Common Ground in Kurdistan

Saturday, September 12, 2009
-->Source ::: FINANCIAL TIMES
By Delphine Strauss


Not many businessmen cite safety as the biggest attraction of investing in Iraq. But for Maaruf Ataoglu, owner of an Istanbul-based restaurant and construction group, Iraqi Kurdistan is a haven.

An ethnic Kurd, Ataoglu first came to the region in 1992, when he was involved in pro-Kurdish politics in Turkey. In 2004, urged by Jalal Talabani, now the Iraqi president, he returned to invest more than $5m and open what was then Suleimaniya’s most sophisticated restaurant. But the connection with Talabani caused him difficulties in Turkey. When rebels from the separatist Kurdistan Workers Party (PKK)mounted a murderous cross-border attack on Turkish soldiers, he faced accusations of channelling funds from Talabani to the militants.

“We faced many problems in Istanbul because of that news. People shot at me, there were many bullets in my car. Because of these problems, we’re in Kurdistan and feel free. It’s dusty and there’s no electricity - but there’s no fear of attacks,” he says with a smile.

While Ataoglu is far from typical, the landlocked Kurdistan region has always looked to Turkey as its main trading partner - even though the PKK’s presence in Iraq’s northern mountains still clouds relations between Ankara and Erbil. In the past, trucks bringing in food and textiles would return with a hidden tank of smuggled “mazout” fuel.

Now, Turkey’s Genel Enerji has begun pumping oil out of the region in partnership with London-listed Heritage Oil - and the trucks queuing at the Habur border are loaded not just with food, but with Beko-branded fridges and nearly new white jeeps. Turkish ministers, lobbying for big businesses as they pursue closer relations with the federal government, say the volume of cross-border trade with Iraq could pass $10bn this year.

But Safeen Dizayee, spokesman for the Kurdish Democratic party, points out that economic integration “does not mean flooding our markets with Turkish goods - we want to export something too. We want to rebuild infrastructure, but we also want investment.”

Thanks to Kurdistan’s relative security, growing numbers of businessmen are now willing to stay and invest. On one Erbil street, a Turkish-run furniture store adjoins a Turkish clinic and a string of kebab restaurants.

But the real money is in construction, where Turkish groups’ engineering expertise - and familiarity with difficult environments - is standing them in good stead. Many Turkish engineers working on projects have come from tougher posts in Kabul. Site managers say Turkish labourers, often ethnic Kurds, do not demand higher wages to work in conditions comparable to home - and freely admit they can undercut US companies that have more elaborate safety standards.

They are also phlegmatic about corruption and price fixing that drive up costs, comparing cement prices of $45 a tonne in Turkey with the $120 charged locally. Some see a presence in the region as a base to expand into the rest of Iraq, should conditions improve.

But Tepe, one of Turkey’s biggest construction groups, which withdrew from the rest of Iraq after some of its workers were killed. It is now building a school in Suleimaniya, Iraqi Kurdistan’s second city, and eyeing lucrative opportunities in thermal and hydropower. It is also building a school modelled on Ankara’s exclusive Bilkent university on the outskirts of Erbil - a $45m act of philanthropy by Ihsan Dogramaci, Tepe’s owner.

Dogramaci is a Turkmen born in Erbil when the city was still within the Ottoman vilayet, or province, of Mosul. Such historical links - and continued tensions over the PKK’s presence - mean economic relations between Turkey and Iraqi Kurdistan have always been about more than just profit. But the mutual interest now is strengthened by Turkey’s need for Kurdish oil and gas - while the Kurdish regional government’s disputes with Baghdad, and sense of vulnerability as US troops pull out, makes it more reliant than ever on Turkey as a friendly neighbour and a route for oil and gas exports.

The result has been to transform political ties. Less than two years ago, the Turkish army sent tanks over the border to hunt PKK militants sheltering in the Qandil mountains. Now, officials meet, both sides join with the US in formal co-operation on intelligence, and Turkey’s government is planning to extend rights for its own Kurdish citizens - an initiative that offers the best chance in years of ending PKK violence.

Talabani gave an interview last month calling on the PKK to lay down arms.

Turkey does not recognise the Kurdistan regional government, and on principle directs its diplomacy through Baghdad - but the question now is how its economic ties with the north could alter the delicate balance between the Kurdish and federal authorities.

Joost Hiltermann, deputy programme director at the International Crisis Group, says Turkey’s main concern in Iraq is to hinder Iranian influence - but adds that it is “hedging its bets and playing both Erbil and Baghdad” as a split looms. A recent ICG report, which raised hackles on both sides of the border, suggests Ankara “is encouraging the Kurds to dream that an economic union is in the offing”.