupras handover, May 28, 2004, may be delayed by a week.

Tupras is one of the most significant privatization items of the government. Tatneft and Zorlu Group were expected to sign the Tupras handover agreement and pay the lump sum of US$1.3 billion on Friday, May 28. Turkish Prime Minister Recep Tayyip Erdogan and Tatarstan Prime Minister Rustem Minnihanov were due to participate in the signature ceremony. However, after the Court issued the injunction on Monday the handover of Tupras is up in the air.

‘It Affects the Markets Negatively’

Experts fear that the markets will react negatively to the Court’s decree. Because the market had anticipated that the Tupras sale would be realized by a one time cash payment of US$1.3 billion, the dollar fell to the level of 1.525 million Turkish liras (TL) yesterday in the inter-bank market; the dollar increased to TL 1.540 inter-banks market and it rose to TL 1.535 million in the free market.

"Unfortunately Turkey is not successful at privatization," commented Asia Finance General Manager Unal Kabaca about the Court’s decision. He said that the injunction would affect the markets negatively. He predicts that the exchange and interest rates will increase and that the stock market will fall.

Anatolia Finance Fund Management Director Ali Guney said that the US$1.3 billion that was expected to go into the Treasury on May 28 is very important for the markets. Guney said: "After this incident, the stock market will be hit especially hard and there will be increases in the exchange and interest rates. The statements that will be released will influence the markets."

Berna Beyazitoglu, an analyst at the international investment bank Credit Suisse First Boston (CSFB), said: "It will reflect negatively on the markets because we think that the news that the agreement would be signed on Friday and that the payment would be made in advance caused yesterday’s rise in the stock exchange and the decrease in the interest rates."