With a common frontier of about 350 kilometers providing for low transportation costs, Turkey is seen as the best transit route for northern Iraqi exports to European markets. “But many biases are still to be dealt with,” Galip Ensarioğlu, the chairman of the Diyarbakır Chamber of Commerce and Industry, told Sunday's Zaman. Ensarioğlu states that Turkey is not able to use its leverage in order to penetrate northern Iraq's promising trade, education, health and tourism markets.
He regrets the fact that Turkey is still hesitating to open a consulate in the Kurdish region, while Iran has consulates in both Arbil and Sulaimaniya and has benefited from the virgin market conditions there. “Iran built 63 trade gates into Iraq on their border, but Turkey could not utilize even its single gate, Habur, in full,” Ensarioğlu said. Sources in the Turkish Foreign Ministry say that Turkey is fully aware of the need for more active diplomacy in the region. “Foreign Minister Ahmet Davutoğlu's upcoming visit to Iraq in September will enhance our diplomatic activities. These include opening new consulates in the region and much more,” said a Foreign Ministry diplomat who wanted to remain anonymous.
Businessmen want Turkish banks in northern Iraq
“At this point, it would be best to enhance diplomatic relations in order to overcome some technical problems, including visa and tariff formalities,” said Felah Moustafa, the Kurdish Regional Government's (KRG) foreign affairs representative, in a statement to Sunday's Zaman. According to him, the more diplomatic contacts Turkey and the KRG have the better the economic relations will be. “There are 16 foreign diplomatic missions in the region, from Russia to Japan. There is no Turkish diplomat here or any trade attachés. This is detrimental to all the constructive efforts of Turkish businessmen,” says Moustafa. Another problem in the region is the absence of Turkish banking. A branch of Ziraat Bank was opened last year in Baghdad, though the city was lacking security as compared to the northern Iraqi cities and even that branch is incapable of handling large international money transactions. Yesur Meylani, director of Ziraat's Baghdad branch, told Sunday's Zaman that despite the difficulties they have in Baghdad, the bank is attracting the attention of businessmen. Meylani is also aware of the need for banking cooperation between Turkey and northern Iraq. “I heard that Rafidain and Al Warka banks want to set up branches in Turkey and are in the process of negotiation with the Banking Regulation and Supervision Agency [BDDK],” he said.
The KRG administration has been inviting foreign investors, including Turkish businessmen, to their region for some time now. The prime minister of the semiautonomous Kurdish region, Nechirvan Barzani, asserted the role of the private sector as the engine of economic growth and development for northern Iraq in last week's edition of “Invest in the Future,” a publication promoting the region's investment and trade opportunities. The president of the regional administration, Massoud Barzani, newly empowered after winning an estimated 70 percent of the vote in the region's presidential elections on July 25, has also reiterated his determination to proceed with close economic collaboration with Turkey.
The KRG has set up certain economic incentives, for example land allocation, in order to attract foreign investors. “We recognize the full property rights of investors here by giving them equal rights with domestic investors. We exempt them from duty for 10 years on important raw materials. Turkey will be our most important partner in the long-run, operating in many sectors. The new Sulaimaniya airport is run by a Turkish company,” said Herish Muharam, the head of the Investment Board of Kurdistan, in an interview with Sunday's Zaman. Muharam indicates that there is an opportunity in northern Iraq for Turkish businessmen since it has not been influenced by the global financial crisis and is also a gateway to the rest of Iraq.
Although the region is well known as one of the planet's last great oil repositories, the KRG is still seeking to balance their economic portfolio so that they are not dependent merely on their oil revenue in the long run. In order to build a diversified economy, the KRG wants to follow an overall economic plan from the financial sector to education in which host companies welcome foreign investors.
Despite the KRG's intention to diversify its economy, the carbon industry contributes the bulk of the northern Iraqi national income and will certainly continue to do so for a long time. According to the latest International Crisis Group (ICG) report, titled “Iraq and the Kurds: Trouble Along the Trigger Line,” oil volume was expected to reach 100,000 barrels per day (b/d) initially and 450,000 b/d by the end of 2010 and 1 million b/d within four years in the two Iraqi government-sanctioned oil areas of Taq Taq and Tawke. Austria's OMW AG, Hungary's MOL Group and India's Reliance Industries Limited are good-sized companies which will probably benefit from these economic gains by planting their flags in the region. Along with these, in the Taq Taq region there is Genel Enerji A.S. (Çukurova Group) and Addax Petroleum Inc., which are ready to pump more than 50,000 barrels a day. Among these only Genel Enerji is a Turkish company, but the prospective Nabucco pipeline project will give Turkey leverage in northern Iraq despite the low number of Turkish oil companies operating in the region.
50,000 Turkish citizens are employed in the region
Building economic relations with northern Iraq on oil seems problematic. The central Iraqi administration does not accept northern Iraqi oil tenders and is blocking gas exports for the time being. But a possible consensus within the federation will certainly turn Turkey into the medium for oil and gas transportation between Iraq and Europe. If an agreement cannot be reached, northern Iraq might seek to appraise its own resources, as in the Chamchamal field, expected to be a “gas city” in the future, and again, Turkey's strategic location can provide it with a hand in the play. Having proved to be successful in running pipelines, Turkey is playing both cards. Ercüment Aksoy, the head of the Turkish-Iraqi Business Council, states that Turkey must establish close relations with both the central and northern Iraqi administrations. Iraqi Prime Minister Nouri al-Maliki has already pledged to be Turkey's partner in Nabucco with 15 billion cubic meters of gas.
Around 50,000 Turkish citizens are already employed in the region, predominantly in the construction sector; yet, economic competition within the region has raised the specter of a row with Turkish investors. Ferda Cemiloğlu, an entrepreneur in the building sector, said in a statement for Sunday's Zaman that thanks to their powerful lobbying groups, Chinese and Iranian companies are competing head-to-head with Turkish ones, despite their low-quality products. “Many foreign companies are bidding with the advantage of 0 percent interest loans through their governments,” she says, “But we are deprived of institutional support.”
The whole picture implies that economic relations between Turkey and northern Iraq are based on nothing but mutual dependence and bilateral agreements on trade. The main components of this potential economic partnership derive from the mutual needs of the two countries in which Turkey can benefit from oil resources in the region and northern Iraq is waiting for Turkish investors. In both Turkey and northern Iraq, many believe that given the geographical proximity, ethnic and religious bonds can pave the way to an economic common market in which both countries can benefit from the free exchange of goods, commodities and individuals as in the example of the Benelux countries.
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