Identifier
Created
Classification
Origin
05ANKARA7073
2005-12-02 06:34:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ankara
Cable title:
Turkish-Syrian Economic Relations Grow
how-toThis record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 ANKARA 007073
SIPDIS
DEPT FOR EB/OIA, EB/CBA AND EUR/SE
TREASURY FOR OASIA - MALACHY NUGENT
USDOC/ITA/MAC/DAVID DEFALCO
SENSITIVE
E.O. 12958: N/A
TAGS: ECON PREL SY TU SYRIA
SUBJECT: Turkish-Syrian Economic Relations Grow
Sensitive but Unclassified. This is a joint cable with
Consulate Adana.
UNCLAS SECTION 01 OF 03 ANKARA 007073
SIPDIS
DEPT FOR EB/OIA, EB/CBA AND EUR/SE
TREASURY FOR OASIA - MALACHY NUGENT
USDOC/ITA/MAC/DAVID DEFALCO
SENSITIVE
E.O. 12958: N/A
TAGS: ECON PREL SY TU SYRIA
SUBJECT: Turkish-Syrian Economic Relations Grow
Sensitive but Unclassified. This is a joint cable with
Consulate Adana.
1. (SBU) Summary. Starting at very low levels, there
has been substantial growth of Turkish business with
Syria although bilateral trade and investment remain
trifling as a share of Turkey's overall trade and
economy. Most of the benefits of the growth of the
economic relationship have accrued to businesses in the
impoverished Southeast, which also have the brightest
hopes for future trade and investment growth. If the UN
decides to impose economic sanctions on Syria, probable
objections from Southeastern businesses would find a
sympathetic audience elsewhere in Turkey and politically
complicate the Turkish government's ability to impose
such measures. End Summary.
-------------- --------------
Improving Trade Relations and Bilateral Agreements
-------------- --------------
2. (SBU) Since the two countries began cooperating
against the PKK in 1999, Turkish-Syrian commercial
relations have been improving, albeit unevenly, along
with political relations. Relations accelerated after
the AKP government came to power in 2002. Turkey and
Syria signed a bilateral "Free Trade Agreement" (FTA) in
2004 as part of the regional EU Partnership process. As
a member of a customs union with the EU, Turkey is bound
to attempt to negotiate parallel agreements to those
established by the EU. However, parallel with the EU's
suspension of finalizing its Association Agreement with
Syria, the GOT has held off submitting the "FTA" to the
Turkish parliament and it has not entered into force. We
understand that the agreement would eliminate tariffs on
non-agricultural goods (as with most EU agreements, the
FTA does not include agriculture or services) over 12
years. The FTA no doubt exempts a long list of sensitive
products. In 2004, Turkey and Syria also concluded an
Avoidance of Double-Taxation Agreement and an Agreement
on Reciprocal Promotion and Protection of Investments.
Unlike the FTA, these agreements entered into force in
August 2005.
3. (SBU) The AKP government has made a concerted effort
to improve relations with neighboring countries (except
Armenia) and Muslim countries. Developing trade
relations with neighboring countries has been a priority
of State Minister Kurshad Tuzmen, who is responsible for
trade and customs. Since he took office in 2002, trade
with neighboring countries has indeed grown from 5% to
30% of Turkey's total trade. Tuzmen, a member of
Parliament from Gaziantep, seems to have a special
interest in Syria. He sometimes claims to have ancestral
ties to and continuing family relations (and perhaps
property) in northern Syria. (In fact, cross border
family relationships are quite common.)
--------------
Current Trade and Investment Flows
--------------
4. (SBU) Turkish exports to Syria are mostly refined oil
products, boilers, machinery, and automotive and auto
parts (particularly after the Syrian Government lifted a
ban on secondhand machinery imports in 2004). Exports
totaled $392 million in 2004. Turkish 2004 imports of
$358 million consisted of cotton and wool, seeds, and
fruits and vegetables. (See data below.) Syrian and
Turkish officials have said they aim to increase the
bilateral trade volume to $2 billion from its current
$750 million level (equivalent to 0.5% of total Turkish
foreign trade of $150 billion).
5. (SBU) The largest known Turkish investment in Syria is
the Akteks textile factory near Aleppo. The factory,
which produces yarn, burned down several years ago and
the company still suffers from well-publicized unresolved
insurance claims. While this incident has added to the
caution of Turkish businesses, business contacts in the
Southeast see construction as a promising sector.
Turkish construction companies tell Consulate Adana they
have been granted USD 106 million in contracts in Syria
and are hopeful that they will get a significant share in
the upcoming tenders for infrastructure projects. Major
Turkish construction companies including as Nurol and
Guris have offices in Syria and closely follow the
opportunities in the construction sector.
--------------
Infrastructure Upgrades
--------------
6. (SBU) To complement the active Turkish consulate in
Aleppo, Turkey has agreed to allow Syria to open a
consulate in Gaziantep that would facilitate business
contacts. The leading Turkish business association,
TOBB, has also constructed (on a BOT basis) a new border
facility at Kilis that would provide a direct link
between Gaziantep and Aleppo. The Syrians have yet to
finish the matching infrastructure on their side of the
border. Similarly, the Syrians have not built a planned
border facility that would link Aleppo to the Turkish
city of Sanliurfa. The Turks have been refurbishing a
mostly disused 40 km stretch of the Hijaz Railway between
Islahiye and Meydan al-Ekbez on the Syrian border. Once
similar work is completed on the Syrian side, the line is
slated to go back into service with two passenger and
four freight trains per day, linking northern Syria more
directly into the Turkey's western rail network.
Finally, despite Turkey's efforts, the two countries have
not been able cooperate on management of the shared
Euphrates or Orontes River basins.
-------------- --
Benefits Mainly Felt in Turkey's Poor Southeast
-------------- --
7. (SBU) Within Turkey, most of the benefits of growing
trade with Syria seem to be accruing to businesses in the
impoverished Southeast. However, local businesspeople
tell Consulate Adana that trade growth is inhibited by
lack of financing mechanisms, poor distribution channels,
few credible banks and opaque Syrian business practices,
as well as Syrian restrictions on imports. None
expressed real enthusiasm for doing business in Syria.
Nonetheless, prior to the initial release of the Mehlis
report last month, several business associations in the
region issued press statements arguing that UN Sanctions
on Syria would harm their newly established economic
relationships.
--------------
Comment
--------------
8. (SBU) Although trade volume with Syria amounts to a
trifling 0.5% of total Turkish trade, most of the
beneficiaries of the current $750-800 million in annual
bilateral exchanges appear to be located in the
Southeast. Many businesses have looked to trade with
Syria as one way to help pull the area out of its
persistent poverty. Southeastern businesses were the
most vocal about losses due to the Iraq embargo. If the
UN were to impose economic sanctions on Syria,
Southeastern businesspeople would be similarly vocal in
opposition and would find a sympathetic audience
elsewhere in the country, as well as in the bureaucracy
and AKP government, further complicating the government's
ability to implement such measures.
--------------
TRADE STATISTICS
--------------
BILATERAL TRADE BETWEEN SYRIA AND TURKEY (USD 1,000)
-------------- --------------
Year TR Exports TR Imports Volume Balance
1995 272.1 258.1 530.2 14.0
1996 307.8 311.5 619.3 -3.7
1997 268.8 456.3 725.1 -187.5
1998 308.9 308.0 616.9 0.9
1999 232.2 307.0 539.2 -74.8
2000 184.3 544.3 728.6 -360.0
2001 281.1 463.5 744.6 -182.4
2002 256.5 506.2 762.7 -249.7
2003 410.8 413.3 824.1 -2.5
2004 391.8 357.6 749.4 34.2
Jan-Aug:
2004 246.1 283.8 529.9 -37.7
2005 348.4 171.9 520.3 176.5
MAJOR TRADE ITEMS (USD mil, as of Jan-Jul 2005)
-------------- --
Turkish Exports
--------------
Item Value
Mineral fuels, mineral oils 117.7
Boilers, machinery 27.0
Man-made staple fibers 21.0
Automotive and side industry 15.1
Iron and Steel 14.2
Salt, sulphur, cement, etc. 13.8
Plastics and Articles 13.1
Animal or Vegetable fats 13.0
Articles of iron and steel 12.5
Electrical machinery 9.9
Other 52.5
Total 309.8
Turkish Imports
--------------
Item Value
Mineral fuels, mineral oils 92.8
Cotton 48.2
Salt, sulphur and cement 3.0
Plastics and Articles 2.8
Iron and Steel 2.6
Edible vegetables 2.3
Oil seeds and fruits 1.4
Coffee and tea 0.7
Wool 0.6
Wood 0.4
Other 3.8
Total 158.6
McEldowney
SIPDIS
DEPT FOR EB/OIA, EB/CBA AND EUR/SE
TREASURY FOR OASIA - MALACHY NUGENT
USDOC/ITA/MAC/DAVID DEFALCO
SENSITIVE
E.O. 12958: N/A
TAGS: ECON PREL SY TU SYRIA
SUBJECT: Turkish-Syrian Economic Relations Grow
Sensitive but Unclassified. This is a joint cable with
Consulate Adana.
1. (SBU) Summary. Starting at very low levels, there
has been substantial growth of Turkish business with
Syria although bilateral trade and investment remain
trifling as a share of Turkey's overall trade and
economy. Most of the benefits of the growth of the
economic relationship have accrued to businesses in the
impoverished Southeast, which also have the brightest
hopes for future trade and investment growth. If the UN
decides to impose economic sanctions on Syria, probable
objections from Southeastern businesses would find a
sympathetic audience elsewhere in Turkey and politically
complicate the Turkish government's ability to impose
such measures. End Summary.
-------------- --------------
Improving Trade Relations and Bilateral Agreements
-------------- --------------
2. (SBU) Since the two countries began cooperating
against the PKK in 1999, Turkish-Syrian commercial
relations have been improving, albeit unevenly, along
with political relations. Relations accelerated after
the AKP government came to power in 2002. Turkey and
Syria signed a bilateral "Free Trade Agreement" (FTA) in
2004 as part of the regional EU Partnership process. As
a member of a customs union with the EU, Turkey is bound
to attempt to negotiate parallel agreements to those
established by the EU. However, parallel with the EU's
suspension of finalizing its Association Agreement with
Syria, the GOT has held off submitting the "FTA" to the
Turkish parliament and it has not entered into force. We
understand that the agreement would eliminate tariffs on
non-agricultural goods (as with most EU agreements, the
FTA does not include agriculture or services) over 12
years. The FTA no doubt exempts a long list of sensitive
products. In 2004, Turkey and Syria also concluded an
Avoidance of Double-Taxation Agreement and an Agreement
on Reciprocal Promotion and Protection of Investments.
Unlike the FTA, these agreements entered into force in
August 2005.
3. (SBU) The AKP government has made a concerted effort
to improve relations with neighboring countries (except
Armenia) and Muslim countries. Developing trade
relations with neighboring countries has been a priority
of State Minister Kurshad Tuzmen, who is responsible for
trade and customs. Since he took office in 2002, trade
with neighboring countries has indeed grown from 5% to
30% of Turkey's total trade. Tuzmen, a member of
Parliament from Gaziantep, seems to have a special
interest in Syria. He sometimes claims to have ancestral
ties to and continuing family relations (and perhaps
property) in northern Syria. (In fact, cross border
family relationships are quite common.)
--------------
Current Trade and Investment Flows
--------------
4. (SBU) Turkish exports to Syria are mostly refined oil
products, boilers, machinery, and automotive and auto
parts (particularly after the Syrian Government lifted a
ban on secondhand machinery imports in 2004). Exports
totaled $392 million in 2004. Turkish 2004 imports of
$358 million consisted of cotton and wool, seeds, and
fruits and vegetables. (See data below.) Syrian and
Turkish officials have said they aim to increase the
bilateral trade volume to $2 billion from its current
$750 million level (equivalent to 0.5% of total Turkish
foreign trade of $150 billion).
5. (SBU) The largest known Turkish investment in Syria is
the Akteks textile factory near Aleppo. The factory,
which produces yarn, burned down several years ago and
the company still suffers from well-publicized unresolved
insurance claims. While this incident has added to the
caution of Turkish businesses, business contacts in the
Southeast see construction as a promising sector.
Turkish construction companies tell Consulate Adana they
have been granted USD 106 million in contracts in Syria
and are hopeful that they will get a significant share in
the upcoming tenders for infrastructure projects. Major
Turkish construction companies including as Nurol and
Guris have offices in Syria and closely follow the
opportunities in the construction sector.
--------------
Infrastructure Upgrades
--------------
6. (SBU) To complement the active Turkish consulate in
Aleppo, Turkey has agreed to allow Syria to open a
consulate in Gaziantep that would facilitate business
contacts. The leading Turkish business association,
TOBB, has also constructed (on a BOT basis) a new border
facility at Kilis that would provide a direct link
between Gaziantep and Aleppo. The Syrians have yet to
finish the matching infrastructure on their side of the
border. Similarly, the Syrians have not built a planned
border facility that would link Aleppo to the Turkish
city of Sanliurfa. The Turks have been refurbishing a
mostly disused 40 km stretch of the Hijaz Railway between
Islahiye and Meydan al-Ekbez on the Syrian border. Once
similar work is completed on the Syrian side, the line is
slated to go back into service with two passenger and
four freight trains per day, linking northern Syria more
directly into the Turkey's western rail network.
Finally, despite Turkey's efforts, the two countries have
not been able cooperate on management of the shared
Euphrates or Orontes River basins.
-------------- --
Benefits Mainly Felt in Turkey's Poor Southeast
-------------- --
7. (SBU) Within Turkey, most of the benefits of growing
trade with Syria seem to be accruing to businesses in the
impoverished Southeast. However, local businesspeople
tell Consulate Adana that trade growth is inhibited by
lack of financing mechanisms, poor distribution channels,
few credible banks and opaque Syrian business practices,
as well as Syrian restrictions on imports. None
expressed real enthusiasm for doing business in Syria.
Nonetheless, prior to the initial release of the Mehlis
report last month, several business associations in the
region issued press statements arguing that UN Sanctions
on Syria would harm their newly established economic
relationships.
--------------
Comment
--------------
8. (SBU) Although trade volume with Syria amounts to a
trifling 0.5% of total Turkish trade, most of the
beneficiaries of the current $750-800 million in annual
bilateral exchanges appear to be located in the
Southeast. Many businesses have looked to trade with
Syria as one way to help pull the area out of its
persistent poverty. Southeastern businesses were the
most vocal about losses due to the Iraq embargo. If the
UN were to impose economic sanctions on Syria,
Southeastern businesspeople would be similarly vocal in
opposition and would find a sympathetic audience
elsewhere in the country, as well as in the bureaucracy
and AKP government, further complicating the government's
ability to implement such measures.
--------------
TRADE STATISTICS
--------------
BILATERAL TRADE BETWEEN SYRIA AND TURKEY (USD 1,000)
-------------- --------------
Year TR Exports TR Imports Volume Balance
1995 272.1 258.1 530.2 14.0
1996 307.8 311.5 619.3 -3.7
1997 268.8 456.3 725.1 -187.5
1998 308.9 308.0 616.9 0.9
1999 232.2 307.0 539.2 -74.8
2000 184.3 544.3 728.6 -360.0
2001 281.1 463.5 744.6 -182.4
2002 256.5 506.2 762.7 -249.7
2003 410.8 413.3 824.1 -2.5
2004 391.8 357.6 749.4 34.2
Jan-Aug:
2004 246.1 283.8 529.9 -37.7
2005 348.4 171.9 520.3 176.5
MAJOR TRADE ITEMS (USD mil, as of Jan-Jul 2005)
-------------- --
Turkish Exports
--------------
Item Value
Mineral fuels, mineral oils 117.7
Boilers, machinery 27.0
Man-made staple fibers 21.0
Automotive and side industry 15.1
Iron and Steel 14.2
Salt, sulphur, cement, etc. 13.8
Plastics and Articles 13.1
Animal or Vegetable fats 13.0
Articles of iron and steel 12.5
Electrical machinery 9.9
Other 52.5
Total 309.8
Turkish Imports
--------------
Item Value
Mineral fuels, mineral oils 92.8
Cotton 48.2
Salt, sulphur and cement 3.0
Plastics and Articles 2.8
Iron and Steel 2.6
Edible vegetables 2.3
Oil seeds and fruits 1.4
Coffee and tea 0.7
Wool 0.6
Wood 0.4
Other 3.8
Total 158.6
McEldowney