VZCZCXRO6845
RR RUEHAG RUEHAST RUEHBC RUEHDBU RUEHDE RUEHDF RUEHFL RUEHIHL RUEHIK
RUEHKUK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK
RUEHYG
DE RUEHDA #0051/01 0960627
ZNR UUUUU ZZH
R 060627Z APR 07
FM AMCONSUL ADANA
TO RUEHC/SECSTATE WASHDC 4489
INFO RUEHAK/AMEMBASSY ANKARA 1035
RUEHIT/AMCONSUL ISTANBUL 0891
RUEHGB/AMEMBASSY BAGHDAD 0120
RUCNRAQ/IRAQ COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RUEHDA/AMCONSUL ADANA 1092

UNCLAS SECTION 01 OF 03 ADANA 000051 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON TU
SUBJECT: TURKEY-IRAQ TRADE SUFFERING FROM INSTABILITY AND A CONGESTED 
BORDER CROSSING 
 
ADANA 00000051  001.2 OF 003 
 
 
¶1. (SBU) Summary:  Turkey's trade with Iraq has suffered in 
recent months due to increased instability in Iraq, continuing 
problems at Habur Gate and inadequate banking services.  The 
situation at Habur dismays many businessmen since, even though 
the facilities there have been upgraded, it still takes 21 days 
for trucks to cross the border.  While Turkey remains the 
dominant source of foreign trade and investment force in Iraq, 
these trends could mean the post-war growth is leveling off or 
even decreasing for some companies.  This is bad news for the 
economy of SE Turkey which benefited proportionately more than 
the rest of the country.  The Turkish-Iraqi Businessmen 
Association (TIRIAD) has recommended measures to protect and 
expand Turkey's role in the Iraq market, including making Habur 
more efficient, cleaning up and improving the financial 
infrastructure and having the GOT open a consulate in Irbil. 
End summary. 
 
Iraq Turmoil Endangering Turkey-Iraq Business 
--------------------------------------------- ------------- 
 
¶2. (SBU) The deteriorating security situation in Iraq, including 
rumors of a Turkish military incursion into northern Iraq, have 
a significant impact on the ability of Turkish firms to do 
business with Iraq.  This is especially damaging for businesses 
in the economically depressed southeast, where many companies 
are dependent on trade across the Iraq border.  Adana's Chamber 
of Commerce recently announced to the press that turmoil in Iraq 
is seriously endangering the region's exports there.  Adana's 
exports to the Middle East totaled approximately $300 million in 
¶2005.  The General Manager of Adana Cement Industry complained 
that his company's exports to Iraq had decreased by 40 percent 
in 2006.  The General Manager of EMS plastic pipe company told 
the press that his company hadn't exported anything to Iraq over 
the past few months since tensions in northern Iraq had 
increased.  Cukurova Steel Silos Company reported that their 
company rejects 50 percent of projects in Iraq because of the 
lack of stability and the difficulty in guaranteeing payments 
from Iraqi businesses.  Furthermore, transit of fuel products to 
Iraq's SOMO petroleum monopoly is down because of problems with 
contracts, letters of credit, and smuggling investigations. 
Even though this is a special transit arrangement, local 
companies have benefited from some of the contracts. 
 
¶3. (SBU) Since the Iraq war began in 2003 shippers have 
complained about the long delays at Habur Gate, the only border 
crossing between the two countries suitable for cargo. 
Currently, a truck carrying non-perishable goods from Turkey to 
Iraq can expect to wait up to three weeks on the Turkish side of 
the border awaiting customs inspections and other formalities. 
(U.S. military logisticians now factor these delays into their 
plans and, although they pay more for the truckers' time, have 
not experienced any supply disruptions for the past year.)  The 
construction of an expanded, fully computerized gate with 10 
truck lanes on the Turkish side raised hope that Habur would no 
longer be a bottleneck.  But shippers complain that the old 
inefficiencies remain, despite the new infrastructure.  On a 
given day, at most only 5 or 6 truck lanes are open, and Turkish 
customs officials are slow at inspecting and processing the 
trucks, a situation that keeps large numbers of trucks waiting 
on the Turkish side sometimes for as long as a week or more 
before being allowed to proceed across the border. 
 
¶4.  (SBU) In the border town of Cizre, Chamber of Commerce 
President Adnan Elci, who was eagerly touting the benefits of 
the new infrastructure in August, is now disillusioned that the 
GOT has not fully staffed Habur, suggesting that the government 
wants to restrict trade with Northern Iraq.  Elci said that 
Turkey's total exports to Iraq, including petroleum products and 
construction materials, was around $2.75 billion in 2005, 
representing 29 percent of total Turkish exports to the Middle 
East, all being shipped via Habur gate. Elci said there were 
hundreds of transportation companies with the required transport 
licenses; twenty-thousand dump trucks, five-thousand trucks, 
twenty-thousand tanker trucks doing business through Habur 
border gate, but the number of truck shipments via Habur fell 
from 563,000 in 2005, to 251,576 in 2006, representing a 48 
percent decrease.  In meetings with Iraqi businessmen, Elci 
found that Iraqi businesses were in search of alternative supply 
routes, possibly through neighboring countries other than 
Turkey. Elci also noted that the slow-down in trade with Iraq is 
bad for Turkey as a whole, it causes disproportionate suffering 
for local business, which is heavily dependent on the transport 
sector. 
 
TIRIAD Forward Leaning on Turkey-Iraq Business 
 
ADANA 00000051  002.2 OF 003 
 
 
--------------------------------------------- ----------------- 
 
¶5. (SBU)  One organization trying to hold Turkey's foothold in 
the Iraq market is the Turkish-Iraqi Businessmen's Association 
(TIRIAD).  In a recent visit to TIRIAD office in Mersin, former 
Managing Director Ihsan Unat told us that TIRIAD was established 
as a result of discussions among like-minded Turkish and Iraqi 
businessmen who met at the 1st Iraq-Turkey Commercial Fair held 
in Gaziantep last year. While acknowledging the impact that the 
deteriorating security situation had on business between Turkey 
and Iraq, Unat pointed out that a lack of trust resulting from 
the poor business practices of some Turkish companies in Iraq 
since the war have undermined the credibility of Turkish 
businesses among Iraqi customers and partners.  For Unat, this 
lack of trust was primarily responsible for the slow growth of 
commerce between the two countries.  The lack of Turkish banks 
or credit institutions willing to finance business in Iraq is 
another problem impeding commerce between the two countries. 
 
¶6. (SBU) Unat explained that TIRIAD was created to prevent these 
problems from leading to lost opportunities for Turkish 
businesses that are naturally well-positioned to lead in the 
Iraqi market.  Unat further explained that TIRIAD functions as a 
bridge between Turkish companies and Iraqi clients and 
customers. Because of the trust issue, Unat said, TIRIAD is 
selective in accepting new members, and currently has only 35 
members in Mersin, Adana, Gaziantep, Diyarbakir and Istanbul. He 
noted that unlike the Mersin-based Turkish-Arab Businessmen 
Association (TURAB), which aims to promote trade with 29 Arab 
and Turkic countries, TIRIAD focuses its attention on Iraq only. 
 With 67 percent of Iraq's imports passing through Mersin Port 
and Free Zone (based on 2005 data), the city is uniquely 
positioned as a center for commercial exchange between Turkey 
and Iraq. 
 
¶7. (SBU)  Of the 530 foreign companies registered at Irbil 
Chamber of Commerce, 380 were Turkish up until August 2006, 
according to Unat. The figure has dropped to around 270 today. 
Unat regretted that, due to the negative reputation Turkish 
firms had gained, their share in the Iraq market [Note: 
Primarliy in northern Iraq. End note.] had declined from 80-90 
percent down to 30 percent.  Unat told us that the Irbil Chamber 
of Commerce currently has about 30 Turkish companies on a black 
list of companies that are forbidden from contracting business 
relationships with Iraqi companies.  Many Turkish firms have 
been replaced in the market by firms from Germany, Jordan, South 
Korea, and Iran.  Unat explained that TIRIAD aims to turn this 
trend around and raise the number of Turkish firms in Iraq to 
over 500 in 2007, making Turkey the market leader there. 
 
TIRIAD Proposes Solutions 
---------------------------------- 
 
¶8. (SBU) The most promising sectors for Turkish-Iraqi business 
continue to be construction, processed food and agricultural 
products.  TIRIAD hopes to set up a year-round commercial fair 
center in Irbil to promote Turkish companies, and plans to 
organize a summit in Mersin to bring Iraqi and Turkish 
businessmen together. In the more distant future, TIRIAD plans 
to open trade centers in the buffer zone along the Turkey-Iraq 
border, similar to those that Iran has already opened. 
 
¶9. (SBU) Until the GOT's recent establishment of a consulate in 
Mosul, Turkey's only consulate presence in Iraq was in Baghdad. 
While most of the foreign countries doing business in northern 
Iraq have established banks, business offices and consulates in 
Irbil, TIRIAD has proposed to the GOT to also open a 
consular/commercial office in Irbil to assist Turkish businesses 
with passport, visa and commercial documentation; although the 
new Mosul office should help in this regard.  TIRIAD is further 
encouraging Turkish banks to open offices in northern Iraq to 
accommodate Turkish companies' financial transactions; and the 
Association is pushing the GOT to expand construction at Habur 
border gate to increase capacity from its current 2000 vehicles 
per day to 5000 to 6000 vehicles per day. 
 
Comment 
------------ 
 
¶10. (SBU) Despite political friction between the GOT and 
Northern Iraq, strong trade relations have been a stabilizing 
factor in the relationship - and a boon to companies across 
Turkey.  Although the cross-border trade has soared above 
pre-war levels (truck crossings increased seven-fold from 2002 
to 2004), it appears to be leveling off or even decreasing for 
 
ADANA 00000051  003.2 OF 003 
 
 
sectors that are sensitive to the instability within Iraq.  Some 
companies in the southeast are looking for markets in Syria, 
Jordan and Iran as a means to recover from losses experienced 
from the decline in trade across the border with Iraq.  A 
GOT-KRG rapproachment could change the mood, but currently 
Turkish businesses in the southeast are increasingly skittish 
about committing more resources to Iraq. 
GREEN