MERSIN BUSINESS ELITE GLAD FOR REGIME

UNCLAS SECTION 01 OF 04 ADANA 0109 SIPDIS DEPARTMENT FOR EUR/SE AND NEA/NGA AND NEA/ARN E.O. 12958: N/A TAGS: ECON ETRD EWWT PHUM PGOV TU SY JO IZ ADANA SUBJECT: MERSIN BUSINESS ELITE GLAD FOR REGIME CHANGE IN IRAQ ¶1. (SBU) Summary: Mersin, one of the largest ports in the Eastern Mediterranean, suffered years of downturn after the first Gulf War. Mersin's business leaders are optimistic they will benefit from new opportunities in the new Iraq. They do worry, however, the U.S. might seek to "punish" Turkey for insufficient wartime support, including perhaps the demise of the QIZ idea. End summary. ¶2. (SBU) On April 11 we called on leading businessmen in Mersin to get their take on the new dawn in Iraq. Mersin (Icel Province) on the south central coast is Turkey's third largest port, after Istanbul and Izmir. It is also a major shipping hub in the Eastern Mediterranean. The city - with its estimated population of 600,000 putting it among Turkey's top ten - is also home to a reasonably diversified economy. ¶3. (SBU) Mersin was a good example of the persisting negative economic impact of the first Gulf War on Turkey. That war and subsequent sanctions on Iraq deprived Mersin of a significant export market, deprived Mersin port and shippers of transport trade revenue, and arguably stunted Mersin's ambitions to expand its tourism industry. All of that, however, is yesterday's news, say Mersin's hopeful business leaders. What It Was Like With Saddam ::::::::::::::::::::::::::::::::::::::::::::: : ¶4. (SBU) Mahmut and Huseyin Arslan are brothers who run the ARBEL company, a major trader and exporter of foodstuffs based in Mersin. The elder brother, Mahmut, is also a major figure in both Turkish and international associations of food exporters. The ARBEL company had considerable experience supplying Iraq under the UN's oil-for-food program. ¶5. (SBU) Mahmut Arslan was in the habit of visiting Iraq every couple of months during the past six years, i.e. during the era of the UN oil-for-food program. Arbel was a regular supplier under the program; it accounted for approximately six percent of the firm's export volume. ¶6. (SBU) In recalling the oil-for-food program, Mahmut Arslan recounted how it was a politicized exercise, on various fronts. For one, he claimed that there were Turkish-nationalist parliamentarians (MHP party) in Ankara who expressed their displeasure that ARBEL was getting the business. (Note: The Arslans are Kurdish. End note.) For another, he claimed it was clear the Iraqis played favorites with suppliers on the basis of nationality. The French and the Russians got the sweet deals. Arslan recalled going to Moscow to clinch part of an oil-for-food contract and meeting there with a Russian businesswoman whose firm was in on the deal; the woman, looking at samples of the ARBEL merchandise that were to be shipped via her company, could not correctly identify the samples for what they were: chickpeas and lentils. Finally, he told yet another story about how the Iraqis themselves tried to freeze ARBEL out at one point in the six-year program -- accusing ARBEL of dealing with Israel. It took a while to demonstrate to the Iraqi authorities that the ARBEL shipments in question had actually gone via Israel to UNRWA - the Palestinian refugee camps run by the UN - at which point ARBEL got back into the game. ¶7. (SBU) Now that a new day has dawned in Iraq, the Arslan brothers are optimistic their company and others like it in Mersin and in Turkey stand to benefit. They say Turkish businessmen traditionally have been well received in Iraq. In fact, Mahmut Arslan went out of his way to compliment Trade Minister Tuzmen for his flesh- pressing skills with the old regime Baghdad; Turkish firms benefited from his efforts. With the sanctions gone, Turkish firms are poised to do even better. Furthermore, and most importantly, the Arslans believe Turkey will indeed be very competitive in the Iraqi market in certain sectors. They specifically mentioned foodstuffs and construction. As for petroleum and related services, the brothers smiled and commented that it would seem that other countries have something of a leg up. ¶8. (SBU) Turning from the specifics of their own export and trading business to the more general question of how Mersin might benefit from the opening up of Iraq, the Arslan brothers were quick to point out that Mersin's port is a natural gateway for exporters to Iraq. The port of Mersin is modern and large and is already used by shippers as a major hub in the Eastern Mediterranean. The Turkish port to Mersin's east - Iskenderun - does not have the facilities for container-cargo that Mersin does. Iskenderun is also quite a bit smaller than Mersin as a port. That said, Iskenderun's port does have a deep draught, which makes it more suitable for bulk cargo vessels. Therefore, Iskenderun, too, could do well from a ramped-up flow of goods into Iraq for the simple reason that the entire indigenous port capacity of Iraq (i.e. Umm Qasr) is too small to handle it alone. There should be plenty for everybody, in other words. The Arslans recalled that it was the Jordanians who had benefited when Mersin and other Turkish entrepots lost the Iraq trade after the first Gulf War. Now, they say, it is time for Turkey to get some of that back. And when it does, Mersin - like port cities everywhere - will inevitably see the positive economic ripple effects from the increased activity of ships and cranes and trucks. The Chamber of Commerce & Industry: "What's with the QIZ?" ::::::::::::::::::::::::::::::::::::::::::::: :::: ::::::::::::::::::::::::::::::::::::::::::: ¶9. (SBU) In our meeting with representatives from the Mersin Chamber of Commerce and Industry, we were probed about the status of Mersin's application to be a QIZ. Their question had a follow-up: given the "rough patch" that Turkey and the U.S. went through because of Iraq, was the whole QIZ concept now dead? ¶10. (SBU) This anxiety on the part of the Chamber members was a sub-set of a more general uneasiness that the US perhaps was going to seek "retribution" against Turkey for failing to support the war in Iraq. A couple of participants in the meeting told us stories about how they had done deals in anticipation of the U.S. troop presence in Turkey, only to have the contracts cancelled when the troops never came. For this they fundamentally blame the Turkish parliament, but they know that at the micro-level some Turkish businessmen took a hit. ¶11. (SBU) The Chamber members described Mersin as having a reasonably balanced distribution of economic activity across shipping/transport, manufacturing, agriculture, and services. There is also an NGO - largely funded by the Chamber - which is working specifically on economic development. This NGO admits, though, it is still at the beginning in the laborious process of getting relevant actors (business, government, labor, universities) to understand and buy into the concept. They have high hopes, but realistic expectations. ¶12. (SBU) On the down side, the Mersin Chamber members immediately acknowledged as their biggest problem the very same thing we heard from every other single interlocutor we spoke to in Mersin: the flood of poor and uneducated rural folk into the city. The strain is evident everywhere: in the labor market, in the educational system, in the criminal justice system. We were told, for example, that Mersin used to have a per capita income that was three times the Turkish national figure. Now, apparently, Mersin's figure has fallen to match the national one. The View from the Top ::::::::::::::::::::::::::::::::: ¶13. (SBU) Mersin has gone from a population of 30-40,000 to roughly 600,00 in a matter of a few decades. It is estimated that more than half of the current population consists of new arrivals from southeastern Turkey, i.e. Kurds. This massive migration has not only challenged the economic infrastructure of the city, but also the Mersin elite's image of its city. Mersin was an unimportant town in Ottoman times, until - oddly enough - the American Civil War. It was at that time that the Confederate States turned to the Ottoman Sultan for cotton, in the wake of Great Britain's boycott. The Ottomans brought to Mersin some Francophone cotton traders from Egypt and the Levant to establish the business. Therefore, starting in the middle of the 19th century, Mersin grew up with a somewhat more cosmopolitan feel than many other Anatolian cities. In fact, it is still a point of pride among some in Mersin that the city has the only Ottoman-era cemetery in Turkey in which Muslims and Christians and Jews were buried together, rather than in separate sections. This kind of quaintness or quirkiness is now basically being buried under the weight of migration from the southeast, it appears. ¶14. (SBU) This civic history was transmitted to us by Cihat Lokmanoglu and Atahan Cukurova, president and general secretary respectively of the Mersin Maritime Chamber of Commerce. These two men - born in Mersin, graduates of Tarsus American College, and then U.S. universities - represent the pro-American social and business elite of Mersin. Like the Arslan brothers and like the Mersin Chamber of Commerce & Industry, they also are optimistic that both their own businesses and the fortunes of Mersin in general are due for an upturn in the wake of Saddam's overthrow. ¶15. (SBU) The only cloud they see on the horizon is, again, the possibility that the US might devalue its partnership with Turkey, either out of spite for Turkey's failure to support the war or out of Turkey's diminished strategic value in the region. What they find particularly galling is the possibility that a possible "tipping" factor for US-Turkish relations might be northern Iraq. Having fought and won its own war against the PKK - costing 30,000 lives over 15 years -- and having done so with the tacit blessing of the US, it would be bitterly ironic if the US and Turkey were to have a major falling out over Kurds in another country. Both Lokmanoglu and Cukurova lamented the failure of the March 1 vote in the Turkish parliament, attributing it to the "parochialism" of neophyte AK Party politicians. ¶16. (SBU) Given their long experience in maritime trade, Lokmanoglu and Cukurova can look back on not only the bad years of the economic embargo against Saddam's Iraq but also headier days from Saddam's "first" war. Looking at each other and laughing, the two men swapped tales from era of the Iran-Iraq war, during which time Mersin did a nifty business in cargo bound for both sides. Indeed, they said, during that conflict there even were ships that came to Mersin laden 50-50: half for the Iraqis, half for the Iranians. "Do you remember," one of them said, "the time that there was that mix-up, and a load of Iranian military uniforms got sent to Iraq and the Iraqi uniforms went to Iran?" ¶17. (SBU) Comment: In Mersin, as in other parts of Turkey, we are now seeing optimism about the economic consequences to flow from the change of regime in Iraq, albeit tinged with some concerns specific to the US-Turkey partnership, including the status of the QIZ legislative proposal. End comment. HOLTZ