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Deployment of Turkish troops in Iraq threatens economic ties. by Madeleine Moreau ,

The deployment of Turkish troops to northern Iraq has sparked strong criticism from Baghdad, threatening political and economic ties between the two countries.
The decision by Turkey to send additional troops to northern Iraq to train Kurdish and Sunni militia fighters against the Islamic State drew intense criticism from Iraq and international powers this month.
Though Turkey claims the deployment of troops at the Bashiqa camp, northeast of Mosul is for training purposes only, Iraqis see the move as a violation of national sovereignty.
In an effort to place increasing pressure on Turkey, Iraqi lawmakers moved quickly to place an embargo on Turkish imports and close commercial offices in Istanbul.
The move is likely to place further stress on Turkey’s economy in the short-term, as it is already suffering from Russian sanctions after Turkey downed a Russian jet last month on the Syria-Turkey border.
More importantly, Iraq’s economic pressure on Turkey reveals the underlying political tensions and conflicting priorities between the two nations as it relates to Kurdish support and fighting ISIS militants.
Turkey-Iraq economic ties
Historically, Turkey and Iraq have had strong economic ties as both share a natural long border with each other. Iraq is Ankara’s second largest export market and Turkey is Iraq’s second largest supplier of imports. Bilateral trade between the two nations is estimated at $11 billion per year.
Iraqi crude is the biggest foreign oil source for Turkey, comprising 32% of its imports in 2013. Likewise, refined petroleum makes up the largest share of Iraqi exports to Turkey at 36% in 2013. The majority of oil exported from Iraq to Turkey is pumped through the Kirkuk–Ceyhan pipeline in the north.
Though oil is Iraq’s largest export to Turkey, it also relies heavily on Turkish metals and food imports. Foodstuff imports from Turkey are estimated to be worth $1.1 billion in 2013.
Additionally, Turkey is one of Iraq’s largest investors in non-energy projects. According to Foreign Economic Relations Board (DEİK) figures, nearly 1,800 Turkish firms have investments in Iraq, totaling $720 million.
In a sign of further economic cooperation, the Turkey-Iraq Business Council established in 2001 and the Turkey-Iraq Industrialists and Businessmen’s Association were created to promote economic ties between the two nations with offices open in both Istanbul and Baghdad.
At the same time however, these figures are misleading.The majority of Turkish exports primarily goes to Iraqi Kurdistan, as Ankara and Erbil share closer political ties than it does with Baghdad. In fact, of the $12 billion in Turkish exports in 2013, more than $8 billion went to Iraqi Kurdistan. Over 80% of goods sold in KRG territories are also of Turkish origin.
The bifurcation of Turkish goods to the KRG over Baghdad has stoked the flames of political tensions over the last several years. Turkey’s decision to deploy troops to northern Iraq to help train Kurdish fighters without notifying Baghdad further demonstrates strained political ties between the two governments.
Security and political challenges
The rise of the Islamic State in Iraq has had a profoundly negative effect on Iraq’s national economy, especially investment and oil production despite high levels of recent output.
Because of these these security and political challenges, Turkish net exports to Iraq dropped from $111.04 million in December 2014 to $836.57 in January 2015.
Turkish businessmen and contractors have also complained of not receiving wages in Baghdad, as the government is strapped for cash funding security operations to fight against the Islamic State. The low price of oil has also negatively impacted Iraq’s budget revenue, even as its rate of oil output increased over the last five years.
Security woes and conflicting priorities have also threatened political relations between Baghdad and Ankara. Conservative lawmakers in Iraq see Turkey’s recent move to train Kurdish Peshmerga fighters in the north as a clear violation of the country’s national sovereignty and an attempt to undermine Iraqi efforts.
The deployment of Turkish troops also sparked strong public reaction. Over 3,000 people gathered for mass demonstrations at Tahrir square in central Baghdad on December 12th. Protesters burned Turkish flags while changing: “No to occupation, no to Turkey.”
Increased anti-Turkish sentiment may, over time, affect the security of Turkish works and businesses currently working Baghdad.
How long will the embargo last?
Overall, Iraq’s decision to embargo Turkish goods and close commercial offices in Istanbul can be seen as more of a political move to show Turkey that deploying troops to Iraq is a violation of its sovereignty. Though, lawmakers threaten to cut off official trade links if Turkey does not remove its troops from the disputed base.
The embargo will most likely hurt Turkey’s economy in the short-term, as long as it continues to suffer from Russian sanctions. It will also likely hurt Iraq, especially food imports, as Iraq relies heavily on foodstuffs from Turkey.
More importantly, the current dispute demonstrates how relations are slowly souring between Baghdad, Ankara and Erbil as all three work to combat the rise of ISIS.
If Iraq’s central government wishes to reap greater benefit from Turkish imports and cooperate with Turkey on security issues, it must make better amends with the KRG. Stronger ties between the government and Erbil will be key in making sure Iraq does not crumble along deep sectarian divides as ISIS continues to hold its grip.
Source: Global Risks Insights, December 27, 2015

Deployment of Turkish troops in Iraq threatens economic ties

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