Many
Turkish businessmen are facing huge losses as their products are systematically
banned in Iraq, while sanctions-hit Iran pursues its own business interests in
the country.
For
the past decade, Turkey’s trade volume in the Iraqi market increased rapidly
with exports ranging from ice cream to pasta from the country's eastern and
southeastern provinces making inroads into the neighboring country.
Turkish
businessmen with big investments in Iraq felt encouraged when Iraqi Prime
Minister Adil Abd al-Mahdi made a landmark visit to Turkey in May and discussed
the possibility of raising bilateral trade from $13 billion to $20 billion. But
instead of seeing a friendly market, the Turkish business community is facing
difficulty in the Iraqi market, as its government has gradually banned Turkish
products, incurring major losses to traders from Turkey's eastern and southeastern
provinces. Both the regions are heavily dependent on an export-orientated
economy.
“In
May, it was eggs, and in June, it was soft drinks and ice-cream, and now, it's
salt, Turkish angel hair pasta, and pasta. As we learned, processed
agricultural products will be also banned gradually,” said Abdulkadir
Kulahcioglu, head of the Federation of Food and Drink Industry Association of
Turkey.
“It
means an estimated $1.06 billion of domestic trade volume. Thousands of cargo
trucks will not be carrying goods anymore. The factories will have to let their
workers go, there will be problems in employment too,” he added.
The
Iraqi government said the ban would only last for one year as it intends to
increase domestic production in Iraq. But Kulahcioglu finds the Iraqi
government’s justification unrealistic, saying Turkey has a 68 percent market
volume only in pasta and even if Iraq started setting up factories for pasta
production, it wouldn't meet the local demand.
To
fill that gap, he said, Iran might intervene and "replace Turkey’s share,
as Iran is a major competitor to Turkey in Iraq's market”.
“Importing
pasta from Iran isn't cheaper than importing from Turkey, so I think it's a
politically-motivated decision. It’s clear that Turkish exporters won’t be able
to find the same trade share again even the bans are lifted after one year,” he
said.
Iran
has traditionally wielded strong influence over Iraq. The Shia power continues
to do so, with Tehran-backed Hashd al Shaabi, also known as PMF, forces having
penetrated into Iraqi politics by aligning with the Dawah Party and other Shia
factions that largely dominate the country's political scene. Iranian products
also dominate Iraq's local markets.
But
as the US sanctions made a comeback in May 2018, Baghdad has once again become
the centre of a tug of war between Iran and the US, which has also maintained
an influence since its invasion of the country in 2003.
Amidst
grueling sanctions, Iran's reliance on Iraqi markets has grown like never
before.
“I
think this is the main reason why the Turkish markets are suffering because
Iran is leveraging the political control over Iraq in order to enhance their
economic power,” Tallha Abdulrazaq, a specialist on Iraq and Iran said.
In
May this year, the US Secretary of State made a surprise visit to Iraq to warn
Baghdad about increasing Iranian activity, pointing at the Iran-backed PMF
militia. In an effort to address American concerns, the new prime minister
announced the PMF’s full integration into the Iraqi army. Even though it meant
abolishing the PMF, experts argued the merger would allow Iran to have a wider
influence over Iraq's security establishment.
In
the same month, the US asked Iraq to stop purchasing energy from Iran, but it
extended a waiver until September 15. Iraq’s energy sector heavily relies on
Iranian imports, especially in the summer months with temperatures soaring up
to 50C. Meanwhile, Iraq has reportedly created a system to bypass the sanctions
and continue its trade with Iran, but this time only with Iraqi dinars.
Abdulrazaq
argues that Iraq’s stance in the stand-off between Washington and Tehran on
trade, the economy and military can’t be characterised as taking Iran’s side.
“Iraq
is Iran's largest trading partner. So they're beholden to Iran in all of these
three different spheres. And they don't really have a choice,” Abdulrazaq
argues.
“The
reason why the US is still providing them waivers is because they feel they
need Iraq in the fight against terrorism, in this case, the ISIS threat,” he
says. Iraq officially declared victory against ISIS in July 2017, after a long
fight with the support of Hashd forces.
A
Turkish exporter with investment in Iraq and other Middle Eastern countries
said that some of his peers think Iraq’s changing markets was a reaction to
Turkey’s hydropower Ilisu dam project on the Tigris river that flows between
southeastern Turkey and Iraq. Turkey last year postponed filling the Ilisu dam
on Iraq’s request due to drought.
Abdulrazaq,
on the other hand, thinks it’s unlikely the Ilisu dam project could be the
reason behind the ban on Turkish products.
“Turkey
has been damming these rivers for many years and as the Iraqi government,
previously said, they're entering negotiations with the Turkish government
about releasing a certain amount of water in order to make sure that the river
is continuing to flow in Iraq,” Abdulrazaq says.
“I
think it's more of a politically motivated decision -- a decision based upon
the Iranian interests.”