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Cablegate: Southern Turkish Businesses Working in Iraq Suffering

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

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.

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