More Updates: Turkey and the PKK/Investing in Iraq/Nigeria

Stephen DeAngelis

October 22, 2009

This the second in a series of updates concerning posts I’ve written in the past.

 

Turkey and the PKK

 

I have written over a dozen previous posts about the security situation in and across the border from the Kurdistan region of Iraq. Some of those posts have been hopeful about future relations between Turks and Kurds and others have reported setbacks in those relations. The latest news from Turkey is upbeat [“Kurdish Rebels Surrender as Turkey Reaches Out,” by Nicholas Birch, Wall Street Journal, 20 October 2009]. Birch reports:

“In the first concrete sign that months of efforts by Turkey’s government to end a 25-year Kurdish insurgency could bear fruit, eight Kurdish rebels crossed over the border from Iraq on Monday to give themselves up. Accompanied by 26 Kurdish villagers who fled Turkey more than a decade ago, the members of the Kurdistan Workers Party, or PKK, were detained by police and taken in for questioning by Turkish prosecutors. Though not the first time such a gesture has been made, it comes months into what Turkish Prime Minister Recep Tayyip Erdogan has described as his government’s ‘democratic opening’ to Turkey’s Kurdish population, who make up about a fifth of Turkey’s 70 million inhabitants. The PKK has fought a guerrilla war aimed at separating Kurdish areas from the rest of Turkey. Tens of thousands of people, mostly Kurds, have been killed since the fighting began in 1984. ‘If they are released, then this is a historic turning point, the start of the PKK’s descent from the mountains,’ Mehmet Metiner, a former adviser to Mr. Erdogan, said of the eight PKK members, in a telephone interview.”

In previous posts, I’ve noted that many members of the PKK and their supporters would gladly return to Turkey from the mountains of northern Iraq if they felt the Kurds were going to be treated fairly by the Turks and weren’t going to face charges as terrorists. The eight rebels who turned themselves in will be seen as a test case. Birch continues:

“The returning Kurdish villagers are likely be questioned and set free, according to Nusirevan Elci, one of 45 lawyers who traveled to the border to represent the group. About 11,000 Kurdish civilians who fled Turkey in the 1990s live in a United Nations refugee camp across the border in Iraq. It was unclear Monday what would happen to the PKK members. The PKK says that none of the eight took an active part in the war. They are expected to benefit from a law pardoning rebels not involved in violence. However, prosecutors could charge them with membership of a terrorist organization. Several PKK members who surrendered themselves in similar circumstances in 1999 are still in prison. The PKK is listed as a terrorist organization by the U.S. and the European Union, as well as by Turkey. Since May, when Turkish President Abdullah Gül talked of ‘a historic opportunity’ to bring peace to Turkey’s impoverished and war-torn Kurdish regions, the country has engaged in an unprecedented, open debate on the Kurdish issue. But the ruling Justice and Development Party, or AKP, has yet to reveal details of Mr. Erdogan’s opening. In a three-page letter destined for the Turkish authorities, the PKK members who crossed the border Monday said they were handing themselves over ‘to assist in ending bloodshed … and to strengthen the foundations of a peaceful solution.'”

This is not a straight forward challenge for the Turks. Emotions run high when it comes to the PKK. For decades they have been seen as terrorists and each new assault on Turkish troops was met with bloodthirsty cries of revenge. Granting amnesty to all PKK fighters is unlikely. Nevertheless, how the eight newest rebels to turn themselves in are treated will be a turning point in how relations between the government and the PKK move forward.

“‘We want to show that we are on the side of peace, and we call for all sides to support the peace process,’ PKK spokesman Roj Welat said in a telephone interview from the group’s headquarters in the Iraqi Kurdish mountains. Acting on the orders of jailed PKK leader Abdullah Ocalan, who was captured and imprisoned in Turkey in 1999, a second ‘peace group’ is expected to arrive in Turkey from Western Europe on Wednesday. The PKK spokesman said it was ‘too early’ to say whether [the latest] ‘peace group’ would be followed by others.”

The PKK would like to see Abdullah Ocalan pardoned and released from prison. By most accounts, that simply is not going to happen. Too many Turks believe he has too much blood on his hands. The fact that he is directing the latest peace offering from his prison cell is not likely to sway that thinking. Skeptics believe the latest PKK overture may be nothing more than a publicity stunt. Prime Minister Erdogan’s peace efforts have not been universally applauded. His critics believe that the olive branches he has offered amounts to nothing less than “the dissolution of Turkey.”

 

In a follow-up Associated Press story, it has been reported that the rebels who turned themselves in were released pending further legal action [“Turkey releases Kurdish rebels, some face charges,” by Christopher Torchia, 21 October 2009]. Torchia reports:

“The legal fate of five of the eight rebels could influence any further moves toward reconciliation. They were freed pending trial on charges of membership in the Kurdistan Workers’ Party, or PKK, said Ayla Akad Ata, a pro-Kurdish lawmaker. The crime carries a penalty of several years in jail. … Prosecutors said the five who face charges included people who traveled from PKK headquarters in Iraq’s Qandil mountains, which were bombed in a Turkish assault last year. Others were from a refugee camp, Makhmur, that Turkey has been pressuring Iraq to shut down for alleged rebel activity.”

Coupled with recent positive peace overtures to the Armenians, Turkey’s outreach to the Kurds reflects a consistent policy of trying to bring stability and economic growth to Turkey. Handled correctly, the moment might be ripe for serious negotiations with PKK leaders.

 

Investing in Iraq

 

As regular readers of the blog know, my company, Enterra Solutions, has active business interests in Iraq; especially, in the Kurdistan region of northern Iraq. That explains my reason for being so interested in seeing a peace settlement between the Turks and Kurds. Over the past couple of years, I’ve also written a number of posts discussing investment opportunities in Iraq. For example, see the posts entitled: Doing Business in Iraq, Development and Corruption in Iraq, and The Milken Institute Global Conference. I continue to be optimistic about the future of Iraq, particularly about the Kurdistan region. Leaders in Iraq are now sanguine enough about the country’s future that they are actively seeking foreign direct investments. As I noted in a World Trade magazine article, U.S. companies have been slow to invest there. Iraqi leaders are now targeting U.S. companies to help them secure a better future [“Iraqis say they want U.S. investment, strategic support,” by Roy Gutman, McClatchy Newspapers, 18 October 2009]. Gutman reports on a trip by U.S. Ambassador Christopher Hill to Basra to meet with Iraqi business leaders and U.S. citizens aboard the tourist ship “Peace” that was making a port call in Iraq.

“Ehsan Abdul Jabbar, the head of a local government investment council in Basra, told the crowd of 50 aboard the ‘Peace’ that the Americans are staying ‘to lead Iraq to the place where it can develop, to reach with Iraq the edge of safety.’ Hill agreed with a businessman who asked for help convincing the United Nations to revoke 1991 sanctions that still thwart Iraq’s air and sea transportation. ‘It’s definitely on my radar screen,’ Hill said — just what the audience wanted to hear.”

The Ambassador’s trip to Basra took place shortly before Iraqi leaders took their sales pitch for investment to Washington, D.C., in an effort to convince U.S. companies to come to Iraq [“Washington Plays Host to Iraqis in Search of Investment,” by Gina Chon, Wall Street Journal, 20 October 2009]. Chon reports:

“The Iraqi government, backed by the Obama administration, kick[ed] off its biggest post-Saddam investment roadshow in Washington, … to convince American businesses to join the country’s reconstruction efforts. Secretary of State Hillary Clinton [spoke] at the opening day of the conference, which is considered to be the first major event under an agreement between the two countries that outlines their long-term relationship in economics, trade, education and culture. Dozens of Iraqi government officials, provincial governors, state investment commission authorities and others … present[ed] overviews of sectors such as oil, agriculture and construction, which have been hobbled since the 2003 U.S.-led invasion, and investment opportunities in about 750 projects, according to National Investment Commission Chairman Sami al-Araji.”

Chon notes that “the conference comes at a time of relative optimism for foreign investors” in Iraq.

“Parliament [recently] amended investment legislation that makes it easier for foreigners to secure land for investment projects. The cabinet has approved a giant oil-field development contract — a $15 billion investment commitment from a consortium led by BP PLC. Oil officials are closing in on other big deals with majors including Exxon Mobil Corp. and Eni SpA. Iraqi politicians have made improving the economy a top campaign message, as the country prepares for parliamentary elections slated for January and the massive pullout of American troops next year.”

Chon admits that the business environment is not perfect and that challenges remain.

“The challenges are still daunting. While overall violence has ebbed, there have been several high-profile attacks in recent months, ahead of elections. There are also hosts of legal risks. For instance, Baghdad hasn’t adopted key international arbitration agreements, nor has it finalized a pact with the U.S.-backed Overseas Private Investment Corp. — a key investment booster — that would allow OPIC to offer business-risk insurance here. The World Bank ranks Iraq No. 152 out of 181 countries when it comes to the ease of doing business. ‘Investors will go where it’s easiest to do business,’ so Iraq has to move faster to make itself more attractive to investors, says Patricia Haslach, head of economic affairs and development assistance at the U.S. Embassy in Baghdad. The biggest potential roadblock for most U.S. companies in Iraq is corruption. American companies are generally under much closer scrutiny by U.S. regulators when it comes to overseas operations. It isn’t unusual for foreign-business representatives to be asked blatantly for kickbacks. Daniel Clayton, chief executive of Calgary-based risk management firm Diligence Ltd., said he has been asked for kickbacks of between 5% and 20% of a contract’s expected profit margin, or the total value of the contract. He said he has denied all requests for kickbacks.”

As I wrote in one the blogs noted above: “Corruption is corrosive because it breeds secrecy, siphons off critical resources, and fosters a criminal environment. Just as importantly, corruption discourages foreign companies from making desperately needed investments in a country’s economy. Those are just a few of the reasons that people who lack integrity cannot lead a country into a better future. … Opportunities abound in Iraq. My enthusiasm is only tempered by lukewarm Iraqi efforts to rid its system of corruption. Rather than dismantling its oversight system, the government needs to strengthen it. When corruption is uncovered in high places, the government should pride itself in having done its job rather than being embarrassed by the revelation that colleagues betrayed the public’s trust. Iraq’s government, like its businesses, need to gain the world’s trust. Operating transparently and adopting international standards are the best ways to earn that trust.” Chon continues:

“Mr. Araji, of the Iraq investment commission, concedes corruption is a huge issue. He said a culture of bribe-taking flourished under Saddam Hussein and will take time to overcome, especially since legal institutions are still rudimentary.”

Corruption is one reason that Iraq ranks 153rd out of 183 countries ranked in the World Bank’s 2010 Doing Business Report. Iraq is only hurting itself by allowing the culture of corruption to continue unabated when it so desperately needs investment capital and the jobs such capital brings.

 

Nigeria

 

Nigeria is often pointed to as the poster child for the “curse of oil.” Instead of making Nigeria a peaceful and prosperous country, oil seems to have inflamed emotions, fostered greed, and increased corruption. In the past, one could almost tell a developing country looking to improve its lot to look at Nigeria and do the opposite of whatever it is doing. I have written several posts about the problems in Nigeria; see, for example, Religious Conflict in Nigeria and The Importance of Human Security. The latter post was written just a month ago and I concluded:

“It is apparent to any casual observer that Nigeria is currently in a death spiral. If its leaders cannot govern with integrity and control crime and corruption, Nigeria’s legacy will be ‘the great country that might have been.’ Failure to stop the death spiral will result in one of the largest manmade humanitarian disasters in African history since Nigeria is Africa’s most populated nation. I’m not sure whether its too late for Nigeria to pull out of its death spiral, but, as an optimist, I think there’s still hope. Time, however, is not on Nigeria’s side. To allow a small minority of its population to destroy the future of the vast majority of the nation is unconscionable. The nation’s oil revenue must be invested in security and infrastructure. You can’t build infrastructure if you can’t protect it. Infrastructure brings jobs and jobs bring hope. It is time for Nigerian leaders to step up to their responsibilities and become the servants of the people rather than self-serving politicians.”

Surprisingly, there is now some promising news coming out of Nigeria. There have been several stories about ranking officials being arrested for corruption; but the best news is that Nigerian officials are trying a new tack for ending violence in the Niger delta [“Nigeria offers ‘revolutionary’ oil deal to delta,” by Tom Burgis, Financial Times, 19 October 2009]. Burgis reports:

“Nigeria plans to transfer 10 per cent of all its oil and gas ventures to the inhabitants of the oil-producing Niger Delta, in a multi-billion-dollar bid to end the rebellion that has for years hampered production in sub-Saharan Africa’s leading energy supplier. The initiative, which comes against the backdrop of a sweeping attempt to overhaul Nigeria’s oil industry, would, if approved by parliament, signal a bold new phase in the government’s efforts to broker a lasting settlement in the delta. However, first it has to overcome the expected objections of representatives of other regions.”

Like all plans, the devil is in the detail and some of those details remain to be worked out. Nevertheless, if the plan is implemented it could help turn Nigeria away from the death spiral I mentioned earlier. Burgis continues:

“The latest overture follows an amnesty that has lured into the open some of the main leaders of the militants who have led a sustained campaign in the delta region against the federal government and the oil industry. Emmanuel Egbogah, the president’s special adviser on oil, told the Financial Times that Umaru Yar’Adua, president, had backed the idea of transferring to delta communities 10 per cent stakes from the holdings of the national oil company in the joint ventures that exploit Nigeria’s vast reserves. Mr Egbogah said he intended to add the proposal to reforms the government hopes to enact by the year’s end, which would also impose tougher terms on oil companies but which are currently embroiled in a tortuous debate in parliament. … The initiative is aimed at answering a longstanding demand from the delta’s fighters and activists, ethnic leaders and aggrieved communities for a share in the ownership of the oil that generates 80 per cent of government revenue. All citizens of oil-bearing communities would be entitled to cash benefits, delivered through a trust-style mechanism, which they could use individually or pool for social projects.”

If the plan is implemented, three things could derail it from achieving beneficial long-term objectives: greed, corruption, and impatience. If the revenue is simply provided as dole to the residents of the delta, it will undermine the delta’s future. Although some money is undoubtedly needed for social service programs, the vast majority of it should be invested in human and infrastructure development. Jobs, not dole, are what is needed to sustain prosperity derived from oil. Without jobs, the delta’s fighters will go back to doing what they know best — creating violence and unrest. The quality of life of generations to come depends on how the money is used. As Burgis noted earlier, the rest of Nigeria is also interested in how oil revenues are shared. Although the deal could mean that other areas of the country “could face reduced income,” Burgis notes that these reductions could potentially “be offset by higher output, if the initiative leads to a reduction in sabotage of the oil industry.”

“The government hopes to provide a disincentive to oil theft and sabotage by linking the earnings of each qualifying community to production from the joint venture that extracts its resources. ‘These benefits will flow directly to them,’ Mr Egbogah said. ‘Every community, whether blind or deaf or dumb, every citizen will say: “I own a part of this business”. Attacks on oil facilities have cut production in Nigeria – an important supplier to the US – by as much as 40 per cent in recent years. A multi-billion-dollar trade in stolen oil has flourished while the majority of the delta’s estimated 28m people live amid despoiled waterways often lacking basic services. The misery persists in spite of the oil-state governments receiving an additional 13 per cent of national petroleum revenues, making their budgets two or three times the size of those in some other regions.”

Nigeria’s future depends on its ability to invest oil revenues in the country’s future. With so much at stake, the way forward won’t be easy. The country numerous problems and the agreement under consideration for the delta addresses only one of them. Nevertheless, the country’s current leadership seems determined to turn the ship of state around and point it in the right direction. Let’s hope they succeed.