Risky Business

Turkey

Economic News

22 Jul 2010
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Even the most enthusiastic of risk-takers wavers at the prospect of doing business in a war zone - and these days, Turkey is feeling this reluctance particularly keenly. Following the kidnapping and murder of several Turkish truck drivers by insurgents in neighbouring Iraq, it came as little surprise when Turkey's transporters' association decided at the beginning of this month to suspend the delivery of goods to US forces stationed there.



Thus, kidnap and murder have proved to be an effective tool of leverage for insurgents in Iraq in recent weeks. The execution on August 3 of Murat Yuce, an employee of private Turkish company Bilintur, was more than a gruesome spectacle. The militants' action spurred the company into complying with their demands to withdraw all staff from the country. Complete disengagement, the company hopes, will lead to the release of yet another employee gone missing. After all, the suspension of cargo activities by Turkey's Kahramanli and Oztur firms precipitated the release of company employees from the grips of their militant captors. Bilintur hopes to be rewarded in a similar manner. The company cannot stomach another execution by the Tawhid and Jihad groups - both of which are believed to be closely linked to al-Qaida.



Critics see the transporters' association's decision to halt the delivery of goods to US forces in Iraq as caving in to the will of terrorists, while others see it as a sensible decision, given the level of turmoil next door. In either case, though it accounts for a mere 5% of all cross-border trade, the association's initiative does highlight growing uncertainty amongst Turkish companies working in Iraq. Officials in Turkey's Sirnak province have claimed that the number of trucks entering Iraq through the Habur border gate decreased from 2000 to 1400 per day following the execution of Murat Yuce.



Security measures to protect the drivers have also been condemned as inadequate. Whilst struggling to watch their own backs, US troops have been unable to provide the necessary number of escorts for logistical services. Partly it is also a question of sheer volume. Turkish trucks make between 200 and 300 trips a day, carrying food, fuel and other supplies specifically for US forces, according to Cahit Soysal, head of the International Transporters' Association.



Safe passage, meanwhile, has only been granted once every five to 10 days. Meanwhile, the prospect of Turkish soldiers escorting drivers into northern Iraq remains an improbability given the explosiveness of the Kurdish issue, let alone the objections from the Iraqi and US authorities. Measures such as scrawling Arabic on Turkish trucks with the words "God is Great" or "Iraqi oil belongs to Iraqis" may have proven to be amongst the more effective precautionary measures against attack. But with such companies as Atahan Lojistik now withdrawing, paintbrushes are clearly no longer felt to be enough.



When Iraqi interim President Ghazi Mish'al Ajil al-Yawar touched down in Ankara on August 16 then, security concerns were high on the agenda. Also on the list of topics for discussion was the continued presence of Turkey's Kurdish separatist PKK in northern Iraq, the status of Kirkuk, Iraq's rebuilding process and the training of Iraq's security forces under the recent NATO initiative.



Yet it was the security of Turks working in Iraq that President Ahmet Necdet Sezer first highlighted when greeting the Iraqi interim president.



"Attacks and abductions aimed at our citizens engaged in transportation to Iraq are further increasing our concerns," Sezer said.



Turkey would naturally like to see cross-border trade increasing, rather than shrinking away. The opening of further border crossings has long been discussed, along with enhancing rail transportation, as trade with Iraq has historically been highly significant for Turkey. Prior to the 1991 Gulf War, Iraq ranked first amongst Turkey's neighbours in trade volume. The UN sanctions that followed that conflict are estimated in Ankara to have cost Turkey between $80bn and $100bn in lost trade. However, Turkey did benefit from the UN oil-for-food programme brought in during 1996, when trade between the two countries sprung up 300% year-on-year. Trade levels therefore promise to rebound to new highs once Iraq achieves a greater degree of domestic stability.



Evidence for this can already be seen. Despite current turmoil, Turkish construction firms pocketed some $39m from projects in the Suleymaniyah region of northern Iraq alone following the US-led invasion, according to a report by the Turkey-Iraq Business Council.



In view of the potential return, it is no coincidence that big Turkish companies such as Akfen, Tepe and Dogus Group have been doing business in Iraq, in spite of security fears.



At the same time, Iraqi trade provides a powerful stimulation for the economy of Turkey's south-east, an otherwise highly depressed area. Some 50,000 Turkish families are dependent on the cross-border trade for their daily bread, according to the RODER group of transportation firms, with almost all of these located in the south-east of the country.



Analysts point out though that according to official figures, exports from Turkey to Iraq represented a mere 1.7% of all Turkish trade in 2003. But, potentially, oil wealth could eventually push Iraq up the ladder of prosperity and conceivably unleash a yet unseen level of consumer demand in the longer term. Yet with pipelines suffering repeated shutdowns due to sabotage, Iraq's potential as an energy supplier remains doubtful in the short to medium term.



Meanwhile, though daredevil businesses may readily venture into unknown territory, the majority will shrink back from investing across the border. As the casualty figures mount, this is unlikely to change in the foreseeable future.

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