TRADE U/S ON TRADE PROTOCOL WITH IRAQ, DISCUSSIONS

UNCLAS ANKARA 007329

SIPDIS


SENSITIVE


E.O. 12958: N/A
TAGS: ETRD PREL ENRG TU IZ
SUBJECT: TRADE U/S ON TRADE PROTOCOL WITH IRAQ, DISCUSSIONS
WITH TALABANI

REF: A. (A) ANKARA 7253

B. (B) ISTANBUL 1596



1. (SBU) Summary: Foreign Trade U/S Tuncer Kayalar told us
November 20 that the pre-war Turkey-Iraq trade protocol was a
swap arrangement, under which Iraq shipped crude oil to
Turkey in return for Turkish goods. Kayalar confirmed that
Iraqi authorities had transferred oil to Turkey before
Operation Iraqi Freedom for goods that still have not been
delivered. The GOT has paid all Turkish exporters, and has
now received approval from CPA and Iraqi officials to ship at
least some of the goods that had been on hold since the war.
In other cases, Iraqi importers are working with Turkish
exporters to change pre-war contracts to meet current Iraqi
needs, but Kayalar said all such deals will have to be
approved by CPA. The U/S was unfamiliar with the specific
case of media equipment said to have been ordered from
Istanbul-based al-Huda, but promised to look into it. He
added that the GOT had proposed to visiting IGC President
Talabani a re-start of the bilateral trade protocol. Ref A
reports on an agreed minute between State Minister Tuzmen and
Talabani on bilateral economic matters. End Summary.



2. (SBU) Foreign Trade U/S Tuncer Kayalar explained to us
the workings of Turkey's pre-war bilateral trade protocol
with Iraq. According to Kayalar, the protocol was a swap
mechanism, under which Iraqi sent crude petroleum to Turkish
authorities, who sold it on the market and used the proceeds
to pay Turkish exporters, who subsequently sent goods to Iraq
under previously-agreed export contracts. The onset of
Operation Iraqi Freedom stopped the mechanism, with some
Turkish goods already paid for (with oil) but not yet
delivered. Kayalar clarified that the GOT had already paid
the relevant exporters, and was now working with Iraqi
officials and CPA to obtain "clearance" to ship the goods.



3. (SBU) The U/S said his office had already sent a list of
pending contracts to Baghdad, and had received CPA's approval
to ship them (with the shipments expected in the coming
days). In other cases, Iraqi importers wanted to change the
shipments to meet changing demands in Iraq, and were working
with Turkish exporters to amend contracts. Kayalar said all
of these amended contracts would have to be approved in
Baghdad, by CPA, before the shipments would take place. He
said he was unaware of the specific case of media equipment
ordered from Istanbul-based al-Huda (ref b),but promised to
look into it.



4. (SBU) Kayalar said the GOT had proposed to visiting IGC
President Talabani a continuation or re-start of this
protocol, again involving barter for Iraqi crude, and
Talabani had been positive. The two sides had also agreed to
begin negotiations on a preferential trade agreement and the
opening of a second border gate (Ref A contains the
GOT-drafted text of an agreed minute expected to be signed by
the two sides November 21). State Minister Tuzmen had
complained "harshly" to Talabani about "outrageous" fees
being levied on the Iraqi side of the border; Kayalar said
elements in northern Iraq were charging anywhere from $70 to
$700 per truck for passage. The fee, he said, appears to
depend on "how they feel when they wake up."



5. (SBU) Kayalar said Tuzmen had also sought Talabani's
support in gaining Baghdad's approval for implementation of
$300 million worth of Turkish export contracts signed when
Minister Tuzmen visited Baghdad in November 2002, and for
implementation of two oil production contracts Turkish
companies had signed with Talabani before the war. We
pointed out that the situation in Iraq had changed
dramatically since then, and that such contracts would have
to be blessed by Baghdad. Kayalar said that had been
Talabani's response as well.


EDELMAN