Turkey, Iran Wreck Own Economy If Closing Down Border with KRG

 

ERBIL — Despite the constant threats Iraq, Iran and Turkey make in response to Kurdistan Region’s independence referendum, the three neighbouring countries have not been successful yet to isolate Erbil. If they ever put their embargoes into action, the outcome will first damage Tehran and Ankara's economy by billions of dollars from trading with Erbil.

Following the independence vote on 25th September, in which the people of Kurdistan Region overwhelmingly voted in favour of statehood, the Iraqi central government and parliament threatened to take serious measures against Erbil, including taking control over the border crossings, airports, suspending foreign currency exchange with Erbil, and halting Kurdistan’s oil exports. However, the only decision they ever succeeded to implement was halting the international flights to Erbil and Sulaymaniyah airports.

The reason behind that is because Kurdistan Region is not an independent country yet, and its airspace, according to international aviation laws, remains under the control of the central government in Baghdad.

Since the day after the referendum, Tehran and Ankara also threaten to impose economic and political sanctions on Kurdistan Region. The National Security Councils of both countries backed Iraq and said they would close down the borders to isolate Kurdistan Region, but none of the decisions were ever put into action.

Turkey said once it would not work with Erbil for the Kurdish oil exports, but rather deals with Baghdad. However, the move was soon nipped in the bud when many states, including Russia, opposed it. President Vladimir Putin said suspending Kurdistan Region’s oil and gas exports is not in the interest of any one.

The Kurdistan Regional Government (KRG) sends its oil on the international market via a pipeline which goes through Turkey to reach Ceyhan port. During a parliamentary session on 30th September, Amanj Rahim, the Secretary for Kurdistan Region’s Council of Ministers, said that according to Erbil-Ankara agreement for oil exports, none of the sides shall allow political situations impact the flow of Kurdistan’s crude to the international markets.

The neighbouring states, especially Iran, had planned to close down the border crossings and halt trades with Kurdistan Region until the customs are handed over to the Iraqi central government. They had also planned to set up Baghdad’s customs offices inside the Iranian territories after Erbil rejected to give up the border crossings. However, none of the threats were enforceable due to the fact that cutting trades lines with Kurdistan Region harms Iran the most.

Finding minimal chance in their plans, Iraq, Turkey, and Iran finally held a trilateral meeting to discuss the situation. Turkey reportedly proposed opening a new border crossing with Iraq so closing the border with Kurdistan Region would not impact its trade with the rest of Iraq. There was, however, no prospect in the proposal since the suggested border is located about 15 kilometres far from Ibrahim Khalil border crossing, and the area is also under the control of the Kurdish Peshmerga forces.

Baghdad later intended to ask Ankara cut off internet services which comes from Turkey to Kurdistan Region. Such a move could significantly impact Erbil, but never succeeded for the fact that the Fiber-Optic internet cables to Iraq cross from Kurdistan Region: cutting Erbil’s internet service would also disconnect Baghdad.

Turkey and Iran had also suggested more financial sanctions by Baghdad against Erbil, including cutting all the funds the Iraqi government sends to Erbil. They were later reminded that Baghdad has actually cut all the budget shares since 2014, but Kurdistan Region is well surviving by selling its oil independently.

According to the information obtained by BasNews, Iraqi Shi’ite leader and Vice President of Iraq, Nouri al-Maliki, is disappointed by the chain of failed attempts. He is reportedly planning to use the Shi’ite militia group of Asaib Ahl al-Haq (a paramilitary branch operating under the command of Hashd al-Shaabi) against the Peshmerga forces in Kirkuk, sending them on oil fields in the northern province to trigger conflicts with the Kurdish forces.

Maliki has also suggested to the Iraqi Prime Minister Haider al-Abadi to cut the medical supplies Baghdad is providing to Erbil. However, the central government is already aware of nearly two million IDPs from the Iraqi provinces currently sheltered in Kurdistan Region, who also need medical supplies.

Khalis Qader, a spokesperson for KRG’s Ministry of Health, explained to BasNews that if the Iraqi government decides to cut the medical supplies — which has already been slashed by almost a half — the IDPs and refugees would face the imminent consequences of a possible shortage. He revealed that the KRG however has managed to tackle the medicine shortage singlehanded after the huge number of Iraqis were displaced into Kurdistan Region, most of whom needed medical attention for being targeted by Islamic State (IS) on their way to escape.

The Iranian government is said to have been strongly encouraging Iraq and Turkey to take immediate action in response to Kurdistan’s independence vote, while it is slightly increasing the rate of its trade with Erbil. Analysts believe that Tehran’s intention is to exploit the situation if favour of replacing Turkey’s withdrawing business firms in Kurdistan Region and boosting its own economic interests.

According to the latest figures, Iran’s trade with Kurdistan Region is over $5 billion a year while Turkish exports to Kurdistan are worth up to $10 billion yearly.

KRG’s Ministry of Trade and Industry has confirmed that nearly 500 Iranian firms are now operating inside Kurdistan Region. For Turkey, the number of factories working in different sectors in Kurdistan is 1,351 while the country has 1,800 other companies operating across the Kurdish region.

Turkey has only one border crossing which connects it to the Kurdistan Region, from where it also exports goods to the Iraqi market. Official figures confirm that nearly 25% of the Turkish exports through Ibrahim Khalil border crossing is for Kurdistan Region, while 75% is targeted at Iraq’s central and southern provinces. Therefore, Ankara’s decision to close down the sole border crossing would leave a greater affect on Iraq not the Kurdistan Region.

Concerning the energy sectors, Erbil and Ankara have a signed contract for oil exports which lasts for 50 years. The sides have already agreed to build a second pipeline for oil transportation. They have also signed a separate agreement for 26 years of cooperation in the sector of natural gas exports. The pipeline is expected to be completed in 2018, after which Erbil would be able to export 10 billion cubic meter of natural gas to Turkey. This amount is expected to grow up to 20 billion cubic meters in 2022.

Iran comes as the third largest exporter of goods to Kurdistan Region. Between the two sides, there are three official border crossings with four unofficial trading corridors. Also, nearly 2 million tourists travel between Kurdistan Region and Iran every year. The number is significantly higher with Turkey.

According to a report by Radio Zamaneh, Tehran’s economic measures against Erbil are now harming its own huge trade with Kurdistan Region due to the fact that over 470 Iranian companies are operating there with almost an equal number of joint-ventured Kurdish-Iranian firms.

Head of the Iran-Iraq Joint Trade Room revealed previously that Iran’s monthly trade with Kurdistan Region is estimated at $600 million. The official said in a conference recently that Tehran should take all the dimensions into consideration before making any decision in reaction to Kurdistan Region’s independence vote.

He urged his country to not act before the Iraqi central government when it comes to the economic ties with Erbil.

Head of Kurdistan Region’s Directorate of Company Registration, Dilzar Ismail, told BasNews that 44% of the registered foreign companies in the region are from Turkey while Iran has occupied 11%. The total number of Turkish and Iranian companies operating now across Kurdistan Region is over 1,500, he said.

The official further explained that Kurdistan Region’s trade has witnessed a significant boost with other countries in the past few years: 37.280% with Turkey, 15.372% with China, 12.503% with Iran and 6.844% with South Korea.

Member of Kurdistan Region’s Association for Trade and Industry, Baqi Mohammed Mahdi, told BasNews that many factories in Turkey and Iran are targeting Kurdistan Region’s market for their exports. He believes that closing down the borders by the neighbouring countries will immediately result in folding hundreds of their own factories which are working rather on a regional scale.