DUBAI, Sept 22: The United States and Turkey on Monday finalised an $8.5 billion loan pact to bolster the Turkish economy and offset costs incurred during the US-led war against Iraq.

US Treasury Secretary John Snow, who negotiated with Turkish officials in the early hours of Monday morning to seal the deal, said the pact would not compel Turkey to send peacekeeping troops to Iraq.

“This assistance package offered by the US to Turkey and the deployment of Turkish troops in Iraq are two separate issues,” Snow said.

The agreement does, however, require the country to cooperate with the United States in Iraq.

The US loan is to have a 10-year maturity and to be paid out in four equal disbursements over about 1-1/2 years.

Snow left no doubt he hoped the agreement would help mend ties between the two Nato allies frayed after Turkey refused in March to let US forces invade neighbouring Iraq from its soil.

“Turkey is a valuable regional ally of the US and is a partner in the global war on terrorism,” Snow said of the deal at a news briefing. “It is in the US interests that Turkey maintain its economic stability and continue its ambitious economic and political reform process.”

It sets two conditions: that Turkey puts “strong economic policies” into place and that it is “cooperating with the United States in Iraq.”

Turkey also has a $16-billion loan programme with the International Monetary Fund. The US Treasury has previously said Turkey must stay on track with its IMF programme to get US loans but the statement on Monday made no reference to the IMF.

The US-led war against Iraq hit many sectors of Turkey’s economy hard.

Because of its geopolitical significance, the US State and Defence departments also are intensely interested in seeing that Turkey regains economic stability.

The loan pact was a long time coming. President George W. Bush offered the money to Turkey in March despite its decision not to let US troops use Turkish soil as a launch pad into Iraq, but talks bogged down for months.

It was unclear that a pact would be ready for signing at the IMF meetings in Dubai this week, but Snow got together after midnight on Sunday with Turkish officials and they talked into the small hours to iron out final details for Monday’s signing.

“The contribution of Turkish troops for peacekeeping and stability operations in Iraq is not a necessary condition for determining Turkish cooperation in Iraq,” Snow specified.—Reuters