Cablegate: Turkey/Iraq Joint Economic Committee to Meet

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A


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.

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