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Turkey-Iraqi Kurdistan: Links growing
beyond aid and smuggling
26.11.2009
By Alex Barker
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November 26, 2009
ERBIL-Hewlęr,
Kurdistan region 'Iraq', — Pass a big construction
site in Erbil, Sulaimaniyah or Duhok – the booming
cities of Iraqi Kurdistan – and it is most likely
that the workers will be toiling away for a Turkish
company.
In good times and bad, merchants from Turkey have
beaten a path over the long, mountainous and
disputed border with Iraq, looking to sell their
wares or tap the region’s great and largely
unrealised commercial potential.
From oil to construction, Turkish entrepreneurs have
amassed some of the political clout and business
hardiness necessary to cope with the Kurdish
region’s rocky regulatory terrain – turning them
into valued partners for others.
When European or US companies are contemplating a
move into Iraqi Kurdistan, their first port of call
is often Istanbul. “It is simple logic for everybody
to turn to Turkey for support,” says Ercüment Aksoy,
head of the Turkish-Iraqi business council. “We are
the pioneers.”
It marks the maturing of a cross-border business
relationship that has long survived in spite of
politics, from the oppression of Saddam Hussein to
the peaks of Kurdish separatist violence in Turkey.
For many years, the flow across the border mainly
amounted to food (often aid), Turkish troops, units
of the rebel Kurdish Workers party insurgents and
hidden loads of “mazout” – illegal smuggled fuel.
Now Turkey is preparing to open two more border
gates and a consulate in Erbil – an unthinkable
political step five or 10 years ago. International
oil companies are working in tandem with Turkish
groups to legitimately pump oil across the border.
There is even talk of reviving the great Ottoman
dream of a railway linking Baghdad and Berlin via
Istanbul.
Ahmet Davutoglu sealed this diplomatic progress in
October by making the first ever visit by a Turkish
foreign minister to the Kurdish region, flanked by
dozens of businessmen. Mr Aksoy says the visit was
“important for business”.
“To have a consulate and the presence of the
government will make it easier in all our areas of
work,” he says. “Diplomatically, rather than
standing back to back, we’re now hand in hand. This
is a great opportunity.”
To date construction has been the dominant business
area. Big public infrastructure contracts – from
airports and universities to roads and new housing
developments – have invariably gone to Turkish
groups able to draw on a skilled,www.ekurd.netoften
ethnically Kurdish workforce that are willing to
tolerate a tough and sometimes dangerous working
environment. A further $180m road-building contract
was awarded to Yüksel Insaat last month, a group
with experience in construction projects from Kabul
to Qatar.
But those seeking their fortune in northern Iraq
tend to be firmly focused on the region’s abundance
of oil. Development is still severely hampered by
the lack of export routes, legal uncertainty and
wrangling between Erbil and Baghdad over sharing oil
revenue.
Two Turkish companies – Genel Enerji and Petoil –
were again among the first to attempt to overcome
these obstacles, taking pole positions in key
concessions. Both are also now examples of Turkish
groups acting as a bridgehead for international
investors – a rough model of co-operation that could
apply to many other sectors as the region’s economy
develops.
Genel Enerji, owned by the powerful Cukurova group,
is in partnership with Heritage Oil of the UK and
has plans to merge, should the deal be given a green
light by regulators and the Kurdish authorities.
Meanwhile Petoil, which secured licence agreements
in northern Iraq a few months before the US
invasion, is now working with Prime Natural
Resources of the US and Oil Search of Australia to
develop fields.
Yet the problems faced by these energy groups
underline how difficult and unpredictable business
can be in northern Iraq. Genel in recent months has
been forced to halt production from its Taq Taq
field following a dispute between the Kurds and
Baghdad over payment mechanisms, dealing a serious
blow to its cashflow.
There is evidence of similar problems in areas such
as construction. Ilnur Çevik, a former newspaper
proprietor and businessmen who worked in northern
Iraq, says the risks of working in such a fledgling
economy are often unbearable.
“There was no proper planning, no proper
supervision, everything was arbitrary, and you have
to deal with corruption,” he said. “On paper it
looks very nice. But the reality is sometimes very
different.”
But Joost Hilterman of the International Crisis
Group argues such cases are the expected commercial
casualties of a tricky working environment.
“Business and Turkish investment is booming. There
are of course cases where the relationship has
soured on an individual basis,” he says “The Kurdish
region does not have a banking system or a
regulatory system. Investors are not the majors
[international companies], they are smaller
companies that are the big risk-takers. Considering
that, the situation is not bad at all.”
Meanwhile Kurdish authorities are looking to court
more established companies, meeting with dozens of
big hitters in Turkey’s business community.
Safeen Dizayee, spokesman for the Kurdish Democratic
party, says the relationship must move beyond
“flooding our markets with Turkish goods” and
building infrastructure to more inward investment
and outward exports. “We had lots of cowboys coming
in, not finishing projects, disappearing with
advance payments. Now we’re looking more at serious
companies,” he says.
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