Iran’s terror and trade war against Turkey

It is not just the terror card that the overzealous mullah regime in Tehran has resorted to playing openly against Turkey; there is an undeclared economic war being waged by the Persians against Turkish interests, which ultimately aims to cut the support for the ruling Justice and Development Party (AK Party) in Turkey. Turkish Prime Minister Recep Tayyip Erdoğan openly acknowledged in an address to party delegates last Wednesday in Ankara that two important issues would eat away at the popularity of his AK Party. “We fought against both a [bad] economy and terror. And this fight is still going on,” he stated.

Unfortunately, both of these challenges have a sizable Iranian contribution, and Turkish officials, including the sharp-tongued prime minister, are very much aware of these wars being pursued by other means. There is overwhelming evidence collected by Turkish intelligence bodies pointing to Iran’s dirty fingerprints on terror groups in Turkey, and that is not only limited to Kurdistan Workers’ Party (PKK) terror. Iranians, best known for proxy wars, try to use ultra-leftist as well as far right groups, in addition to Kurdish terror, to foment chaos in neighbor Turkey, hoping to thwart its development and lock the country into internal struggles.

But there is another side to the cold war pursued by the Iranians against Turks that often goes unnoticed: an economic war. Tehran’s recalcitrant attitude in negotiating terms for natural gas sales to Turkey and its insistence on high prices — well over $500 for 1,000 cubic meters of gas — is a case in point. Despite the fact that natural gas prices are coming down globally and that Turkey has obtained price cuts from other suppliers, i.e., Russia and Azerbaijan, Iran does not want to revisit the terms of the contract. Even when there are serious questions about the quality of Iranian gas, which is in itself a clear violation of the terms of the contract, Iran simply brushes off Turkey’s threats to take Tehran to the international arbitration board. Turkey has won a complaint in arbitration before, and would be likely to win again this time; but as the case drags on, Iran hopes that higher prices will make a dent in the Turkish economy, already slowing down due to the economic crisis in Europe.

When Turkish Finance Minister Mehmet Şimşek recently admitted that the government would be likely to miss its budget deficit targets this year, he pointed to increasing commodity prices in general and the high gas prices Turkey has to pay in particular. Agreeing with Şimşek, Minister of Energy and Natural Resources Taner Yıldız criticized Iran last week for not budging on high prices. The state-owned Turkish Pipeline Corporation (BOTAŞ), which purchases gas from Iran, announced in August that it had suffered a TL 1.3 billion ($730 million) loss in 2011, as it has been paying more for its gas than it has received from customers. Since gas sales are to residential as well as industrial clients — who mostly use it to generate electricity to fuel the economy — the government was understandably reluctant to impose a hike in gas prices. It is worth remembering that almost half of the power plants in Turkey use natural gas to fire the generators that drive the economy.

As if that were not enough, some suspect that PKK terrorists are acting as subcontractors for Iran, conducting acts of sabotage on the pipeline coming from Iran to interrupt the flow of gas to Turkey.

Of course, the price of the gas is not the only economic adversarial tool Iran uses against Turkey. Iranian officials make life very difficult for Turkish truckers on the trade route to Central Asian markets passing through Iranian territory, with unfair and excessive bureaucratic impediments costing the trucking industry $21 million euros a year in fuel surcharges alone. In the meantime, Iranian truckers have been rapidly replacing Turkish drivers on this route to Asia, in clear violation of the trade protocol agreed by the two countries. When you consider the fact that Iranian companies are benefiting from trade deals Turkey lost due to logistical barriers erected by the Iranian government on the path to Central Asia, the cost to the Turkish economy may amount to billions of dollars in lost revenue.

Iran has also been unwilling to open its market to Turkish companies for decades, no matter how many times senior government officials in Tehran have said they desire to see increased trade between the two nations. Even Turkish companies that traditionally sell goods to Iran are reporting enormous difficulties they have started to experience in Iran recently. Some of them have given up on their operations in Iran completely, while others are using third parties to bypass Iranian bureaucratic hurdles at an extra cost. In the textile industry, for example, many Turkish businesses complain about the exorbitant customs tariffs Iran levies on their products, added to which is a failure to pay or late payments by Iranian importers, extending the list of complaints against Iran. Difficulties in financial transactions, often performed through private dealers who charge unusually high broker fees, continue to hamper Turkish businesses. Squeezed by UN and US/EU sanctions, the fact that the Iranian government does not make it easy for Turkish companies to operate in Iran defies simple logic.

But when you dig deeper into Iranian thinking, this should not come as a surprise, as we all know how the fear of Turks is entrenched in the mentality of the Persians, who have always treated Turkey’s overtures — innocent as they may be — with deep suspicion. For example, when Abdullah Gül, in his first presidential visit to Tehran in February 2011, offered zero tariffs on 30 categories of goods, almost all favoring Iranian products, Tehran balked at the idea, fearing that it would in turn allow Turkish companies to penetrate into the Iranian market. Gül was fuming in his hotel room, saying to his aides that Iran had no interest in developing trade ties with Turkey.

Let’s do some fact checking here. The trade volume between the two countries was $16 billion last year, heavily favoring Iran at a ratio of four to one, mostly based on oil and gas sales to Turkey. In other words, Iran is contributing immensely to Turkey’s current account deficit. This year the volume is expected to hit $21 billion, mainly due to the unexpected gold rush in which Iranians have started to buy bullion from Turkey in order to shore up the weakening Iranian currency, as well as to carry out international transactions, averting financial sanctions. If you take oil, gas and gold from the total figure, there is not much trade left between Turkey and Iran. This is ridiculous when you consider the size of the two economies, which amounts to $1.3 trillion gross domestic product (GDP) combined.

Yet this is another indication that Iran has no real interest in fostering trade ties with Turkey. Though Iranian officials talk about a “free trade agreement” between the two countries, we do not even have a “preferential trade agreement” with Iran today. The open-ended discussions on preferential trade are ongoing, with the last one held in Ankara at the end of June during the visit of Iranian Vice President Ali Saidlo. As expected, it went nowhere because the Iranians simply negotiated for the sake of negotiations, not to conclude talks on preferential trade and obtain results.

Iran is also intent on damaging Turkish economic interests in third markets. Turkey put Iraq’s government, under Shiite Prime Minister Nouri al-Maliki, on notice for flagrant violations of trade agreements discriminating against Turkish companies in favor of Iranian competitors, despite Iranian companies offering poor quality and substandard work on many government tenders, something that often results in complications and constant delays on the completion of work. Syria is another critical market for Turkey, allowing access to the broader Middle Eastern market for Turkish commercial goods and acting as a gateway to the oil-rich Gulf region. That is why extricating Syria from the grip of Iran is so important for Turkey.

If Iran keeps this up, it will eventually have to swallow its own bitter pill. Future terror and economic wars will be waged on Iranian soil rather than in other countries through proxies.

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