Feature: Turkey -- the price of alliance

By CHRISTOPHER DELISO, UPI Business Correspondent   |   Oct. 22, 2002 at 11:11 AM
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BAYKAN, Turkey, Oct. 22 (UPI) -- It was a classic get-rich-quick scheme, and it flourished right up until the Gulf War. By jury-rigging a gas tank five times the normal size underneath a small truck, and loading it up with potatoes, clever Kurds from Turkey's southeast accumulated small fortunes from the semi-legal oil trade with Iraq.

One erstwhile entrepreneur from the town of Baykan explained it thus: "The potatoes were just decoys to get past customs -- we always took a loss on them. But the cheap prices at Iraqi gas stations more than made up for it. We could buy gas for 20 cents a liter, and resell it in Turkey for almost five times the price."

After the invasion of Kuwait brought sanctions against Saddam, the industry collapsed. Widespread bankruptcies occurred as the would-be oilmen -- confident of an eternal boom -- found their assets overextended.

The fallout has continued since. The former Baykan baron agrees, pointing out some of the local workers said: "See that man in the tailor shop, or that other one cutting hair? They're probably making around $5 a day now -- before the Gulf War they were making $500 a day."

While admittedly a microcosmic and not completely representative view of the bigger economic picture, this vignette demonstrates why Turkey is wary of another Iraq war.

Unique as a secular Muslim state, Turkey is essential for Washington. Its strategic geography -- bordering Greece, Bulgaria, the Caucasus countries, Iraq, Iran and Syria, and set across the water from Ukraine and Russia -- has made it America's single-most important ally. Turkey receives huge support, especially in the military sector, from the United States. The country also benefits from enormous largesse from the International Monetary Fund. The Turkish view of Kurds as "terrorists" and the denial of a 1915 Armenian "genocide" are supported, the former overtly and the latter tacitly, in Washington.

Yet nothing comes for free. As the United States appears irrevocably headed for war against Iraq, Turkey is facing immense pressure not only to comply, but to remain a shining example of one of a place where good (i.e., secular) Muslims live.

However, the Turks are afraid, and for good reason. Early elections are fast approaching (Nov. 3), and dissatisfaction with the economy -- the prime complaint of the average Turk -- has benefited the aspiring Islamist party, while causing most of President Bulent Ecevit's leading statesmen to resign.

The most portentous resignation was that of finance minister and respected economic reformer Kemal Dervis. Now, Dervis and his pro-Western "dream team" hope to resurrect Turkey's economic reform initiative after the November elections.

A ranking Turkish economics official told United Press International that "no matter what, they (the Islamists) can't change the system ... it is not the election that we are concerned about. That won't affect the Turkish economy. We are afraid only of the movement against Iraq."

The Turkish leadership has been forced to walk an increasingly fine line between its political allegiance to the West, its social ties with the Arab world, and its own economic survival. The beleaguered Ecevit warned again last week that Turkey would not tolerate an independent Kurdistan. UPI recorded the president as claiming the Americans "are actually steering" the secessionist spirit in Iraq.

But if the second Gulf War goes anything like the first, it will be Turkey's already pained economy that suffers most.

In 1990, U.N.-imposed sanctions meant the closure of an oil pipeline that had given Turkey $280 million annually in transport royalties and handling fees. Iraq was also one of Turkey's largest trade partners. Citing Turkish officials, the APS Oil Review claimed that by 1999 "losses, including lost trade and business opportunities, were worth over $65 billion."

In a lukewarm compensatory gesture, the Saudis (who began supplying Turkey's oil needs) offered $1.1 billion of free crude oil. However, they also got Turkey to sign a contract for the import of 8.5 million tons annually with Saudi Aramco.

Turkey was promised cash from the West as further compensation. Instead, the country was beset with an ever-growing pile of loans, which have made it the IMF's largest-ever debtor. It's no wonder why there's little appetite in Ankara for another shot at Iraqi President Saddam Hussein.

War in Iraq would also affect Turkey's vital tourism industry. Hotel and bar owners as far away as Bodrum (on the Aegean coast) are concerned. The Irish manager of one popular pub there told UPI that "if tourists hear 'Turkey is next to Iraq,' they will simply avoid the whole country -- even though we are nowhere near Iraq, and in no danger whatsoever."

Indeed, even on its map of Turkey, the Avis Car Rental company in Van discreetly covers neighboring Iraq over with the map legend. In pretending that Iraq doesn't exist, the company hopes that the tourists will, too.

Whether they be Turkish or Kurdish, urban or rural-based, business leaders increasingly share the same view: a war against Iraq will damage Turkey's investment climate, just as the country has worked to enhance its package of incentives for foreign investors and incorporators.

As a pre-condition for accession talks with the European Union, Turkey has been pressured to give more rights to its large Kurdish minority. While reforms are proceeding, Ankara has also promised a strong response should Iraqi Kurds try to create an independent state, which it fears may inspire Turkish Kurds to secede.

The international oil companies realize Turkey's oil reserves are dwindling. The oilmen have therefore set their sights on an obscure "petroleum basin" existing in the multi-national Hakkari Basin -- the triangle of instability connecting Turkey, Iran and Iraq, and populated by Kurds. Curiously enough, the richest oilfields seem to be just across the border, in Iraq.

Further, Turkey's national oil company, TUPRAS (which owns 86 percent of Turkey's refining capacity), has its refinery operations centered in a Kurd-majority town (Batman). Indeed, an independent Kurdistan is definitely low on Ankara's wish list.

Now, Turkey is finding it tough to remain loyal. Yet the United States does occasionally return a favor.

Recently, Washington protested that Turkey's EU application was being unjustly hindered by shortsighted Eurocrats who had cited, along with human rights concerns, Turkey's economic shortcomings.

It is rather unrealistic, however, to expect EU directives to harmonize dutifully with American interests. After all, it wouldn't be the Americans who would have to absorb the shock of a volatile Turkish economy.

Ironically, should Turkey's economy become damaged after pleasing Bush and his allies, this will only exacerbate European opposition, on economic grounds, to Turkey's membership in the EU. Yet should Ankara's support for Gulf War II be perceived as faint-hearted, life may get a lot more complicated -- in the form of an independent, American-aided Kurdistan. Either way, the price of alliance is steep.

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