Iraq and Turkey have previously shared good economic relations and thrived among each other’s markets. But since the arrival of a critical situation in one of Iraq’s major cities, trade between both states has been affected, resulting in considerable repercussions for Turkey’s stock exchange.
Iraq has been considered one of Turkey’s most lucrative markets in the world. In 2004, exports to Iraq from Turkey amounted to approximately 1.8 billion USD. In the past decade Turkey’s exports to Iraq have increased by more than six times, growing at an average rate of more that 25 per cent annually – reaching 10.8 billion USD in 2012. This stark increase in trade relations placed Iraq in second place as Turkey’s most valuable export market, after Germany.
In 2013, it was confirmed that Iraq occupied one of Turkey’s top spots for consumption, with exports to Iraq amounting to approximately 12 billion USD – of which more than 8 billion went to Iraqi Kurdistan. During the same year, Turkey only bought 200 million USD worth of goods from Iraq, highlighting reasons for why it has been pointed to as one of Turkey’s most profitable markets.
Turkish exports to Iraq have been diverse, ranging from items such as textiles, steel and machinery. Imports to Turkey from Iraq, however, have almost entirely consisted of oil. As a matter of fact, Iraqi crude oil has become one of the biggest foreign oil sources for Turkey, comprising 32% of its imports in 2013.
Although Turkey and Iraq have shared solid and growing levels of economic relations, which have caused numerous sources to predict that a demand for Turkish goods will keep on growing, there have recently been some indications of deterioration in the trade relations between the two states. These signs of deterioration mainly stem from issues involving oil shipments from Iraqi Kurdistan to Turkey using the Kirkuk-Ceyhan pipeline.
The Kirkuk-Ceyhan oil pipeline is 600-miles long and Iraq’s largest crude oil export line. The line travels through Iraq’s second city Mosul, but since the Islamic States occupation of the city in 2014, there has been a blow to the trade relations between Turkey and Iraq, along with an increase in the number of attempted sabotages to the pipeline.
Islamic State’s occupation of Mosul has also affected trade from Turkey to Iraq. Trucks from Turkey formerly travelled to transhipment centres that were 50 kilometres inside Iraq. From the transhipment centres, goods would be sent to Baghdad via Mosul. However, since the Islamic States’ arrival in Mosul, commerce on that route has been ceased.
Soon after the Islamic State’s possession of Mosul, thirty-one Turkish truck drivers were abducted in the city before the Turkish Consulate was seized, and an abduction of a further forty-nine Turkish people. Due to security concerns over Turkish citizens, two major Turkish banks closed down their branches in Baghdad and have ceased all operations.
Prior to ISIS’s occupancy of Mosul, the Istanbul stock exchange had reached 81,600 points, but within four days of ISIS rule in the city, the index fell to 77,646, amounting in a 4,000-point loss for the Turkish stock exchange. It has also been reported that before the Islamic State took control of Mosul, traffic waiting to cross Turkey-Iraq borders would often stretch up to 20 kilometres, with trucks waiting for days to get through Habur and reach the border checkpoint. Today, however, the waiting line is much shorter and frequently comprises of only several trucks.