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 neighbouring country.
Turkish businessmen with big investments in Iraq felt encouraged when the new Iraqi Prime Minister Adil Abdul 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 east and southeast 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,” Abdulkadir Kulahcioglu, head of the Federation of Food and Drink Industry Association of Turkey, told TRT World.
“It means an estimated one billion 600,000 dollars 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, told TRT World.
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 Daesh threat,” he says. Iraq officially declared victory against Daesh 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 told TRT World 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.”