Why Iraq matters

The growing tension between Baghdad and Ankara is not good. History shows that political instability and tension are bad for business. This is especially true in our region, where there are no neighboring market economies. In this neighborhood, you need to be on good terms with countries’ capitals in order to access their markets.

In 1991, the first Bush administration cut off Turkish access to Iraqi markets when it launched Operation Desert Storm, which we remember today as the first Gulf War. At that time, Iraq was our second-largest trading partner after Germany, and was seen as a having great potential for growth. It was very much like a natural hinterland or extension of the Turkish market. Turkish construction companies were especially keen on future projects across the border and saw it as a gateway to the Middle East. That potential crashed to zero overnight.

The second American operation with the second Bush administration has changed the status quo. The Iraqi transit route is halfway open. We leave goods at the border city of Zakho to be distributed further. Trade figures have started to increase again. In 2010, Iraq became our fourth-largest export destination. In the first half of 2012, export figures between Iraq and Turkey have increased about 37 percent. There is potential for the figure to go beyond 10 billion dollars, reaching about 10 percent of total Turkish exports. That’s not bad, considering that Turkey’s other major trade bloc – the European Union – is still mired in crisis. Turkish construction companies are also very active in Iraq. Just in 2012, the total value of new construction projects undertaken by Turkish companies in Iraq has reached one billion dollars. It just so happens that all of these 14 projects are in southern Iraq, where the population is mostly Shiite. Business, it seems, is refreshingly sectarian-blind.

With all this in mind, the recent tension with the Iraqi government could not have come at a more inopportune time. With Syria in flames now for a while, Iraq was Turkey’s only gateway to the south. The heated back and forth between Ankara and Baghdad, however, has led to a search for yet another alternative. The route to Aqaba in Jordan, from Mersin through Port Said in Egypt, looks increasingly problematic, with growing radical Islamist terrorist activity in the Sinai. The port of Haifa is automatically becoming a favored route, despite our icy relations with Israel. Somehow, though, when it comes to Israel, it is always business as usual.

Why rattle relations with Iraq now, you may ask? Details are available in a new TEPAV report: It is oil, Kurdish oil. When it comes to Iraq, it is still hard to explain that private companies in Turkey are first and foremost just that, private companies. But it was inevitable that the capitals would get involved, as they usually do in our neighborhood.