Rohani visits Turkey amid dispute on trade issues

Rohani visits Turkey amid dispute on trade issues

Iranian President Hassan Rouhani, second right, talks with Turkish Prime Minister Recep Tayyip Erdoğan, second left, in their meeting in Tehran in this January. (Photo: Sunday's Zaman)

June 07, 2014, Saturday/ 00:01:14/ NESİBE HİCRET SOY / ANKARA
As Turkey prepares to host Iranian President Hassan Rouhani on Monday for the first time since he took office last summer, several unresolved trade issues between the neighboring countries are still on the table.

According to Turkish diplomatic sources, Rouhani's visit is scheduled for June 9. Iranian Ambassador to Turkey Ali Reza Bikdeli recently told reporters that the most important agenda item between Turkey and Iran is the signing of certain agreements and holding the first meeting of the Turkey-Iran High Level Strategic Cooperation Council.
 
Yet, several points of dispute particularly on economic and trade issues remain unresolved between Turkey and Iran. The high fuel surcharges imposed by Iran on Turkish trucks at border gates inconvenience truckers and cost Turkey almost an extra 56 million euros every year.
 
Fatih Şener, the executive president of the International Road Transport Union (UND), said in a telephone interview with Sunday's Zaman that Iran imposes a fuel surcharge of $750 per truck per passage. In addition, even if Turkish trucks purchase their fuel in Turkey, they have to pay that amount as a transit passage charge.
 
“Annually almost 16,000 Turkish trucks drop their load at the Turkish-Iranian border so as to avoid paying those high charges,” said Şener, stressing that Iran's practice is unfair and an excessive bureaucratic procedure.
 
Turkish truckers have been crying foul over the extra fuel surcharges being imposed on them as they exit the Middle Eastern country. Iranian officials say fuel prices in the country are lower than in Turkey due to state subsidies so the country charges Turkish truckers higher taxes to make up for the difference in price.

UND officials point out that Iran is a common transit country for Turkish shipping companies whose final destinations are Azerbaijan and Central Asian countries and that Iran's unfair practices undermine Turkey's competitiveness in the entire region.
 
In late February, a Turkey-Iran Ground Transportation Joint Commission (KUKK) meeting was held in Tehran to facilitate land transportation between the two countries. According to media reports, Turkish transportation sector representatives asked Iranian officials to eliminate the extra fuel surcharges and end unfair competition in transportation.
 
Şener said the Iranian side has not taken any measures to solve the problem despite three meetings between Turkey and Iran on the issue. “This problem requires high-level negotiations,” said Şener, adding that the UND is planning to hold a series of events on the eve of Rouhani's visit to being attention to the issue.
 
Another problem, as Şener noted, are the long queues that have formed at Iranian border gates, with the waiting periods for an entry or exit extending up to 10 days.

‘No concrete development on Iranian gas prices'


Another point of disagreement between the two countries is on the price of natural gas imported from Iran. In 2012, Turkey took major energy trading partner Iran to an international court of arbitration, arguing that Iran was overcharging Turkey for its natural gas.
 
As Turkey insists on proceeding with arbitration so long as Iran does not offer the Turkish side its requested discount on the price of natural gas, there has not been a concrete development on the issue yet, an official at Energy and Natural Resources Ministry told Sunday's Zaman.
 
Iran charges more for its natural gas than any other of Turkey's trading partners. In 2012, Turkey paid Azerbaijan $330 per 1,000 cubic meters and $400 to Russia for the same amount. Iran, however, sells its gas to Turkey at $505 per 1,000 cubic meters, which Turkey estimates is costing the country an added $800 million a year for natural gas.
 
The official from the Energy Ministry also stressed that although it has not yet been confirmed, the gas price issue may be on the agenda during Rouhani's visit.
 
Much of the problem in the gas trade between Tehran and Ankara derives from a “take or pay” condition that requires Turkey to import predetermined amounts of natural gas -- 10 billion cubic meters per year -- according to a gas deal signed in August 1996 that is valid for 25 years.

 

Economic, cultural, political cooperation deals expected to be signed

 
A senior Iranian diplomat from the embassy who wanted to remain anonymous stated that certain agreements on political, economic and cultural cooperation between the two countries are expected to be inked during the Iranian president's visit.
 
“Both sides are working on six or seven issues on which an agreement could be signed and the Iranian side is in touch with several ministries in Turkey, particularly the Ministry of Foreign Affairs. It is not yet definite but agreements could be signed on trade, culture, tourism and education during the visit,” said the diplomat to Sunday's Zaman on Thursday.
 
In order to prepare the groundwork for the Iranian president's visit, Mahmoud Vaezi, the Iranian minister of communications and information technology, visited Turkey on Wednesday and met with officials including Prime Minister Recep Tayyip Erdoğan. During his visit, he highlighted the energy cooperation between the two countries and signaled that a deal on in that area could be signed during Rouhani's visit
 
During Erdoğan's visit to Iran at the end of January, four agreements were signed between the two countries with the aim of strengthening bilateral relations, particularly in trade.
 
Erdoğan and First Vice President Eshaq Jahangiri signed a cooperation agreement to form a joint trade committee. Iranian Trade Minister Mohammad Reza Nematzadeh and Turkish Economy Minister Nihat Zeybekçi also signed a preferential trade agreement (PTA). In addition, Turkey's state-run Anadolu news agency signed a cooperation agreement with Iran's Islamic Republic news agency (IRNA) in a ceremony attended by Erdoğan and Jahangiri.
 
Bilateral trade between Turkey and Iran in 2012 stood at $23 billion despite the embargoes on Iran which were mostly due to gold trading. Turkey's gold trade boomed for over a year while Ankara was paying Iran in gold for natural gas and oil imports.
 
The Turkish government found it easier to import large amounts of gold and then send these to Tehran as payment for its natural gas and oil purchases.
 
In the first three months of this year, however, Turkey's gold imports declined by 80 percent to 9.3 tons, data from Borsa İstanbul (BIST) showed. Observers said the decline is largely due to the government suspending its gold-for-oil trade.
 
The gold-for-oil strategy has come under close scrutiny by the opposition in Turkey and prosecutors following a corruption investigation that became public on Dec. 17 of last year.
 
The investigation saw a number of prominent businesspeople and politicians close to Erdoğan's ruling Justice and Development Party (AK Party) being accused of corruption -- including export fraud, forgery of documents and gold smuggling. The investigation alleges that Iranian-Azerbaijani businessman Reza Zarrab and certain bureaucrats collaborated with Iranian businessman Babak Zanjani -- who has been blacklisted by both the EU and the US government -- to smuggle gold into Iran.
 
Bilateral trade volume in 2013 was $14.6 billion, and Iran was Turkey's seventh largest trading partner.
 
Hayat Khatib from Ankara contributed to this report.