Helping to lead the way in a number of burgeoning Iraqi industries, Turkish firms from the energy extraction, commerce and construction sectors are investing and expanding in Iraq. And though recent events have put a bit of strain on the relationship, Turkey remains the country’s largest trading partner, as demonstrated by Turkish exports nearly tripling since 2007.
Indeed, in an April 2012 report published by the US government’s Special Inspector General for Iraqi Reconstruction (SIGIR), Turkey came in fifth in a ranking of the geographic origins of foreign commercial activity in Iraq in 2011.
According to SIGIR (based on information provided to it by the Dunia Frontier Consultants), Turkish commercial activity in Iraq amounted to some $3.7bn in 2011, comprising 6.6% of total foreign commercial activity, putting it just behind the Netherlands ($3.8bn), the UK ($4.1bn), the US ($6.9bn) and South Korea ($12bn).
Turkish-Iraqi trade volumes have been showing steady increases as well. According to Zafer Çağlayan, the minister of economy, prior to the US-led invasion of Iraq in 2003, the Turkish-Iraqi trade relationship amounted to about $940m. By 2011 that figure had increased to some $11bn.
Çağlayan highlighted a number of Turkish industries active in Iraq, particularly those in energy and construction. Türkiye Petrolleri Anonim Ortaklığı (TPAO), the national oil and gas company, was selected in 2010 as one of three firms, alongside the Korean Gas Corporation and Kuwait Energy, to help develop the Mansuriyah field in the central Iraqi province of Diyali, as well as the Siba field near Basra.
More recently, Genel Energy announced it would acquire an additional 26% interest in northern Iraq’s Miran exploration block from a regional subsidiary of London-based Heritage Energy for $156m.
Meanwhile, some $12.7bn of construction projects have been completed in Iraq by Turkish firms since 1975, with $11.3bn of that, or almost 89%, coming after the 2003 invasion.
Basra itself has also seen a number of investments undertaken by Turkish investors, ranging from electricity – around 400 MW of the 600 MW produced in Basra comes from Turkish investment – to furniture showrooms.
“Today, Turkish television shows fill Iraqi airways,” Bill Spindle wrote in an article for the Wall Street Journal in August. “Baghdad’s biggest shopping mall is owned and operated by Turks. In Basra … the Turkish consulate is so eager to boost trade, it has been known to issue visas even in the middle of the night to help local businesspeople travelling to Turkey on short notice.”
Transport is a point of interest as well. According to Talib Nejim Al Maamouri, the head of the engineering department at Amanat Baghdad, the public works department in the capital, Turkish firms are joining companies based in Italy and Iraq to build $300m worth of bridges in the city. This comes as part of an overall Iraqi government effort to spend $9.8bn on roads, bridges and housing through 2016, including a highway, which will link Baghdad with Turkey’s highway system.
However, recent events have shown that Turkey’s trade relationship with Iraq may have its own set of challenges as well. Turkish authorities recently negotiated an oil and gas trade deal with the Kurdistan Regional Government (KRG), which governs Iraq’s autonomous northern region.
Oil exports to Turkey began in July, which has angered the Iraqi national government in Baghdad. The Iraqi government view the exports as illegal, since it denies that KRG has the authority to negotiate international trade deals without Baghdad’s approval. A deal to solve the conflict was scrapped in April after the KRG claimed the central government was withholding revenue meant for the autonomous region.
“Exporting oil from the Kurdistan region to Turkey is illegal and illegitimate,” said Ali Al Dabbagh, a representative of the Iraqi national government. “The oil and gas are the property of all Iraqis and those exports and revenues must be managed by the federal government, which represents all Iraqis… This issue will affect the relations between the two countries, particularly the economic ones.”
The Iraqi government has continued to raise warning signs. In August, Ahmet Davutoğlu, Turkey’s foreign minister, visited Kirkuk, which falls under KRG control. Davutoğlu did not ask permission from the central government before making the trip, which Baghdad officials claim amounted to a violation of the national constitution, international law and diplomatic protocol.
“It is a blatant interference in internal Iraqi affairs, and Turkey bears responsibility for this act before the Iraqi people,” Iraq's foreign ministry said in a statement. “It is not in the interest of Turkey or any other side to underestimate national sovereignty and to violate the rules of international relations.”
However, it appears that both Iraq and Turkey have little to gain and much to lose by allowing any such dispute to escalate. Therefore, while the war of words may continue, economic principles seem to indicate that the Turkish trade and investment relationship with Iraq will continue in earnest.