US embassy cable - 03ANKARA7329

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