Turkey Pulse

Turkey assesses losses from Iraqi market

Article Summary
Turkish officials, politicians and traders are trying to calculate Turkey's losses in the Iraqi market after the ISIS takeover of Mosul and other Iraqi cities.

Official and non-official bodies involved with foreign trade are trying to calculate the losses sustained by the Turkish economy following the operations by the Islamic State of Iraq and al-Sham (ISIS, now also known as the Islamic State) in Iraq and predict what is to come. In addition to the government, the main opposition party the Republican People's Party (CHP), Union of Chambers and Stock Markets of Turkey (TOBB) and Exporters Assembly of Turkey (TIM) have set up working groups to study the matter.

The Ministry of Economy is in direct contact with private firms to learn their losses in the Iraqi market and devise ways to overcome the blockage on exports to the south of Iraq.

The ministry asked companies to "urgently report their problems in logistics, transport and collection of payments and whether any of their orders have been canceled.” The ministry also wants to know whether companies can fulfill their obligations and which items' orders have been most often canceled. The information gathered is to be shared with an Iraqi crisis desk at the Foreign Ministry.

Iraq sets back increase in national exports

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In 2013, Iraq was the second-largest export market for Turkey at $11.9 billion. Its proximity to Turkey, its large area and population and high potential for growth have made Iraq an attractive market, but one that is now threatened by ISIS terror. The potential for further losses also poses risks to Turkey’s overall exports target of $166 billion. Such a setback could adversely affect Turkey’s current deficit and many other economic calculations.

For example, in June, Turkey’s monthly exports went up by 6.6% to $12.5 billion, but could have risen another 2.5 points if not for the losses in the Iraqi market. In other words, if there had been no Iraqi crisis, Turkey’s exports in June would have climbed by 9.1%.

Exports to Iraq down 21%

According to latest information provided by TIM on July 2, Iraq has lost it second-place standing in Turkey’s export markets and is now in third after Britain. In June, while exports to Germany increased 10% and to Britain 22%, exports to Iraq were down 21%.

All was well through much of May. In the first five months of the year, exports to Iraq went up by 11% to $5.4 billion. The decline started with the ISIS operations. Mehmet Buyukeksi, the chairman of TIM, said, "After the capture of Mosul by ISIS, our exports started to suffer. At the moment, only limited trade is possible, using the only alternative to the Kirkuk route.”

TOBB sets up working group

The Union of Chambers and Stock Markets of Turkey, in coordination with the crisis desk at the Foreign Ministry, is working on a "crisis exit plan." The working group of the union is in contact with companies that have trade and investment links with Iraq. The emphasis is said to be on questions of logistics and transportation.

CHP calculates the bill to be $8.5 billion

The CHP has calculated that with increasing oil prices, a decline in exports and a slowdown in the regional economy, Turkey will sustain a loss of $8.5 billion. According to the CHP report, Turkey’s energy bill will climb $4.5 billion, the loss in exports will be $2.5 billion and losses from transportation and contractual services will reach about $1.5 billion. The report also predicted a 1% increase in the inflation rate because of the crisis, noting that a 10% loss in the Iraqi market will add $1.4 billion to the current deficit and that the transport sector will suffer substantially. Instead of the 2,000 trucks entering and leaving Iraq before the Mosul crisis, now about half that number make the same trip.

Poultry producers in trouble

Turkish exporters cannot reach southern Iraq now that Mosul has fallen. There has been a massive decrease in sales of chicken meat and eggs. Instead of the usual 10 truckloads of 360,000 eggs a week sent to Iraq, now it is only five.

When the demand for eggs plummeted, producers began to slaughter their chickens. But because the export route is blocked, chicken meat sales also diminished. A nosedive in sales is now reported in a wide spectrum of products from shoes to construction supplies. It will only get worse if the situation doesn’t improve.

Opportunities beckon

The effects of the civil war in Iraq on Turkey are not limited to losses in revenue, but also include new sources of revenue. The increasing control of the Kurdistan Regional Government (KRG) over its oil and finding buyers via Turkey, the increase in oil shipped to Turkey and the KRG’s increase purchases of Turkish gasoline from 9,000 tons to 13,000 tons daily are all positives.

Because of a gasoline shortage in central Iraq, Turkey is now sending 160 additional trucks with 4,000 tons of gasoline daily. Because of the shortage in northern Iraq that led to long lines at gas stations, daily purchases were limited to 30 liters (8 US gallons) per customer. KRG Prime Minister Nechirvan Barzani personally came to Turkey to ask for more.

Turkey’s biggest gain in the coming period will come when it starts buying northern Iraqi oil. As this oil fetches prices lower than the market value, it could have a positive effect on Turkey’s energy bill.

Energy Minister Taner Yildiz signaled June 19 that Turkey may start buying northern Iraqi oil. “At the moment, we don’t feel the need to consume the oil shipped to Turkey from northern Iraq. Consumption of this oil domestically may be discussed later on."

The crisis in Iraq is also making regional alliances more apparent. While an overt sectarian-based cooperation between Iran, Syria and the Iraqi government is perceptible, it is also clear that KRG President Massoud Barzani is boosting economic integration with Turkey for many reasons. While there are problems with Turkey’s exports to the south of Iraq, there is no such problem with the exports to its north.

Barzani, of course, has also political reasons for closer ties with a democratic and secular Turkey, given the prevalence of totalitarian regimes in the neighborhood.

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Found in: turkish exports to mena, turkey-iraq trade, turkey, kurdistan regional government, islamic state of iraq and al-sham, islamic state, iraq, economy

Mehmet Cetingulec is a Turkish journalist with 34 years professional experience, including 23 years with the Sabah media group during which he held posts as a correspondent covering the prime minister’s and presidential offices, economy news chief and parliamentary bureau chief. For nine years, he headed the Ankara bureau of the daily Takvim, where he also wrote a regular column. He has published two books.

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