Mersin's Transit Trade for U.S. Poultry to Iraq

UNCLAS SECTION 01 OF 02 ANKARA 001558

SIPDIS

SENSITIVE

STATE FOR EUR/SE, EB/EPD, AND EB/TPP/ABT
DEPT PLEASE PASS USTR FOR NOVELLI, LERRION
USDA FOR FAS FOR ITP/LEIER, DLP/SHNITZLER, DRENNAN
USDOC FOR DEFALCO
VIENNA FOR APHIS

E.O. 12958: N/A
TAGS: ETRD EAGR PGOV TU
SUBJECT: Mersin's Transit Trade for U.S. Poultry to Iraq

SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION.

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SUMMARY
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1. (U) OVER THE PAST TWO YEARS, TURKEY, AND IN PARTICULAR
THE PORT OF MERSIN, HAS BECOME A MAJOR TRANSIT POINT FOR
COMMERCIAL SALES OF U.S. POULTRY MEAT TO IRAQ AND COUNTRIES
IN THE REGION. TURKEY CREATED A FREE-TRADE ZONE IN MERSIN
IN 1987, WHICH HAS EXCELLENT PORT FACILITIES AND AMPLE COLD
STORAGE. TRADERS ARE HOPEFUL THAT TRADE WILL CONTINUE TO
GROW. TRADERS FACE A NUMBER OF CHALLENGES IN SHIPPING TO
THE REGION, WHICH THREATENS THE TRADE. END SUMMARY.

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TRADE STOPS IN AUGUST 2004
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2. (U) IN AUGUST 2004, NORTHERN IRAQI OFFICIALS BEGAN
REFUSING TO ACCEPT U.S. HEALTH CERTIFICATES FOR POULTRY MEAT
OSTENSIBLY BECAUSE OF AN OUTBREAK OF AVIAN INFLUENZA IN
SEVERAL U.S. STATES. ALTHOUGH THE OUTBREAK HAD ALREADY BEEN
BROUGHT UNDER CONTROL WITH MOST COUNTRIES LIFTING THEIR
TEMPORARY BAN, REGIONAL IRAQI OFFICIALS UNEXPECTEDLY BEGAN
STOPPING U.S. SHIPMENTS. THE POULTRY MEAT WAS ALLOWED TO
CROSS THE TURKISH-IRAQI BORDER, BUT STOPPED INLAND.
EVENTUALLY, THE BAN WAS LIFTED AND TRADE RESUMED.

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GROWING TRADE
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3. (U) FROM MARCH 8 - 11, AGCOUNSELOR MET WITH A NUMBER OF
TURKISH COMPANIES IN ADANA AND MERSIN, WHICH ARE CURRENTLY
INVOLVED IN COMMERCIAL AGRICULTURE AND FOOD TRADE WITH IRAQ.
SEVERAL COMPANIES IN THE FREE TRADE ZONE INDICATED RECENTLY
THAT THEY ARE SHIPPING OR LOOKING TO SHIP FROZEN POULTRY TO
IRAQ, ESPECIALLY U.S. POULTRY. ONE EXPORTER IS CURRENTLY
SHIPPING APPROXIMATELY 4-5000 TONS A MONTH TO PRIVATE BUYERS
IN IRAQ. THE HEAD OF THE COMPANY INDICATED THAT THIS TOTAL
COULD EASILY REACH 80,000 TONS IN 2005. IN ADDITION TO
IRAQ, THE COMPANY IS SHIPPING 12 TMT OF POULTRY A MONTH TO
AFGHANISTAN AND 6 TMT TO AZERBAIJAN. OTHER COMPANIES ARE
SELLING LESS TO IRAQ, BUT BELIEVE MARKET DEMAND COULD
INCREASE, ESPECIALLY IF THE SECURITY SITUATION STABILIZES.
IN GENERAL, THE UNITED STATES, BRAZIL AND CHINA ARE SHIPPING
POULTRY TO IRAQ.

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PROBLEMS ABOUND
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4. (U) WHILE EXPORTS HAVE INCREASED SO HAVE THE
DIFFICULTIES ASSOCIATED WITH IT. TRADERS FACE SECURITY
CONCERNS, SHIPPING AND PAYMENT DELAYS, AS WELL AS PROBLEMS
WITH DOCUMENTATION ON A DAILY BASIS.


5. (SBU) SECURITY CONCERNS ARE, OF COURSE, A PRIORITY. MANY
TRADERS AVOID RISK BY TRANSFERRING PRODUCT TO KURDISH OR
ARAB TRUCK BEFORE SENDING TO THE SOUTH. NONE OF THE
EXPORTERS NOTED ANY RECENT PROBLEMS WITH SECURITY. HOWEVER,
ONE REPORTED THAT THEY HAD A DRIVER KIDNAPPED ABOUT A YEAR
AGO. THE INITIAL RANSOM REQUEST WAS FOR $100,000. HOWEVER,
WORKING THROUGH CONTACTS, THE RANSOM WAS REDUCED TO $26,000.

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BORDER DELAYS
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6. (SBU) FOLLOWING SECURITY, MOST EXPORTERS WERE CONCERNED
ABOUT DELAYS AT THE IRAQ-TURKISH BORDER, WHERE, ACCORDING TO
ONE EXPORTER, LINES CAN REACH UP TO 85 KM. SOME TRADERS ARE
NOW TRANSFERRING PRODUCT ON THE TURKISH SIDE ONTO TRUCKS
FROM CIZRE AND SILOPI. ACCORDING TO TRADER, TRUCKS FROM
THOSE TURKISH CITIES ARE GIVEN PRIORITY TREATMENT AND WAIT
LESS TIME AT THE BORDER.


7. (SBU) ONCE IN IRAQ, SHIPMENTS ARE TRANSFERRED TO EITHER
ARAB OR KURDISH-OWNED TRUCKS FOR DELIVERY TO THE SOUTH. ONE
MERCHANT WHO HAS COLD STORAGE FACILITIES IN MOSUL AND ZAKHO
INDICATED THAT THE SITUATION SEEMED TO BE IMPROVING IN
MOSUL. HE HAD STOPPED SHIPMENTS IN AUGUST TO THE SOUTH BUT
WAS HOPING TO RESUME THEM SHORTLY. ACCORDING TO ONE
EXPORTER, THE DELAYS AT THE TURKISH-IRAQI BORDER WERE
FORCING TRADERS TO SEEK ALTERNATIVE ROUTES. TURKISH TRUCKS
TRANSITING SYRIA, HOWEVER, ARE BEING CHARGED A $500 A TRUCK
SURCHARGE. SOME TRADERS INSTEAD ARE TRANSFERRING CARGO ONTO
SYRIAN VESSELS, OFFLOADING IN LATTAKIA AND THEN SHIPPING ON
SYRIAN TRUCKS TO IRAQ. SOME INDICATED THAT SHOULD THE
DELAYS AT THE TURKISH-IRAQI BORDER NOT IMPROVE, THEY WOULD
USE THE SYRIAN ROUTE. THIS OPTION HAS BEEN HAS BEEN
DISPUTED BY OTHERS, HOWEVER.


8. (U) SEVERAL TRADERS REPORTED THAT IRAQI BORDER OFFICIALS
HAVE ESTABLISHED DIRECT COMMUNICATIONS WITH THEIR TURKISH
COUNTERPARTS. RECENTLY, WHEN THE BORDER CLOSED, IRAQI
OFFICIALS REQUESTED THAT TURKISH OFFICIALS AT THE FREE TRADE
ZONE STOP ISSUING CERTIFICATES ALLOWING SHIPMENTS OUT OF THE
ZONE. ALTHOUGH SOME EXPORTERS COMPLAINED, THIS PROBABLY
PREVENTED UNNECESSARY DELAYS AT THE BORDER.

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SUITCASE CHECKING
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9. (SBU) THE ABSENCE OF A RELIABLE BANKING SYSTEM MEANS
THAT MOST TRANSACTIONS ARE MADE IN CASH WITH IMPORTERS OFTEN
DELIVERING PAYMENTS WITH SUITCASES FILLED WITH MONEY. ONE
TRADER FELT THAT NOT ONLY IS THIS DANGEROUS BUT IT
CONTRIBUTES TO THE GROWTH OF BLACK-MARKET TRADE. MOST
TURKISH TRADERS COMPLAINED THAT IRAQI BUYERS USE ANY EXCUSE
NOT TO MAKE PAYMENTS. OTHERS INDICATED THAT THEIR SUCCESS
DEPENDED EXCLUSIVELY ON THE STRENGTH OF THEIR COUNTERPARTS
IN IRAQ. ONE POULTRY EXPORTER, WHO HAS BEEN OPERATING IN
IRAQ SINCE THE MID 1990S, WORKS EXCLUSIVELY WITH THREE
WEALTHY COUNTERPARTS WHO, IN HIS WORDS, HAVE INFLUENCE IN
THE REGION.

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HEALTH CERTIFICATES COULD BE A PROBLEM
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10. (U) ACCORDING TO ONE TRADER, IRAQI OFFICIALS ACCEPT
HEALTH CERTIFICATES ISSUED FOR AZERBAIJAN, TURKMENISTAN AND
UZBEKISTAN, WHICH NORMALLY ACCOMPANY U.S. SHIPMENTS. THIS
COULD BE PROBLEMATIC IN THE FUTURE UNLESS A NEW U.S.-IRAQI
HEALTH CERTIFICATE IS NEGOTIATED.


11. BAGHDAD MINIMIZE CONSIDERED.

EDELMAN