Up and Down Trade: Syria and Iraq

By Paul Cochrane in Damascus, Abu Kamal and Lattakia for Executive magazine

Look at any map of maritime shipping routes and there are two geographically ideal ports for goods Iraq bound: Umm Qasr for ships from Asia, and Lattakia and Tartous in Syria for cargo from Europe, the Americas and Africa.
Maps however do not convey the realities on the ground, with the obvious points of entry to Iraq fraught with complications. Umm Qasr’s ports are in a state of infrastructural disarray, shippers report corruption and theft, and some $13 billion is needed for the first stage of a new port, the ‘Larger Port.’ Further billions are needed for the new Al-Faw port, and the other four harbors in the Shatt Al Arab all require serious upgrades.
Kuwait, a potential contender for major trade hub status with Iraq, is currently hampered by customs, high taxation and foreign ownership issues in addition to inadequate port facilities, although the development of the $1.2 billion Bubiyan island port facility will change this in coming years.
All of this has left Iran, Turkey, Jordan and Syria to take up the slack as the main maritime and trade routes into beleaguered Iraq. Iran however is benefiting in terms of exporting Iranian goods and machinery, Turkey likewise, leaving much of the maritime trade for Iraq to come through Jordan’s Aqaba port – logistically far from Iraq, particularly the urban zones of the Jazira – and better geographically positioned Syria.

Up and down trade

Syria, despite its proximity to Iraq, has not exactly pushed the boat out to capitalize on the geographical attributes that make the country a natural trade partner with its neighbor and a major transit route from the West and Africa. Official trade figures from 2004-2006 are only indicative of one particular trend, declining imports from Iraq, from SYP 4.53 billion in 2004 to SYP 958 million in 2006.
The trend for Syria’s exports to Iraq can be best described as a reverse bell curve, from SYP 23.95 billion in 2004, down to SYP 13 billion in 2005, and then surging to SYP 32 billion in 2006. With the figures for last year yet to be released, it is not known whether Syria’s exports spiked or declined in 2007, particularly given the reasons for 2005’s plunge in exports not clear from talks with the public and private sectors.
Equally, on a visit to the North East Syrian-Iraqi border at Abu Kamal-Al Qaim, there was no traffic to speak of and locals reported minimum activity. This was not overly surprising given the state and size of roads from Deir E Zour to the border, in addition to the lack of a major highway on the Iraqi side, despite Abu Kamal’s strategic position 648 km from Lattakia, and 403 km to Baghdad, one of the shortest routes to the Iraqi capital and immediate north.
Indeed, the state of Syria’s infrastructure does beg the question of why Damascus is not doing more to improve connections to Iraq, although the Logistics Performance Index released by the World Bank last year does give an idea. Out of 150 countries reviewed Syria ranked 135, and 15 out of 16 countries in the MENA region, ranking best for domestic logistics costs and worst in ‘logistics competence.’

The Syrian-Iraqi border at Abu Kamal

Considering Abu Kamal’s logistical difficulties, the South Eastern border at Al Tanf is the more favored crossing, connecting to a major highway in Iraq’s Anbar province that also merges Jordanian traffic to Ramadi and Baghdad, clocking in at around 955 kilometres from Lattakia to Baghdad.
Syria’s northern border at Tall Kujik is also a preferred route, for both Turkish and Syrian traders.
“For security reasons a lot of people take cargo to Aleppo and then to Northern Iraq to the Kurds, as they have established some form of security,” said Samir Hamod, manager of Maersk’s trade coordination office in Lattakia.
Goods are also transported from Aleppo by train on a rather circuitous route via Qamishle in the far north to Mosul. “It’s the best way, safe and lower costs,” said a Lattakia-based logistics company that preferred to remain anonymous.
Syria is to improve this route however, currently laying a railway via Deir E Zour that will run to Mosul and on to Iran, although when the Iraqi side will be operational is far from clear (the first stage of a 284 km railway around Baghdad, slated to cost $8 billion, is expected to take six years to complete).


Low quality trade

One reason for such unpredictable trade, aside from security on the Iraqi side, is the accessibility of the border crossings. “It’s hard to know about the borders, they are sometimes open, and at other times closed, so trade is good at times, bad at others,” said the logistics company.
Indeed, according to a Voices of Iraq (VOI) report in February that quoted the head of Al Qaim City Council, the border with Abu Kamal was only re-opened in November after closing for an undisclosed time after security improved on the Iraqi side.
Although trade has increased since then, local traders complained in the VOI report of second-level quality or expired goods entering from Syria. “Despite the Al-Qaim border now being open, I am still importing foodstuff items from Turkey because Turkish products are of a much higher quality and competitively priced when compared to similar Syrian products. Locally consumed products in Syria are high quality, and Syrians export low quality products to Iraq,” a trader is quoted as saying.

Truck on the Damascus to Deir E Zour highway

According to Jihad Yazigi, editor of economic and business newsletter The Syria Report, Syria’s manufacturing sector has benefited from bolstered trade with Iraq, as following the 2005 Greater Arab Free Trade Area (GAFTA) pact local production has been affected by higher quality products and packaging.
“Usually the Syrian manufacturing sector has difficulties exporting, and Iraq is an easy market. It has given breathing space to a lot of manufacturers, with Iraqis coming and paying cash,” said Yazigi.
He added that goods exported to Iraq are primarily foodstuffs and manufactured products.

Port development

Syria has much to do in developing infrastructure for trade with Iraq, but its major ports are getting much needed investment. In February, a cooperation agreement was inked between Syria and the Japan International Cooperation Agency to modernize and improve goods shipping and infrastructure at Lattakia’s port. A Chinese firm is also to install a gantry crane in the next three months.
Meanwhile, the Tartous International Container Terminal is being upgraded by a Filipino firm, ICTSI, which is also to manage the port as part of a 10-year concession.
“For Syrian decision makers the country’s position as an infrastructure route is so strategic that at the Tartous port they contracted a private company to manage it. This is new for the government, to encourage BOTs (Build Operate Transfer), and this is a significant contract,” said Yazigi.
Although Tartous is geographically better suited for trade with Iraq, the port currently handles considerably fewer containers than Lattakia, handling 38,649 containers in 2006 compared to Lattakia’s 471,970. Cargo at Tartous however is significantly higher, at 12.76 million tons as opposed to Lattakia’s 8.09 million tons.
But just as customs issues need to be ironed out at the Iraqi border, Maersk’s Homod said Lattakia’s port authorities’ need to streamline inspections.
“Lattakia can handle a lot of containers but one problem we are suffering from is customs. A lot of commodities have to be inspected - strip searches - inside the port so that causes congestion. The normal procedure at a terminal is to go to a warehouse and empty it there,” he said.

Port of Lattakia

Influx of Iraqis

Legislation and regulations are certainly not lacking for trade with Iraq to flourish, with bilateral agreements in place, gas and electricity networks in operation, and relations between Damascus and Baghdad warmer than they have been for 30 years. Turkey, Iraq and Syria have even agreed, just last month, to set up a joint water institute to share their water resources. Syria’s first private airline, Sham Wings, is also now flying to Baghdad, competing directly with Iraqi Airways.
“It’s not so much legislation [that needs to be amended] as attitude,” said Dr Nabil Sukkar, Managing Director of the Syrian Consulting Bureau for Development and Investment. “We are liberalizing trade, but it’s difficult to know what is happening on the ground. That has to be talked about rather than through legislation.”
As economists and businessmen point out, aside from official trade statistics there is minimal information about the scale of trade, what is traded, and where it is bound.
“We know the origin of containers but it’s difficult to determine where the cargo will go,” said Homod. “A lot of cargo is declared in transit, or to the free zone, and can then go to Jordan, Turkey, Iraq or Lebanon.”
Furthermore, informal trade with Iraq is presumed to be extremely high, as well as inflows and outflows of cash to the 1.36 million Iraqi refugees currently in Syria.
The number of refugees increased 19% last year, which has had negative effects on the Syrian economy since 2003, triggering inflation, higher rents and costing the treasury some $1 billion a year, but on the other hand has strengthened ties.
“There has never been as strong a relationship between the two countries as due to the refugees – intermarriage, contracts and investment in factories, and a private university. A lot will also stay on when there is stability in Iraq,” said Yazigi.

ALL PHOTOS BY PAUL COCHRANE