Turkey's controversial Ilisu dam project has been dealt a severe blow. An international consortium of German, Austrian and Swiss companies withdrew their financial support last week, accusing Turkey of failing to meet environmental concerns and commitments to relocate people affected by the dam. The dam if completed would be one of the largest in the region. But it is the center of a growing national and international campaign by environmentalists to stop it.
A Turkish bulletin has announced that an international consortium had pulled out of the Ilisu dam project. The consortium made up of German, Swiss and Austrian financial institutions said it is concerned about the project's effect on the environment.
The $1.6 billion Ilisu dam, if completed, would flood one of the country's most important conservation areas, including the 10,000 year old town of Hasankeyf.
The lake would also flood an area of more than 300 square kilometers, which would force the relocation of 10,000 people from 80 surrounding villages by its scheduled completion in 2013.
National and international environmental groups have joined forces to stop the dam. Guven Erken the head of the Turkish environmental group Doga Dernigi says the consortium's withdrawal is a major blow to the project.
"It is very significant this is the second consortium that collapsed. Turkey has to establish a new consortium. And that will certainly cause further delay in the construction of the project," Erken said.
Set to produce 3.8 billion kilowatt hours of electricity a year, the project is part of the Turkish government's plan to boost economic prosperity in the country's less developed south-eastern region.
The Environment Minister Veysel Eroglu earlier this month wrongly predicted the consortium wouldn't withdraw from the project. But he also said any withdrawal would not mean an end to the dam.
"We have the power, financial sources and capabilities to build this dam, but I am confident we will find other international resources," he said.
In a statement following the decision, the environment ministry reconfirmed its commitment to the dam's completion. Gun Kut of Istanbul's Bosphorus University is an expert on water issues. He says Turkey overcame similar problems in building another dam.
"In the Ataturk dam the same problem was there. Nobody wanted to fund it. The World Bank didn't want to fund it. So Turkey built from its own resources. So that is feasible. In the end you are expecting some returns that are not only economically but also socially and politically important," he said.
But with the Turkish government facing a growing budget deficit, analysts say it may be reluctant to try and fund the dam. One alternative is tapping weathier Middle Eastern countries to fund the project. The ruling AK party has strong ties in the region and it could well turn to them for support.
But analysts say that may not be so easy. Iraq, Turkey's neighbor, is strongly opposed to the new dam because it would control the Tigris River, a key source of water for its agriculture.
This year Baghdad has accused Ankara of causing widespread drought because of Turkish dams failing to release enough water. Ankara denies the charge. But Kut says the sooner the dam is completed along with the larger Southeastern Anatolia Project, or GAP project, the sooner tensions will ease.
"The longer it takes Turkey to complete the GAP, the more there are problems with the neighbors. Once GAP is completed everyone will know how much water is there , how much is to be utilized by everyone, the capacity. And then it will be possible to find a lasting solution," Kut said.
But opposition to the Ilisu dam is also growing within Turkey.
One of Turkey's biggest pop stars Tarkan, is singing about the dangers of dams to the environment. With the likes of Tarkan and numerous other pop stars and writers, joining the campaign to stop the the Ilisu dam, it has become a cause celeb among many of the country's large young population.
Environmentalist Doga Dernigi says the delay of the project means pressure on the government will likely grow.
"It will allow Turkey to reconsider the whole Ilisu dam idea and take a better decision. Because so far this project was put forward as must to the Turkish public," Dernigi said. "But now Turkey has learned more about the project and we have learned so much lesson from other dams. It did not bring the proposed economic income and it had major major ecological effects."
With the government facing opposition from environmentalists and human rights groups both at home and abroad along with pressure from its Middle Eastern neighbors, analysts say the government is aware that with every delay to the Ilisu that pressure can only grow.