US embassy cable - 04ANKARA6170

UNCLAS SECTION 01 OF 02 ANKARA 006170 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, IZ, PREL, SY, TU 
SUBJECT: TURKEY/IRAQ JOINT ECONOMIC COMMITTEE TO MEET 
NOVEMBER 4 
 
REF: ANKARA 6043 
 
Sensitive But Unclassified 
 
1. Summary:  (SBU) The first post-war meeting of the 
Turkey-Iraq Joint Economic Committee will take place November 
4 in Ankara, co-chaired by Turkish Trade Minister Kursad 
Tuzmen and Iraqi Oil Minister Thamir Ghadban.  Turkey has a 
long list of objectives, including security for Turkish 
truckers and business-people in Iraq, promoting Turkish oil 
industry investments, and progress on bilateral agreements on 
investment, trade, customs, energy, and double taxation.   A 
large number of Turkish companies are working in Iraq and 
trade is growing; exports to Iraq are expected to double this 
year to $1.8 billion.  End Summary. 
 
2.  (SBU) According to MFA and Foreign Trade officials, 
Turkey will host the first post-Saddam meeting of the 
Turkey-Iraq Joint Economic Committee November 4 in Ankara. 
(Previous economic talks in late 2003 and early 2004 included 
substantial support and input from CPA Baghdad and Embassy 
Ankara.)  Sevket Ilgac, Deputy Director General in the 
Undersecretariat of Foreign Trade told us that State Minister 
for Foreign Trade Kursad Tuzmen will lead the Turkish 
delegation; Iraqi Oil Minister Thamir Ghadban will lead the 
Iraqi delegation.  This follows the precedent set in the 
Hussein era, when the primary issue for the JEC was 
administering the Bilateral Trade Agreement under which Iraqi 
oil was bartered for Turkish goods and services. 
 
3.  (SBU) The Turkish side has a long and optimistic agenda 
for the meeting.  Top of the list is security, followed by 
establishing the legal and physical infrastructure to 
facilitate expanding trade with Iraq, which continues to grow 
rapidly, despite the growing security problem and the large 
number of Turks kidnapped or killed in Iraq.  By mid-October, 
Turkish exports to Iraq (this does not include humanitarian 
fuel deliveries) reached $1.5 billion and are expected to 
reach $1.8 for the year; more than double the exports in 
2003.  The Foreign Trade Undersecretariat hopes to reach 
exports of $2.5 billion in 2005.  A number of large Turkish 
contractors are working in Iraq, either in direct support of 
coalition forces or on other reconstruction projects. 
Officials estimate that as many as 1,000 Turkish businessmen 
and workers are in Iraq, in addition to a large number of 
Turkish drivers (including about 700 on the road at any given 
time) making deliveries into Iraq.  Ilgac said a number of 
Turkish firms are interested in investing in Iraq.  In 
particular, the Turkish state oil and gas firms, TPAO and 
BOTAS, are very interested in developing oil and gas fields 
in northern Iraq.  (See reftel.) 
 
4.  (SBU) Turkey is concerned that trade growth could be 
limited because Iraq and Turkey operate only one border 
crossing at Habur Gate, which is already operating at full 
capacity, according to Ilgac.  He said the Turkish side will 
raise the unresolved issue of the second border gate.  He 
added that the Union of Chambers and Commodity Exchanges of 
Turkey (TOBB) has received government approval to modernize 
the border facilities at Habur under a BOT contract, but said 
the GOT did not want to start construction because it will 
disrupt traffic flow.  Turkish transporters have been using 
road and rail corridors through Syria.  Three trains of about 
20 cars each cross through the northeast tip of Syria each 
day.  However, Syria continues to charge extremely high 
transit fees for the rail traffic.  Syria recently reduced 
the fees on transiting trucks and truck traffic from Turkey 
has increased sharply in the past month. 
 
5.  (SBU) The Turkish side will propose talks on a number of 
bilateral economic agreements, including a General Protocol 
on Bilateral Economic Cooperation, which Turkey hopes will 
include a Preferential Trade Agreement, and cooperation 
agreements on protecting investments, customs, energy, and 
double taxation.  Ilgac said that Turkey wants to lock in low 
tariffs for exports to Iraq and reduce non-tariff barriers. 
The Turkish side also wants to discuss issues remaining from 
the Hussein-era oil protocols, including execution of 
contracts interrupted by the war for which funds had already 
been deposited in Halk Bank from the sale of counterpart oil 
deliveries.  For example, Ilgac said $50 million is 
contracted to be spent on railway cars, but the contract 
cannot be executed until the tracks in northern Iraq are 
repaired.  He also said Turkey will offer to repair the 
tracks in exchange for bartered oil shipments. 
 
6.  Comment:  When asked whether Iraq's bilateral debt to 
Turkey would be discussed, Ilgac did not think that Turkey 
would be interested in trying to settle this issue right 
away.  Turkish officials continue to work to keep 
transportation lines to Iraq operating, despite increasing 
concern and political criticism about the rising number of 
Turks kidnapped and killed in Iraq.  Officials recognize that 
Turkey stands to gain when security and economic growth are 
restored in Iraq.  Although the Turkish agenda for the JEC is 
overly optimistic, it shows that they want to take steps now 
to establish the legal and physical infrastructure to 
facilitate a growing economic relationship.  However, the 
proposal to barter oil for rail rehabilitation is an example 
of the old-think that still prevails among Turkish trade 
officials.  Modeled on the old 'protocol' agreements, such 
barter arrangements have proven to be non-transparent 
vehicles for abuse and corruption.  End comment. 
EDELMAN