A Newly Assertive Turkey Dominates Trade With Iraq


[image]AFP/Getty Images

Turkey-Iraq ties took a hit this year when Iraqis in Basra, top, protested Turkey's decision to shelter an Iraqi accused of overseeing assassinations.

BASRA, Iraq—The U.S. made its mark on Iraq with a military intervention. Iran has reshaped the country through shared religious beliefs. Now, as American influence wanes here, Turkey, a neighbor to the north, is wielding economic clout to become a major player in Iraq.

Turkey is today the country's biggest trading partner, with exports nearly tripling since 2007. Rising Turkish influence is evident almost everywhere: Private companies are cleaning streets, training doctors, operating the best hotels and providing the bulk of electricity to Basra, one of Iraq's most power-challenged cities. Turkey's commercial offensive is part of the broader assertiveness that is transforming it into a regional power across the Middle East.

In a bid to expand Turkish influence - and counter Iran - companies are building infrastructure and selling products that are winning fans in Iraqi cities like Basra. Video and reporting by WSJ's Sam Dagher and Bill Spindle.

In a sense, Turkey's widening commercial role in Iraq has been late in coming. Turkey opposed the U.S.-led invasion, and then paid the price when the occupation government hamstrung Turkish trade and favored companies from more cooperative allies. Turkey, too, initially recoiled from the new Iraq, anxious about regional instability and a quasi-independent Kurdish region on its border.

One result: Iran, the other big regional power bordering Iraq, dramatically expanded its influence, building on historic ties with Iraq's majority Shia Muslims.


Today, however, Turkish television shows fill Iraqi airwaves. Baghdad's biggest shopping mall is owned and operated by Turks. And here in Basra—which until 2008 was controlled by Iranian-backed militias—the Turkish consulate is so eager to boost trade it has been known to issue visas even in the middle of the night to help local businessmen traveling to Turkey on short notice. The Turkish consul, Faruk Kaymakci, says he has a motto: "European quality at Middle East prices."

Turkish trade with Iraq climbed to $8.3 billion in 2011 from $2.8 billion in 2007, according to Turkish government statistics. Almost 600 Turkish construction companies are working in Iraq, according to the Turkish Foreign Economic Relations Board.

The country's play for influence isn't limited to commerce. Turkey's government, starting with Prime Minister Recep Tayyip Erdogan and his foreign minister, Ahmet Davutoglu, has been an important player shaping Iraq's political landscape. They have sought to bolster representation for a minority Sunni Muslim population that has felt sidelined as parties representing the majority Shiite population have come to dominate after the fall of Saddam Hussein.

But Turkey's rising political clout in Iraq, as well as the rest of the region, is increasingly fanning sectarian divides and contributing to regional skirmishes. Its more assertive regionwide posture, particularly in the high-stakes struggle in Syria, a neighbor of both Iraq and Turkey with a population that resembles Iraq's volatile sectarian mix, makes it a prime target for backlash.

Whereas just a few years ago Turkey was on friendly terms with nearly every country around it—part of a "zero problems with neighbors" policy it carefully tended—the government has now suffered a complete breakdown of relations with Syria. Tensions with Iran, which also borders both Turkey and Iraq, are also rising as Iran has sought to expand its influence in Iraq and clashed with the West over its nuclear program.

Turkey's activity in Iraq began to ramp up in 2008, when the Turkish government began to fully embrace Iraq's Kurdish north by loosening the northern border. A U.S. push that same year began to incorporate restive Sunni-dominated areas into the national political system, which the Turks saw as an important rebalancing of political interests in Iraq.

In response, Turkey helped build a Sunni-dominated political bloc, known as Iraqiya, which became the primary opposition to Prime Minister Nouri al-Maliki and his Shiite-led coalition. Mr. Maliki hasn't forgotten, especially as he has seen Turkey calling for the ouster of President Bashar al Assad next door in Syria.

Bill Spindle/The Wall Street Journal

A Turkish floating power plant generates electricity in Basra.

Relations with Iraq's Shiite-led government were strained in April when Turkey agreed to shelter a prominent Iraqi Sunni leader, and bitter rival of Mr. Maliki, who fled Iraq amid accusations he oversaw secret assassination squads.

The politician, Vice President Tarek al Hashemi, denies the charges, which he says are politically motivated.

Despite efforts to cultivate relations with all of Iraq's mainstream political and sectarian factions, "Turkey increasingly is seen as nurturing the Sunnis," said Sinan Ulgen, a Middle East analyst at the Carnegie Endowment in Brussels.

The spat led to protests, the torching of a few Turkish flags and a flurry of anti-Turkish rhetoric, including a call by Basra's mayor for companies from other countries to step up and compete against Turkish companies. The Iraqi government suddenly passed over Turkish companies for some lucrative contracts, both Iraqi officials and Turkish executives say.

"It's hurt us," said Kahraman Sadikoglu, a 62-year-old shipyard magnate from the port city of Tuzla, Turkey, who has been working in Iraq since even before the U.S. invasion.

But the Turkish juggernaut won't easily be stopped.

When the Iraqis hosted a summit of Arab leaders recently, the regular Iraq hotel staff was cleared out, and the government hired a Turkish hospitality company to ramp up the service standards for summit dignitaries. Special guests of the Iraqi Prime Minister stay in a VIP residence built by a Turkish firm in the fortified Green Zone.

In Maysan province, a Turkish company is building a new hospital, which it will then operate. "Not a week passes without a visit from a Turkish businessman," says Abdul-Hussein Abdul Ridha, chairman of the provincial council in Maysan, whose office is just down the road from the new hospital.

Turkey has even played an expanding role in areas such as Basra, which is as far from the Turkish border as one can get. Turkish Airlines operates more flights from here, almost on a daily basis, than any other airline. Stores selling sleek new Turkish furniture are sprouting up across the city.

"We're helping Iraqis discover the outside world," says Mr. Kaymakci, the Turkish diplomatic consul to Basra. His consulate, which operates 24-7, is one of only three foreign diplomatic outposts in the city itself.

His marching orders from the Turkish foreign ministry when he started his post: "become Basrawi," he says, the term Basra natives use to refer to themselves. Mr. Kaymakci even occasionally plays goalie on the municipality soccer team, a level of public visibility and exposure that is unheard-of among Iraq's security-conscious Western diplomatic corps.

Leading Turkey's advance into Iraq is a cadre of hardy moguls and adventurous entrepreneurs. Mr. Sadikoglu, the shipyard magnate, has been in Iraq ever since the government of Saddam Hussein hired his company to clear dozens of sunken vessels from the waters in and around Umm Qasr Port, Iraq's only water link to the outside world.

Most of the hulks had been there since the Gulf War in 1991 or even the Iran-Iraq war during the 1980s.

After the U.S. invasion, the occupation government and the United Nations invited Mr. Sadikoglu to continue on in 2003.

"There was still a lot of shooting going on in the port," Mr. Sadikoglu recalled. That was just one of many challenges as his company cleared some 34 wrecks from the channels through 2004.

In December of that year, Mr. Sadikoglu, the captain of his salvage ship and a driver were kidnapped by one of the Iraqi criminal gangs that by then had taken over the ports and surrounding areas. He says he paid $500,000 to free himself and the other two men after three months in captivity. The incident was widely reported in the local media at the time.

For the next three years, violent militias and criminal gangs operating in Basra made work in the port impossible. But after a military offensive re-established central-government control in 2008, Prime Minister Maliki personally asked Mr. Sadikoglu to return. Despite family misgivings about his going back to Iraq, he agreed to do so.

On a recent day, Capt. Haki Tugcu stood aboard Mr. Sadikoglu's ship with a colossal crane perched on its deck. His crew, half Turkish, half Iraqi, was pulling a sunken 50-foot tug boat from the muddy channel floor. It is the 71st wreck that Sadikoglu Group has removed from Iraq's critical port waters.

"Turkey and Iraq are neighbors," said Capt. Tugcu, dressed in a T-shirt and sandals to beat the blistering 120-degree midday heat. "We help each other."

Needing to transport hundreds of workers back and forth to Basra, Mr. Sadikoglu lobbied Turkish Airlines to start flights in and out of the city. Acutely aware of the electricity shortages facing southern Iraq, Mr. Sadikoglu even persuaded a fellow Turkish entrepreneur to essentially weld electric power stations on top of the deck of three ships and then float them to southern Iraq. Today they provide 400 megawatts of the 600 megawatts of electricity produced in the city of Basra.

Basra was experiencing an economic boomlet, triggered by the improved security situation and the arrival of dozens of international oil companies angling for a share of the oil revenue slowly starting to emerge from vast crude fields just outside town.

Mr. Sadikoglu, who owns a major hotel in Istanbul, upped his bet in 2010. He agreed with the local government's investment council to spend as much as $18 million to build a 250-room, five-star hotel on land allocated to him by Basra's municipal investment council.

That project has since been derailed by a dispute over property records, which are poor: A local stepped forward to claim that the land belonged to him, not the municipality. But Mr. Sadikoglu vows to return to that project, as well.

Smaller but equally dogged Turkish investors have followed Mr. Sadikoglu.

Cemil Asanbuga, from the Turkish city of Adana, opened Basra's first Turkish-owned furniture store almost nine months ago. He was already operating one in the northern Iraqi city of Dohuk, having run a furniture factory and showroom in Turkey for 20 years. In Basra, he is introducing some Western-style customer services—multiyear warranties, product guarantees, long store hours—to a market still reeling from the warped business climate of the Saddam Hussein era.

Mr. Asanbuga, who is hiring and grooming local workers, says he doesn't expect to get rich quickly. "It's new here. It will take time. But business will eventually be very good," says the 42-year-old owner. He already has a second local showroom in the works.

Still, nothing is simple in this volatile part of the world. When Mr. Erdogan sheltered the political opponent of Mr. Maliki from Iraq's courts, Mr. Maliki lashed out, accusing Turkey of meddling in Iraq's affairs. The Turkish ambassador was called in for a dressing-down. The Iraqi government complained that Turkish consulates such as the one in Basra were overstepping their bounds.

Turkish trade could stall, and perhaps even shrink, due in part to the political friction, says Ercument Aksoy, the chairman of DEIK, the Turkish trade group. Married to an Iraqi and a veteran of business dealings in Iraq, Mr. Aksoy says the slowdown will very likely just be "temporary."

Perhaps, says Maitham al Ahmed, a Basra businessman. But he said the protests—which he helped to organize—were intended as a shot over Turkey's bow, a warning to stay out of Iraqi politics.

"We want the Turks to be here," said Mr. al Ahmed, who operates an independent local newspaper and radio station. "But we're telling them we don't want them to go that way. It would really damage our relations."

—Sam Dagher and Ali A. Nabhan contributed to this article.

Write to Bill Spindle at bill.spindle@wsj.com

A version of this article appeared August 1, 2012, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: A Newly Assertive Turkey Dominates Trade With Iraq.