US embassy cable - 05ANKARA4609

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 004609 
 
SIPDIS 
 
E.O. 12958: DECL: 08/05/2010 
TAGS: ECIN, EPET, ETRD, PREL, IZ, TU 
SUBJECT: TURKEY AND IRAQ DEADLOCKED ON SECOND BORDER 
CROSSING AS BOTTLENECK AT HABUR CONTINUES 
 
REF: A. ANKARA 4366 
 
     B. KIMMEL-SNOW E-MAILS DTD 8/3 AND 8/4 
 
Classified By: Acting DCM James Moore for reasons 1.4 (b) and (d) 
 
1. (C) Summary: With reports of increasingly tight fuel 
supplies in Iraq, the Charge called the MFA Deputy Under 
Secretary for Economic Affairs and wrote to the GOT to urge 
 
SIPDIS 
whatever action can be taken by Turkish customs to maximize 
throughput at Habur Gate.  Separately, an MFA official gave 
econoff a readout on last week's Turkey-Iraq bilateral 
discussions on a second border crossing.  The talks appear to 
be hopelessly deadlocked, with Iraq pushing a second gate 
near Habur, and Turkey insisting on a second route--not just 
a crossing--substantially further west.  While there will be 
a modest expansion of capacity at Habur in a year or so, 
significant easing of congestion by means of a second 
crossing seems a distant prospect.  A separate but related 
issue continues to be late payments by SOMO, which the GOT 
fears could result in a breakdown in the fuel supply line at 
any time. The GOT is trying to get SOMO officials to come to 
Turkey to discuss setting up a more workable system. End 
Summary. 
 
Urging Turkish Customs to Maximize throughput at Habur: 
--------------------------------------------- --------- 
 
2. (C) Following ref b's reports of severe tightness in fuel 
supplies in Iraq, post endeavored to engage the GOT to urge 
that every possible measure be taken to maximize throughput 
of fuel supplies at the congested Habur Gate.  Post 
understands from the U.S. military LNO at the border that the 
customs staff is doing everything it can under difficult 
conditions.  However, additional throughput might be 
achievable if additional personnel were assigned to Habur--a 
challenge that Turkish customs has had difficulty meeting in 
the past. 
 
3. (C) Charge spoke to MFA Deputy Under Secretary for 
Economic Affairs Ender Arat on August 5 and asked that all 
possible measures be taken.  Arat confirmed our understanding 
that Turkish customs had problems getting personnel to work 
at Habur and had to pay a premium. On the other hand, he took 
the point that it was bad for fuel shortages in Iraq to reach 
such a critical stage, and acknowledged that the truck 
backlog was too long, and not in Turkey's financial interest. 
 He undertook to talk to Customs.  Post sent over a 
diplomatic note, copying it to Turkish Customs.  We have also 
arranged a meeting with the Acting Under Secretary for 
Customs in the coming days. 
 
Second Gate Talks Deadlock: 
-------------------------- 
 
4. (SBU) Separately, Econoff met with MFA Deputy Director 
General for Economic Affairs Mehmet Gucuk for a readout of 
last week's bilateral talks with Iraq on a second border 
crossing that took place in Ankara July 28-29. 
Representatives of the Iraqi Ministries of Transport, Trade, 
and Foreign Affairs attended, as well as the director of the 
Iraqi side of the border gate.  The Turkish side was led by 
Director General for Economic Affairs, Oguz Ozge. Gucuk 
confirmed press reports that, as with the previous meeting, 
the two sides remain far apart. 
 
5. (C) According to Gucuk, the Iraqi side will only consider 
a second gate near Habur, which would connect with the 
existing roads on either side of the border.  Gucuk said the 
Turks tried to convince the Iraqis that a new route was 
needed, not just a new crossing, since the roads between Iraq 
and Turkey would see increased volume as Iraq stabilized and 
these roads would be the main route from Europe to Iraq. 
Gucuk said the Turkish side sees little utility in creating a 
second border crossing that will join up with the existing 
road on the Iraqi side of the border.  As in the past, Gucuk 
referred to Turkey's longstanding concern that the existing 
route allows KDP guards to garner border fees whereas the 
Turkish-proposed route near Ovakoy--though it would still 
pass briefly through KDP-controlled territory--stands a 
better chance of channelling border fees to the central 
government.  In earlier meetings, Gucuk expressed GOT 
frustration that they could not get the central government in 
Baghdad to understand this and to exert some control over 
Barzani on this issue.  Gucuk was clearly resigned to an 
extended deadlock on the second gate issue.  He said the 
Iraqi side had wanted to issue a statement that the talks had 
been useful but the Turkish side did not see the utility of 
such a statement. 
 
Measures to Ease Habur Gate Congestion: 
-------------------------------------- 
 
6. (SBU) Aside from building a second crossing, two other 
initiatives are in the works to expand existing capacity; 
however, neither will be completed quickly and neither is 
likely to meet existing volume requirements.  Gucuk said that 
the Union of Turkish Chambers of Commerce (TOBB) has a 
contract on a Build-Operate-Transfer basis from the Turkish 
State to rehabilitate and expand the Habur Gate.  Gucuk said 
TOBB had done a similar BOT project at the border crossing 
between Turkey and Bulgaria.  Post understands that TOBB will 
soon take over operation of the gate and begin its work. 
This may cause short-term disruption however when the work is 
completed--expected in a year or so--it is expected to expand 
capacity by roughly 50 percent, according to press reports. 
Another initiative is to create a pipeline across the border, 
as reported in ref A.  While positive, these initiatives may 
not be sufficient to meet peak volumes such as the current 
level of truck traffic. 
 
MFA Asserts SOMO Late Payments a Threat to the System: 
--------------------------------------------- -------- 
 
7. (SBU) Gucuk again raised the problem of delayed payments 
by SOMO to Turkish contractors.  As of July 21, SOMO owed 
Turkish suppliers $572 million, of which more than half were 
in arrears.  Gucuk said the GOT is concerned that the 
recurring problem of SOMO paying late posed a constant threat 
to the supply chain.  The suppliers, many of them small 
companies, could not continue to do business without 
receiving more timely payments.  Gucuk said that it would be 
bad for Iraq if the suppliers stop shipping or seize 
shipments to settle arrears.  According to Gucuk, the small 
suppliers do not feel they have the bargaining power 
individually to convince SOMO to pay more quickly, so they 
are pressing the GOT to try to work out a more comprehensive 
solution.  Gucuk said the MFA is working through its 
Ambassador in Baghdad to request SOMO send some of its 
officials to Turkey to discuss the issue.  He said the 
Turkish side would prefer a system using letters of credit, 
or some way of putting the payment system on a sustainable 
basis.  Comment: Though the suppliers continue to ship, the 
fact that larger private companies have exited this business 
and the single largest supplier is state-owned TPIC with $173 
milliion in unpaid bills lends credence to the MFA's 
contention that the current situation may not be sustainable. 
 Even TPIC, which Gucuk has told us in the past is being 
pressured by the GOT to continue shipping, has urged us to 
pass word to SOMO that it cannot continue to pay late.  End 
Comment. 
 
Iraq REO Minimize Considered. 
MCELDOWNEY