Iraqi Kurds fear fight with Turkey will damage economy

IRBIL, Iraq — With tensions between Turkey and Iraq rising over Kurdish rebels, business leaders are expressing growing concern that Turkish military action in northern Iraq could damage the one bright spot in Iraq's economy.

Northern Iraq's Kurdish region is booming. In Irbil, the region's largest city, construction has begun on a $1 billion shopping and office complex. In Sulaimaniyah, the region's second city, sidewalks teem with people even deep into the night, a far cry from the violence-wary atmosphere of Baghdad.

Business would suffer if hostilities with Turkey closed the border crossing at Harbur, 150 miles to the north. While the crossing isn't as busy as it was before the U.S.-led invasion in 2003, it's still the entry point for much of the food that's sold in Iraqi Kurdistan.

"We only have one border crossing with Turkey, but it's an important crossing," said Falah Mustafa Bakir, the head of foreign relations for the Kurdistan Regional Government.

Kurdish officials also worry that Turkey might pull the plug on cross-border sales of electricity and bar Turkish companies from doing business in Iraq.

"If Turkey closes that border, it will have a negative impact on our economy and their economy as well," Bakir said. "So it's not only one side that will be losing, it will be both sides."

But the estimated $3 billion in commerce that flows between Turkey and Iraq through Harbur is far more significant to northern Iraq than it is to Turkey's much bigger economy, which exceeds $700 billion annually.

Turkey has dispatched aircraft into Iraq's Kandil Mountains to attack suspected hideouts of rebels from the Kurdish Workers' Party, known as the PKK in its Kurdish initials. It's also massed thousands of soldiers at the border, though it's refrained from a wide-scale assault.

Friday, Secretary of State Condoleezza Rice met with Turkish Foreign Minister Ali Babacan and called the PKK a terrorist group, which is how the State Department classifies it. But the meeting didn't calm Turkish officials. "This is where the words end, and the action needs to start," Babacan said.

Kurdish business leaders find the escalating rhetoric unnerving.

"Of course we're worried. If the border is closed, we will have to look for another route, maybe like Iran and Syria," said Nawzad Ghafur Karim, the vice president of the Sulaimaniyah Chamber of Commerce.

While goods already enter Iraq from those two countries, expanding the flow could be an unwelcome prospect for the United States, which has strained relations with both countries and is highly suspicious of shipments coming from Iran because of concerns that Tehran could be supplying Shiite Muslim militias.

A destabilized Kurdistan also would be a diplomatic setback for the United States, which is hoping to promote stability in the region.

Mahmoud Barzani, the president of the Kurdistan Regional Government, attempted to assure investors at the Irbil International Trade Fair earlier this week that Kurdistan remained safe and open for business.

"As you are aware, there is currently a great deal of tension on the border between Iraq and Turkey because of Turkey's struggle with the PKK. There is a fear that this dispute will spill over into the Kurdistan region," Barzani said at the event, attended by 300 companies from 22 countries, including Turkey.

"We reiterate that we want good relations with our neighboring countries, especially Turkey," he said.

Turkish investors and businesses are powering much of Iraqi Kurdistan's economic boom.

More than 1,000 Turkish companies have set up shop in Iraq's Kurdish areas, according to Mohamed Raouf, an economics professor at Sulaimaniyah University. He estimates that half of Kurdistan's $7 billion share of Iraq's oil revenues is spent with Turkish companies that are building new roads and other public works in Iraq's north.

Raouf said he thought that the Kurdish government would be able to find other transportation routes.

"If Turkey closes the road, it won't stop our economy," Raouf said. "We are not a closed country. Turkey doesn't control all of our borders."

But no one doubts that closing the Harbur gateway could have a devastating impact on Kurdistan's economy. Last month, food prices spiked when Iran closed five less important crossing points for two weeks to protest the U.S. detention of an Iranian businessman on charges that he was smuggling weapons.

(Calvan reports for The Sacramento Bee.)