Outgoing Abadi signs blow to Turkish exports

Turkey sees trouble in the new internal customs checkpoints the federal government has established in northern Iraq.

al-monitor Turkish President Recep Tayyip Erdogan (R) and Iraqi Prime Minister Haider al-Abadi attend a news conference in Ankara, Turkey, Aug. 14, 2018.  Photo by REUTERS/Umit Bektas.
Fehim Tastekin

Fehim Tastekin


Topics covered

turkish-iraqi trade relations, turkish exports, haider al-abadi, taxes, krg, iraqi kurdistan

Oct 10, 2018

While Turkey was eagerly anticipating a new government in Baghdad to sort out many problems with Iraq, a last minute decision by the outgoing prime minister has added a fresh item to the list of ongoing disagreements between the two countries.

Haider al-Abadi unexpectedly signed a decree to set up three new checkpoints in government-controlled areas in northern Iraq that will effectively slash Turkey’s trade with it. The trucks that enter the country normally pass through the sole border crossing that is controlled by the Kurdistan Regional Government (KRG) and will now also have to pass at least one of these additional checkpoints.

The three checkpoints will be located in Altun Kupri between Erbil-Kirkuk road, in Qara Anjir on Sulaimaniyah-Baghdad highway and in Fayda between Dohuk-Mosul road. The internal federal customs points will supervise collection of the federal government’s share of fees that the KRG imposes on imports from Turkey.

According to the Iraqi authorities, the checkpoints are not going to collect additional fees but will ensure that the applicable taxes are paid. However, considering the loose rule of law and widespread corruption in Iraq, the checkpoints are likely to lead to double taxation. Naturally, Turkey sees the decision as a move to diminish Turkish exports, and Turkey’s embassy in Baghdad has been warning companies and drivers about the practice.

According to the information Al-Monitor obtained from official Turkish sources, although the central government's tax rates vary by commodity, the federal government's checkpoint at Safra between Kirkuk and Baghdad road simply taxes 15% without checking the cargo.

The situation seems haphazard. “They say the tax rate at Habur crossing is 5%, but Kurds sometimes impose 30%. Further inland there is another 15-20% tax. We unload our cargo at Kirkuk. We cannot go back and collect them. So we pay up. This increases the costs and time spent," a customs official who did not want to be identified told Al-Monitor.

The official stressed that trucks also face bribes at every checkpoint. “Our problems on the roads are numerous," he added. "We don’t think the taxes imposed on the Turkish trucks even reach the federal government. The Iraqi government boasted in 2017 it collected $1 billion in customs fees, but Turkish traders alone paid more than $1.8 billion. This is just Turkish traders — I am not including the Iranians.”

According to the official Turkish sources, the Iraqi authorities didn’t accept Turkey’s demands to abolish the Safra checkpoint, citing KRG's refusal to pay Baghdad's share from tax revenues. Turkish officials added that the Iraqi part had also promised to abolish customs checks at Safra when Habur crossing falls under the federal government’s control. However, Ankara was shocked when three more checkpoints were set up instead. The federal government is deploying tax collectors on all routes it controls to collect taxes before they reach Kirkuk.

In 2017, the KRG and the federal government discussed joint control of the Habur crossing and an military team came to the border to evaluate the possibility. Turkish newspapers interpreted the visit as a takeover by the Iraqi government, but the reports proved to be wrong.

The three new checkpoints cast shadows on Ankara’s plans to open a second crossing on the border at Ovakoy. Abadi had reportedly agreed with Ankara’s plans to open the second crossing at Ovakoy close to the junction of Syria, Iraq and Turkey. Noting that there are already six crossings between Iran and Iraq and only one on the Turkish border that is controlled by the Kurds, Ankara recently stepped up its push for the new crossing. Turkey sees the Ovakoy crossing as the only possible way to free itself from dependence on the KRG-controlled Habur crossing and put end to the internal customs mess.

Yet it is still unclear whether Baghdad wants the crossing at Ovakoy, which would form the beginning of a route between Ovakoy to Tel Afar and Mosul under peshmerga control. It is not possible to open a new crossing until the central government imposes its control over the border and along the route. In October 2017, Iraqi government forces easily recaptured Kirkuk but when they turned to Fish Kabur near the Ovakoy location, clashes escalated and both sides sustained casualties with making any progress.

Naturally, the Kurds oppose the Ovakoy crossing plan, which would reduce their revenues. And no one in Baghdad is willing to please Ankara by angering the Kurds.

The new route bears significant importance for Turkey's security and regional policies. Once it is under Turkey’s control, outlawed Kurdish militants won’t be able to freely move between Iraq and Syria. The United States, which uses the same routes for operations in Syria, is also not pleased with the Ovakoy project. Turkey was informed through diplomatic channels that Kurds are strongly against it.

Iran, which has expanded its trade with the southern Iraqi provinces and with Kurdistan, is also trying to find ways to undermine Turkish trade.

It's not clear whether the new Iraqi government will comply with Turkey's demands.

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