IRAQ: TURKS AGREE TO IMPROVE EFFICIENCY AT HABUR

C O N F I D E N T I A L SECTION 01 OF 04 ANKARA 007444

SIPDIS


E.O. 12958: DECL: 12/01/2013
TAGS: PREL ETRD ETTC PTER TU IZ
SUBJECT: IRAQ: TURKS AGREE TO IMPROVE EFFICIENCY AT HABUR
BORDER CROSSING, SEEK PREFERENTIAL TRADE AND OIL
ARRANGEMENTS

REF: ANKARA 7253


Classified by DCM Robert Deutsch. Reasons 1.5 b and d.


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Summary
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1. (C) Iraqi Minister of Interior Nuri Badran led an
interagency Iraqi/CPA delegation to Ankara Nov. 30-Dec. 2 to
discuss with Turkish authorities improving the efficiency of
operations at the Habur border crossing so that bulk fuels
flow smoothly and regularly through the winter months. The
agenda of the Turkish side was much broader, something the
Iraqi/CPA delegation only learned during the first session.
The Turks sought to engage in detail on the aspects of the
agreement reached with Jalal Talabani and the IGC delegation
on Nov. 21 (Reftel). The talks produced signed agreed
minutes (text at para 5) that dealt with a broad range of
trade, transportation and oil issues in addition to improving
conditions and working for more throughput at Habur. The
Turks repeatedly insisted that Habur was operating at full
capacity 24 hours/day seven days/week and that there were no
lines of trucks there. In the end, they conceded that the
bridge has fewer than 2,800 trucks per day crossing and has a
capacity of 4,000 (this figure is also suspect),but that
goal would be impossible to reach in the short term. The
Turks, and State Minister for Foreign Trade Kursad Tuzmen in
particular, were insistent that Iraq afford Turkey
preferential treatment, from assuring Turkey that at least
one of the six foreign bank licenses available in Iraq be
granted to a Turkish bank, to granting Turkey below-market
prices for Iraqi crude oil, to assuring that all Turkish
contracts approved and funded by the UN under Oil-for-Food be
prioritized for completion. The Iraqi side resisted making
commitments, but agreed to continue talks on these issues in
the months ahead. End Summary.



2. (C) Iraqi Interior Minister Badran, accompanied by Deputy
Trade Minister Fakhreddin Rashaan, CPA Deputy Administrator
Amb. Richard Jones, SOMO head of shipping Fatin Fatohi, MFA
Amb. Sabah Omran, CPA advisors to the Interior, Trade and Oil
Ministries, a representative from Iraqi Customs,
representatives from the 101st Airborne and KBR, and Charge
and Embassy staff met with Turkish MFA, Trade, Customs and
Interior officials in Ankara Nov. 30 and December 1. The
Iraqi side had asked to discuss Habur Bridge and issues
related to ensuring the smooth flow of bulk fuels for the
winter months. Tuzmen, in the opening session Dec. 1 said
that in addition to solving the Habur problems (which he
seemed to blame on changing and unpredictable fees for
importing goods on the Iraqi side),Turkey needed the talks
to address: 1) a second border crossing; 2) a new agreement
between SOMO and TPIC/TPAO on oil sales; and 3) entry into a
new phase of the Turkey-Iraq border trade agreement. He
concluded his opening statement by saying "we need trade
privileges from you. We are unique as a democracy in the
neighborhood. I do not want equal treatment. I want special
treatment for Turkey."



3. (C) In the three subcommittees that met separately on Dec.
1 (customs, trade and oil) the tone was similar, with the
Turkish side pressing hard for agreements to be signed that
day that would grant Turkey special status in its trade with
Iraq. The Iraqis did not make commitments but agreed to
consider Turkish proposals. On the Habur issues in the
Customs group, the Turks agreed to put additional customs
personnel at the Habur facility, to reorganize their customs
procedures and to strengthen the cooperation of the various
Turkish authorities working at the facility with a goal of
processing 1850 trucks/day in each direction by the end of

2003. (Comment: Monitoring implementation of this commitment
will be critical.) In the trade subcommittee, the Turks said
that they were prepared to immediately consider sending fuel
products to Iraq through Syria via rail (and possibly by
truck) to reduce the pressure/reliance on Habur, and wanted
to begin the technical work on a second gate in early 2004.
They said that the road work alone required on the Turkish
side for that project will take eight months to complete,
making this a medium-term alternative to Habur at best. In
the oil group, after unsuccessfully seeking from SOMO a
preferential pricing agreement for crude in the context of
the border trade agreement, the Turks agreed to move kerosene
by train through Syria within two weeks under an existing
contract and agreed on price for other refined products. The
two sides agreed to initiate negotiations concerning details
and modalities of new crude contracts.



4. (C) In the final session, Tuzmen reiterated his
expectation of preferential treatment, and sought commitments
that Iraq would honor all Turkish OFF contracts that had been
approved and funded whether or not they had been selected for
prioritization and a guarantee that a Turkish bank would
receive one of the six available licenses for foreign banks
to operate in Iraq. When the Iraqi side was unwilling to
make such commitments, Tuzmen grew animated and said that he
would understand Iraqi support as an expression of political
will in Iraq toward Turkey. The Iraqis and CPA advisors
assured him that Turkey had Iraq's support, but that the
commitments he sought were beyond the competence of the
delegation.



5. (U) Text of Minutes of Meeting as signed in Ankara, Dec. 2:


Begin text:


MINUTES OF MEETING


The Turkish and Iraqi Delegations met in Ankara on December
1-2, 2003, to activate the Agreed Minutes signed on November
21, 2003 in Ankara and agreed on the following;



1. The two Sides agreed to exert every possible effort to
further promote and diversify bilateral trade to a higher
level corresponding to their potentials on a mutually
beneficial basis.



2. The Turkish Side submitted a draft agreement on
Preferential Trade to be implemented between the two
countries and a note on the concept of the Border Trade
Centers to be established on the Turkish-Iraqi border.
The two Sides decided to meet during January 2004, in Ankara
with the aim to conclude the above-mentioned agreements.



3. The two Sides noted with satisfaction the execution of
the existing contracts of the Turkish companies within the
framework of the Border Trade Arrangement.


The two Sides agreed on the following payment mechanism for
the deliveries of the Turkish companies starting from the
date of the signing of this Minutes of Meeting.


a. The concerned Ministry of the Iraqi importer will submit
the certificate of acceptance to the Ministry of Trade after
ten (10) working days from the date of the arrival of the
goods to the warehouses of the first party in compliance with
the relevant contracts.


b. The Ministry of Trade, following the confirmation of the
senior advisor of the Ministry of Trade CPA, will submit
these documents directly to the Office of the Commercial
Counselor of the Turkish Embassy within five (5) days.


c. the Undersecretariat of Foreign Trade will give the
necessary instruction for the completion of the procedure.


The two Sides agreed to hold technical meetings
simultaneously with the negotiations of BTC and PTA, with the
aim to determine the implementation of the &contracts funded
and partially shipped8 as well as &contracts funded but not
shipped.8


The two Sides also agreed to conclude a new contract between
TPIC and SOMO for the purchase of crude oil from Iraq within
the framework of border trade. To this end, TPIC of Turkey
submitted its proposals to the Iraqi Side for consideration.
The two Sides agreed to initiate the negotiations concerning
details and modalities of the new contracts.



4. The two Sides, considering the existing congestion
observed in the Habur Border Gate and referring to the
Article 10 of the Agreed Minutes dated November 21, 2003,
decided to start the negotiations for opening a second border
crossing point during December 2003, in Silopi.



5. The two Sides expressed that the
Nusaybin-Qamishly-Mosul railway should be utilized within
full capacity. To this end, the two Sides agreed to take
initiatives to organize a trilateral meeting among the TCDD,
IRR and CFS authorities under the coordination of the
Undersecretariat of Foreign Trade of Turkey and the Ministry
of Trade of Iraq during December 2003, in Turkey.



6. The two Sides noted with satisfaction the new suggested
contracts between TPIC and SOMO for trading of petroleum
products including gasoline, gas oil and kerosene via
Nusaybin-Qamishly-Mosul railway, and by trucks via
Habur-Zakho or any other established routes.


The Turkish Side stated that the kerosene exportation to Iraq
via the Nusaybin-Qamishly-Mosul railway would start in two
weeks.



7. The Turkish Side submitted to the Iraqi Side the list
of the contracts, including the construction of National
Center for Diabetic and Endocrinology Diseases and light
commercial vehicles and cars which were signed by Turkish
companies with the Iraqi state companies within the framework
of Oil for Food Program and requested the assistance of the
Iraqi Side for their prioritization.


The Iraqi Side agreed to extend necessary assistance and
support for these contracts.



8. The two Sides expressed that Kirkuk-Yumurtalik Pipeline
and its functioning constitutes an important and strategic
element in the bilateral commercial and economic relations
between Turkey and Iraq. In this framework, the Iraqi Side
undertook to take all necessary measures for the proper
functioning and protection of the Pipeline.



9. In order to fully benefit both countries' potential, the
two Sides agreed that the existing situation at the
Turkey-Iraq border crossing needs to be improved. In that
respect they agreed as follows:


a. To form a joint committee of customs officials at the
border, which would meet at least weekly to improve
efficiency and coordinate anti-smuggling operations. The
first meeting will be held no later than December 10th 2003.
Representatives from each side will be approved by their
respective authorities and agreed to by both parties.


b. To increase information exchange, including establishing a
hot line between customs posts on both sides of the border
and exchanging statistics about the flow of traffic going
both ways across the border.


c. To increase significantly the number of national customs
officials at their respective customs posts so that they
maintain full capacity operations 24 hours a day 7 days a
week to reach a goal of 1850 trucks per day in each direction
by the end of 2003.


d. To focus their efforts at improving efficiency of
operations so that the number of trucks waiting to enter
their respective countries immediately begins to decrease
with a goal of significantly reducing average driver waiting
time on both sides of the border aiming at no more than 24
hours by the end of 2003.


The respective authorities of the two Sides will meet again
to review the implementation and impact of these agreed
customs actions no later than January 15th 2004.



10. The two Sides agreed to organize the visits of Turkish
contractors and bankers to Iraq during January 2004.



11. The two Sides agreed to conclude an &Action Plan8 for
further promoting and consolidating commercial and economic
relations between the two countries.



12. The two Sides decided to hold the 15th Session of the
Turkish-Iraqi Joint Economic Committee in April 2004, in
Ankara.


Done and signed in Ankara on December 2, 2003, in two
originals in the English language, both texts being equally
authentic.
On Behalf of the Turkish Side On Behalf of
the Iraqi Side
Tuncer Kayalar Fakhreddin
Rashaan
Undersecretary for Foreign Trade Deputy Minister
of Trade


End text of minutes.



6. (U) Amb. Jones has cleared this message.



7. (U) Baghdad minimize considered.
EDELMAN