Turkish Trade with Iraq

UNCLAS SECTION 01 OF 02 ANKARA 002813

SIPDIS


DEPT FOR EUR/SE AND NEA/NGA
CENTCOM FOR J3, J5 AND POLAD


SENSITIVE


E.O. 12958: N/A
TAGS: ETRD ETTC IZ TU
SUBJECT: Turkish Trade with Iraq

Ref: State 104141



1. (U) This cable contains an action request. See para

11.



2. (SBU) Summary: Turkish foreign trade officials
emphasized Turkey's desire to gain a share of the
commercial opportunities arising from Iraq reconstruction,
and implied that special consideration should be given to
Turkish companies. They raised concerns about
implementation of UN Oil for Food (OFF) Program contracts
awarded to Turkish companies. The Foreign Trade
Undersecretariat provided limited trade information, but
no realistic estimates of the extent of smuggling outside
the OFF. End Summary.



3. (U) Emboffs met with a group of Foreign Trade
Undersecretariat officials on April 28 to discuss Turkish
trade relations with Iraq (reftel) and share information
on Iraq reconstruction. Serhat Gok, Deputy General
Director for Exports, chaired the meeting.



4. (U) OFF Contracts: Gok stated that Turkey's prime
concern now was the fate of the Oil for Food Program (OFF)
and whether previously approved contracts would go
forward. As of the end of Phase 13, Turkey had 182 OFF
contracts worth USD 350 million, of which 82 (worth USD
199 million) were approved. The others were still
pending. Econoff responded that OFF had been temporarily
extended, but that the UN was now giving priority to
processing and shipping relief items to Iraq under OFF.



5. (SBU) Reconstruction: Gok said that trade with Iraq
was important for the economy of southeastern Turkey, and
particularly of Turkey's trucking sector. He said that
about 40 percent of Turkey's 25,000 TIR truck fleet was
currently unemployed and hoped that a revival in trade
would help put drivers back to work. Gok told us that
Turkey hoped to both a prime supplier to U.S. troops and
to the reconstruction effort (especially export of
construction services, food, medicines).Hinting at a
linkage between the U.S. priority treatment of Turkish
companies under the Boeing offset program, he implied that
Turkish companies should be given special consideration in
reconstruction contracts. Emboffs provided Foreign Trade
with the Embassy Commercial Service' factsheet on Iraq
reconstruction, and responded that Turkish companies were
welcome to compete on an equal basis for those commercial
opportunities.



6. (SBU) Trade Facilitation: Foreign Trade noted that the
GOT planned to encourage trade by establishing border
trade centers in southeastern Turkey, and by opening a
second border crossing south of Habur. Gok pointed out
that the second border crossing would allow Turkish
truckers to avoid passing through the Kurdistan Democratic
Party (KDP) territory. He implied that this was desirable
not only for political reasons, but also to avoid payment
of bribes to KDP officials. A new border crossing would
also facilitate Turkish trade with Persian Gulf states,
currently discouraged by high transit fees levied by
Syria. Comment: The entire length of Turkey's border
with Iraq is currently controlled by the KDP on the Iraqi
side. Hopefully it will soon be controlled by an Iraqi
national border authority. Driving trade away from an
area of KDP influence is short-sighted and undesirable,
and, in the short-term, impossible. Furthermore, the
Turkish border extends only 20 kilometers south of the
current Habur crossing. Establishing a new crossing in
the same area would appear to have more political than
economic justification. Ultimately, the new Iraqi
government would have to agree to this new border
crossing; this could not be a unilateral GOT decision.
End comment.



7. (SBU) FTA/MOU: Gok confirmed that the GOT had not
signed a free trade agreement with the GOI, but
acknowledged that Turkey and Iraq had a trade MOU. Gok
declined to answer Emboffs' questions about the MOU and
its relationship with OFF, referring us to MFA.

8. (U) Trade Data: Gok provided the following statistics
on Turkish exports to Iraq based on figures released by
the Turkish exporters unions (year, exports in USD
millions):


1999 - 246
2000 - 375
2001 - 706
2002 - 465


Note: In January, other Foreign Trade sources estimated
2002 trade at USD 649.7 million, of which about 500
million was "official" trade. The corresponding figures
for 2001 were USD 839.8 and 709.6 million.



9. (U) Asked to estimate the scope of illegal trade taking
place outside OFF, Gok said the so-called suitcase trade
with all neighboring states to Turkey's south and east
amounted to between USD 3.3 and 7 million between 1998 and

2002.


Comment and Action Request
--------------



10. (SBU) Foreign Trade's reticence to discuss Turkey's
MOU and provide realistic estimates of the scope of past
Iraq trade suggests that the scope of this illegal trade
was large in relation to Turkey's legal trade with Iraq.
Embassy is not able to estimate the scope of this
smuggling, but we will continue to discuss these and other
issues raised in reftel with other GOT officials and with
trade associations. Another meeting on Turkish views on
Iraq economic links and reconstruction will be reported
septel.



11. (U) Embassy would also appreciate an update on
Turkey's pending OFF contracts. Pearson