US embassy cable - 03ANKARA2813

UNCLAS SECTION 01 OF 02 ANKARA 002813 
 
SIPDIS 
 
 
DEPT FOR EUR/SE AND NEA/NGA 
CENTCOM FOR J3, J5 AND POLAD 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ETRD, ETTC, IZ, TU 
SUBJECT:  Turkish Trade with Iraq 
 
Ref:  State 104141 
 
 
1. (U) This cable contains an action request.  See para 
11. 
 
 
2. (SBU) Summary:  Turkish foreign trade officials 
emphasized Turkey's desire to gain a share of the 
commercial opportunities arising from Iraq reconstruction, 
and implied that special consideration should be given to 
Turkish companies.  They raised concerns about 
implementation of UN Oil for Food (OFF) Program contracts 
awarded to Turkish companies.  The Foreign Trade 
Undersecretariat provided limited trade information, but 
no realistic estimates of the extent of smuggling outside 
the OFF.  End Summary. 
 
 
3. (U) Emboffs met with a group of Foreign Trade 
Undersecretariat officials on April 28 to discuss Turkish 
trade relations with Iraq (reftel) and share information 
on Iraq reconstruction.  Serhat Gok, Deputy General 
Director for Exports, chaired the meeting. 
 
 
4. (U) OFF Contracts:  Gok stated that Turkey's prime 
concern now was the fate of the Oil for Food Program (OFF) 
and whether previously approved contracts would go 
forward.  As of the end of Phase 13, Turkey had 182 OFF 
contracts worth USD 350 million, of which 82 (worth USD 
199 million) were approved.  The others were still 
pending.  Econoff responded that OFF had been temporarily 
extended, but that the UN was now giving priority to 
processing and shipping relief items to Iraq under OFF. 
 
 
5. (SBU) Reconstruction:  Gok said that trade with Iraq 
was important for the economy of southeastern Turkey, and 
particularly of Turkey's trucking sector.  He said that 
about 40 percent of Turkey's 25,000 TIR truck fleet was 
currently unemployed and hoped that a revival in trade 
would help put drivers back to work.  Gok told us that 
Turkey hoped to both a prime supplier to U.S. troops and 
to the reconstruction effort (especially export of 
construction services, food, medicines).Hinting at a 
linkage between the U.S. priority treatment of Turkish 
companies under the Boeing offset program, he implied that 
Turkish companies should be given special consideration in 
reconstruction contracts.  Emboffs provided Foreign Trade 
with the Embassy Commercial Service' factsheet on Iraq 
reconstruction, and responded that Turkish companies were 
welcome to compete on an equal basis for those commercial 
opportunities. 
 
 
6. (SBU) Trade Facilitation:  Foreign Trade noted that the 
GOT planned to encourage trade by establishing border 
trade centers in southeastern Turkey, and by opening a 
second border crossing south of Habur.  Gok pointed out 
that the second border crossing would allow Turkish 
truckers to avoid passing through the Kurdistan Democratic 
Party (KDP) territory.  He implied that this was desirable 
not only for political reasons, but also to avoid payment 
of bribes to KDP officials.  A new border crossing would 
also facilitate Turkish trade with Persian Gulf states, 
currently discouraged by high transit fees levied by 
Syria.  Comment:  The entire length of Turkey's border 
with Iraq is currently controlled by the KDP on the Iraqi 
side.  Hopefully it will soon be controlled by an Iraqi 
national border authority.  Driving trade away from an 
area of KDP influence is short-sighted and undesirable, 
and, in the short-term, impossible.  Furthermore, the 
Turkish border extends only 20 kilometers south of the 
current Habur crossing.  Establishing a new crossing in 
the same area would appear to have more political than 
economic justification.  Ultimately,  the new Iraqi 
government would have to agree to this new border 
crossing; this could not be a unilateral GOT decision. 
End comment. 
 
 
7. (SBU) FTA/MOU:  Gok confirmed that the GOT had not 
signed a free trade agreement with the GOI, but 
acknowledged that Turkey and Iraq had a trade MOU.  Gok 
declined to answer Emboffs' questions about the MOU and 
its relationship with OFF, referring us to MFA. 
8. (U) Trade Data:  Gok provided the following statistics 
on Turkish exports to Iraq based on figures released by 
the Turkish exporters unions (year, exports in USD 
millions): 
 
 
1999 - 246 
2000 - 375 
2001 - 706 
2002 - 465 
 
 
Note:  In January, other Foreign Trade sources estimated 
2002 trade at USD 649.7 million, of which about 500 
million was "official" trade.  The corresponding figures 
for 2001 were USD 839.8 and 709.6 million. 
 
 
9. (U) Asked to estimate the scope of illegal trade taking 
place outside OFF, Gok said the so-called suitcase trade 
with all neighboring states to Turkey's south and east 
amounted to between USD 3.3 and 7 million between 1998 and 
2002. 
 
 
Comment and Action Request 
-------------------------- 
 
 
10. (SBU) Foreign Trade's reticence to discuss Turkey's 
MOU and provide realistic estimates of the scope of past 
Iraq trade suggests that the scope of this illegal trade 
was large in relation to Turkey's legal trade with Iraq. 
Embassy is not able to estimate the scope of this 
smuggling, but we will continue to discuss these and other 
issues raised in reftel with other GOT officials and with 
trade associations.  Another meeting on Turkish views on 
Iraq economic links and reconstruction will be reported 
septel. 
 
 
11. (U) Embassy would also appreciate an update on 
Turkey's pending OFF contracts.  Pearson