US embassy cable - 04ADANA154

UNCLAS SECTION 01 OF 02 ADANA 000154 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, MARR, MOPS, IZ, TU, ADANA 
SUBJECT: SOUTHERN TURKISH BUSINESSES WORKING IN IRAQ SUFFERING 
 
REF: ANKARA 6848 
 
 
1.(SBU)  A southern Turkey regional Turkish-American Business 
Association (TABA) president and an active Turkish contractor in 
Iraq spoke with AMCON ADANA PO on 12/10 to express his concerns 
over the consequences of the ongoing trucker strike against SOMO 
and some DESC contracts.  (Note: the strike was reported in the 
southern Turkey edition of the HURRIYET mass daily on 12/10. End 
Note.)  He said that the reports of the strike were already 
driving up transportation rates for Turkish contractors working 
in Iraq up to 15% in the last two days.  He said that this 
compounded already soaring construction material costs in Iraq 
itself, especially for ready-mix concrete, gravel and steel, 
whose prices had increased 45-60%, indeed to the point where he 
said they were best described as "war profiteering."  "They say 
it is a surcharge for security and almost raise the price by 
fifty percent on everything, regardless of what our supply 
contracts say.  They just reply 'take it or leave it' when we 
point out our contracts and there is no judge there to help you 
and only pressure from U.S. contractors to deliver on time on 
the other end.  Something has to give," he said. 
 
2.(SBU)  He also pointed to shortages of gravel and other bulk 
construction materials in northern Iraq, dismissing as 
"ridiculous" some of the proposed solutions offered by U.S. 
contracting authorities, such as trucking in sand and gravel 
from Silopi in southeast Turkey, circulating in the 
Anaconda/Balad base camps. 
 
3.(SBU)  He reiterated that security concerns among his 
professional staff and workers about conditions in Iraq were 
taking a toll, both driving up his labor rates beyond the 
premises of his original contract bids and "drying up the pool 
of skilled construction labor."  PO explained that the security 
situation in northern Iraq had been a major discussion topic in 
the recent trilateral Ankara meeting between Turkish, Iraqi and 
U.S.  security officials, where there was serious and earnest 
consideration of new measures.  The contact said that he had 
seen the press reporting, and appreciated the high level 
attention, but stated that "the reality of better security would 
be the only thing that changes these market problems.  If this 
continues people from Turkey are not going to remain willing to 
go to Iraq" to help with reconstruction.  He said many 
contractors that he knew were already losing money because of 
shifting business conditions and would not opt to bid again on 
future business in the region because of security concerns for 
their staff and capital. 
 
4.(SBU)  Finally, he reiterated that several Adana or Cukurova 
region-based contractors working with American firm KBR in 
northern Iraq continued to face serious payment shortfalls and 
erratic payment schedules, but had been unsuccessful in gaining 
payment schedule relief on their own inter-related loans to 
Turkish banks.   He added that "the few (Turkish) banks who used 
to be  willing to lend for Iraq business are not willing to do 
new loan business and are just pressing (clients) to pay off 
existing loans. This is driving all but the biggest Turkish 
companies out of Iraq business because there is no working 
capital available in the loan market."   He said that his 
Iraq-related banking was with AK Bank. 
 
5.(SBU)  On a related note (reftel), he discounted the 
likelihood of regional boycotts against U.S. goods in 
southeastern Turkey, observing that "too many people in 
southeastern Turkey one way or another have an economic link to 
the U.S. now" or interest in those calling for a boycott to pay 
any attention to the recent strike call. 
 
6.(SBU)  The TABA president also noted a 12/9 Cukurova region 
local press report that over 3,000 workers had left work on or 
around the Incirlik air base (note: where 39th Air Base Wing is 
hosted by the Turkish Air Force 10th Tanker Wing. End Note.) to 
work in Iraq.  He said that the reports was "very exaggerated," 
however he stated that many small Adana merchants with 
enterprises linked to the Incirlik presence either had explored 
doing business with a U.S. entity in Iraq or were conducting a 
parallel business to their Incirlik enterprise somewhere in 
Iraq.  He estimated the total number of those Turkish business 
people to be "several hundred, not several thousand" and 
described their success rate at establishing new businesses in 
Iraq as "hit and miss."  He said that these small business 
people also did not have the capital or skilled labor base to 
weather the stresses on commerce currently posed by regional 
insecurity. 
 
7.(SBU) Baghdad minimize considered.