AKP-KRG Economic Trade Relations
In 2011 Iraq was the second largest export market for Turkey with 70% of these exports shares going to Iraqi Kurdistan Turkey[1] has a significant investment interests in northern Iraq and a combined investment from other Middle Eastern countries they amount for a high percentage of the total investment in the Kurdish region.[2] The Iraqi Kurdistan and Turkish economic relations are extremely sensitive and have been impacted by the changing political landscape over the years. The KRG was the 6th largest export market for Turkey in 2011 and by 2013 the KRG became the second largest export market of Turkey. Turkish exports to Iraqi Kurdistan include: agriculture, banking and finance, construction, education, electrical power systems, health care, oil/gas extraction and services, telecommunication, transportation, tourism, and the water industry[3]
1990-2008[edit]
The economic relations between Turkey and Iraqi Kurdistan can be traced back to the creation of the Kurdish semi-autonomous state in 1992.[4] During the first gulf war in 1991 Turkey was supportive of US led military campaign against Saddam Hussein. This led to lost of revenues of estimated 35 billions dollars but also to a humanitarian crisis in northern Iraq which forced hundred and thousands of Kurdish refugees to flee into Turkey. Despite their differences, Saddam Hussein provided the much needed stability at its southern border and the Baath party was a mean to curtail the Kurdish aspirations. Turkey had learnt from their first mistake not to politically or militarily destabilize the region, fearing that such developments could lead to sectarian conflicts and uncontrolled fragmentation. Therefore the AKP and the Turkish military was worried about the long-term consequences of an another war in Iraq and specially by the close relationship between the Kurds and the Americans. With the memories from the first gulf war and the consequent chaos and financial losses the Turkish parliament in march 1, 2003, voted against allowing the US troops to use Turkey as a northern front. The invasion of Iraq in 2003 have had enormous consequences not only for the internal politics of Iraq and Turkey but also the trans-national relationships between Iraq and Turkey. Over the years, Iraq has been ravaged by sectarian and ethnic conflicts, northern Iraq is politically unstable with more actors involved in the region, both internal and external actors.[5]
Economic relations between Kurdistan and Turkey further developed after the US led invasion of Iraq in 2003. After sanctions were lifted Kurdistan, as the rest of Iraq, was looking for investors to rebuild the damaged infrastructure. The new investment law adopted in July 2006 incentivized foreign direct investment. The law included a 10 year tax break, full ownership of one’s investment and free or highly subsidized land.[6] These condition have lead to an increase in Turkish investment into Kurdistan. From 2005-2013 Turkey made up 2.64% of all investment into Iraqi Kurdistan, excluding the oil trade.[7] The total amount of active Turkish companies in Iraqi Kurdistan. As seen in Figure 1 the number of Turkish companies in the Kurdish region of Iraq have more than doubled in between 2009-2013. The number of Turkish workers also rose from approximately 25,000 in 2010 to approximately 30,000 in 2012.[8] Furthermore, a joined Swiss and Finish fact finding mission who conducted research in the KRG, in 2011 found that over 75% of consumer goods have been imported from Turkey.[9]
2008-2012[edit]
The relations between AKP and KRG increased from 2008 and onward. Prior this a normalization between Turks and Kurds was challenged by the military and the nationalists. The positive contributions are due to increased financial relations between AKP and Turkey and it reached to a degree where Iraq became Turkey's top three trading partners, where 70% of Turkey's exports shares going to Iraqi Kurdistan. The relations reached to a level where high levels of representatives of AKP and KRG meet each other for the first time.
But the financial relations was not on equal basis because the KRGs dependence on Turkey was more vital due to strained relations with the Bagdad government[10]
Turkey provided several beneficial aspects:
- Outlet for the oil to the international market
- Imports technology and services
- Interaction with western investors based in Istanbul (source needed)
KRG provided:
- Low-cost supplier of energy
Political balance against militant Kurdish groups, like PKK[11]
2012-2014[edit]
Erdogan announces that there had been meetings held with the jailed leader of Kurdistan Workers' Party, Abdullah Öcalan, in effort to achieve a peace settlement with the group that Turkey have had war with for more than three decades, now know as the Kurdish–Turkish peace process, also known as Solution process. The meetings resulted in a ceasefire declaration by the PKK and also withdrawal of the PKK troops from Turkey to their bases in Qandil Mountains, northern Iraq. The increased relations was also reflected by multi billion dollars energy deals between AKP and KRG. They agreed to build new pipelines from the oil fields in Iraqi Kurdistan to Turkey without the approval of Iraqi government. AKP provided KRG with access to the European market by bypassing the Iraqi Kirkuk–Ceyhan Oil Pipeline. AKP and the KRG have both expressed their views in favor of strengthened economic relations and this could not be more highlighted than during first meeting between Tayyip Recip Erdogan (AKP) and Masoud Barzani (KDP) in which Erdogan presented Barzani as the leader of Kurdistan. By mentioning Kurdistan and raising the Kurdish flag next to the Iraqi and Turkish ones is seen as a significant break from traditional Turkish policy towards the Kurds.
2014-2016[edit]
With the rise of Islamic State of Iraq and the Levant there has been frequently sabotages to the oilfields and the pipelines. In 2014 the attacks brought the exports from 550,000 barrels/day to a complete halt.[12] As the Bagdad control of the northern provinces fell due to the sectarian wars with ISIS the KRG stepped up and took over the oil fields around Kirkuk and integrated it to the KRG´s oil production system independently from Baghdad. The Kurdish oil was exported to international markets through Turkeys Kirkuk-Ceyhan pipeline. Turkey played a vital part of the KRG´s economy specially since Iraq under Maliki cut Kurdish regions share of the national budget (17 percent) as a counter measure for Kurdish export of the oil. This put KRG in unconditional dependency on Ankara and AKP, “For the KRG, to maintain a revenue stream independent of Baghdad's chokehold is an existential-level question.”, Masoud Barzani.[13] Iran and Iraq was not an alternative due to sensitive geopolitical considerations.[14]
2016-2017[edit]
In 2016 the Kurdish Regional Ministry of Trade and Industry reported a 20% increase in trade with Turkey, compared to the first six months. This rise in trade can be explained by the need for reconstruction after the fall of ISIS in 2016-2017.[15]
2017-2018[edit]
On September 25, 2017 an independence referendum was conducted in the KRG provinces with the aim of take a step closer to an independent Kurdistan, this was conducted despite objections from all neighboring countries. Prior the referendum Ankara had sent delegation to Erbil in an effort to persuade Masoud Barzani not to go ahead with the referendum. Erdogan expressed his concern over a Kurdish referendum."The game played in Northern Syria was aimed at completely isolating Turkey from the Middle East” Erdogan, 30 September 2017. The end result was a major setback not only for the KRG but also to AKP. The decision to go ahead with the referendum shifted the political balance in the region dramatically. Not only did the referendum deteriorate the relationship between Erbil and Ankara but it also drove Iran, Turkey and Iraq closer to each other, despite their political and ideological disagreements. Prior the referendum the trade between KRG and Turkey reached a top 5B USD in the first 6 months of 2017 and it was projected to increase to 10B USD by the end of 2017. After the referendum in September 2017 Turkey supported the central Iraqi government to take over strategic points controlled by the KRG, such as the Ibrahim Khalil border crossing. On October 16th Turkey closed its airspace to all flight from and to the KRG. International flights in Sulaimaniyah International Airportwere also halted due to Iraq, Iran blocking their air space. Erdogan further threatened “the moment we close the valve, it is over, all their income goes out of the window.”. In oktober 2017 the Iraqi central government in Baghdad ordered its military to retake parts of northern Iraq, gained by the Kurds during the war against ISIS. The strategically and oil rich Kirkuk were taken back by the Iraqi government in Battle of Kirkuk (2017). Also the Iraqi Council of Ministers has taken measures to reduce the KRG’s financial power, a draft budget in 2018, which saw the cut of overall revenue shares from 17 percent to 12.6 percent, was approved. The Turkish exports to Iraq fell dramatically during 2018 (-13.5 percent).
2018[edit]
As of 2018 the relations between KRG and its neighbors are still strained but under the leadership of Nechirvan Barzani, Prime Minister of KRG and President of KDP, the relations has improved despite ongoing sanctions on KRG. Baghdad has yet to raise the sanctions, open the airports in KRG and agree on the KRG share of the national budget.
Figure 1: Turkish Companies Operating in Iraq Including the KRG[16]
| YEAR | Number of companies |
|---|---|
| 2009 | 485 |
| 2010 | 730 |
| 2012 | 1023 |
| 2013 | 1500 |
References[edit]
- ↑ Massimo, Morellic; Pischedda, Costantino. "The Turkey-KRG Energy Partnership: Assessing Its Implications". Middle East Policy Council. XXI (1). Retrieved 20 May 2018.
- ↑ Unegbu, Angus; Okanlawon, Augstine (1 Feb 2015). "Direct Foreign Investment in Kurdistan Region of Middle-East: Non-Oil Sector Analysis". Cornwell University Library. Retrieved 20 May 2018.
- ↑ Cagaptay, Soner; Fidan, Christina; Sacikara, Ege (16 Mar 2015). "Turkey and the KRG: An Undeclared Economic Commonwealth". The Washington Instituite. Retrieved 20 May 2018.
- ↑ Charountaki, Marianna. "Turkish Foreign Policy and the Kurdistan Regional Government". Perceptions. XVII (4): 185–208. Retrieved 20 May 2018.
- ↑ Taspinar, Omer (7 Oct 2008). "Turkey's Middle East Policies: Between Neo-Ottomanism and Kemalism". Carnegie-Endowment for International Peace.
|access-date=requires|url=(help) - ↑ Amirehsani, Kevin. "Interview, part I of II: Kurdistan presents investment opportunity". Global Risk Insight - Know your world. Retrieved 20 May 2018.
- ↑ Unegbu, Angus; Okanlawon, Augstine (1 Feb 2015). "Direct Foreign Investment in Kurdistan Region of Middle-East: Non-Oil Sector Analysis". Cornwell University Library. Retrieved 20 May 2018.
- ↑ Fidan, Christina Bach (7 Mar 2016). "Turkish Business in the Kurdistan Region of Iraq". Turkish Policy Quaterly. Retrieved 20 May 2018.
- ↑ "Report on Joint Finnish-Swiss Fact-Finding Mission to Amman and the Kurdish Regional Governmen". Refworld. Swizerland: State Secretariat for Migration (SEM). Retrieved 20 May 2018.
- ↑ "Turkey". OEC. Retrieved 20 May 2018.
- ↑ Taspinar, Ömer; Gönül, Tol (22 Jan 2014). "Turkey and the Kurds: From Predicament to Opportunity" (PDF). US-Europe Analysis (54). Retrieved 20 May 2018.
- ↑ Zhdannikov, Dimitry (17 Nov 2017). "Exclusive: How Kurdistan bypassed Baghdad and sold oil on global markets". Reuters. Retrieved 20 May 2018.
- ↑ al-Nidawi, Omar (1 Dec 2017). "How ISIL changed the oil map of Iraq". Aljazeera. Retrieved 20 May 2018.
- ↑ Taspinar, Ömer; Gönül, Tol (22 Jan 2014). "Turkey and the Kurds: From Predicament to Opportunity" (PDF). US-Europe Analysis (54). Retrieved 20 May 2018.
- ↑ "Trade between Kurdistan and Turkey increases". Rudaw. 27 Aug 2017. Retrieved 20 May 2018.
- ↑ Mulhem, Suliman (15 Feb 2018). "Baghdad Yet To Lift Sanctions on Iraqi Kurdistan or Provide 2018 Budget". Foreign Policy Journal. Retrieved 20 May 2018.
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