In particular, economic relations expanded with more than 1,300 Turkish companies registered by the KRG. Strategic sectors such as banking and finance, infrastructure, oil and natural gas, exports, and education have a robust Turkish presence in the Kurdistan Region of Iraq (KRI). Extensive infrastructure projects strengthened the economy, created jobs and facilitated the delivery of public services. Since 2003, the construction sector experienced above-average employment growth and a substantial share of employment. According to a Finnish-Swiss report, approximately 75% to 80% of the construction business, including roads, tunnels, silos, dams, housing projects, and major airports, was undertaken by Turkish companies. By 2013, Turkey’s trade with Iraq amounted to $11.9 billion, making Iraq Turkey’s second biggest export market and Turkey Iraq’s, including the KRG’s, largest external trading partner.
Over the first five months of 2014, exports to Iraq had already equaled $5.4 billion, an increase of 11%. The economic tide changed in June 2014, when ISIS seized control of Mosul, Iraq’s second largest city, and blocked major trade routes to the south. On July 2, 2014, the Turkish Exporters Assembly (TIM) reported that Iraq had dropped to Turkey’s third largest trading partner, falling behind Britain. Within a short time period, trade with Iraq had decreased 21%. Trade between the KRI and Turkey remained relatively on track as Turkish business representatives utilized the secure environment of the KRI to launch trade with other regions of Iraq facing precarious security situations.
Turkey's dependence on foreign sources for 95% of its oil and natural gas needs served as a driving force for its deepening relations with the KRG. This strategy worked to prevent oil delivery disruptions from the Kurdistan Region that could inflict a debilitating blow on the Turkish economy. President Masoud Barzani’s announcement that 150,000 barrels per day of crude oil from the Kirkuk oilfields would begin to flow to Turkey and the recent hydrocarbons agreement between Erbil and Baghdad provided opportunities to resume uninterrupted energy flows.
Prime Minister Ahmet Davutoglu and President Masoud Barzani discussed an array of issues regarding economic, energy, political, and military cooperation during Barzani’s trip to Ankara in July 2014 and Davutoglu’s trip to Erbil in November 2014. In Erbil, Davutoglu confirmed Ankara would send military advisers to train members of the Peshmerga. Turkey also announced it will open a refugee camp in Duhok, with a total capacity of 35,000 people and continue providing additional humanitarian support for IDPs and Syrian Kurdish refugees who sought refuge in Turkey or the KRI. Turkey’s support for the KRG is important as the Region hosts over 1.5 million IDPs from across Iraq and a few hundred thousand refugees from Syria. During the previous month, Ankara allowed the safe passage of Peshmerga forces to the besieged Syrian border town of Kobane to support YPG militia operating in the city as part of the international coalition to combat ISIS. Prime Minister Nechirvan Barzani’s subsequent visit to Turkey in December reiterated the strength of Ankara-Erbil relations during a time of uncertainty in the region. Sustained cooperation on economic and security relations between Ankara and Erbil is necessary to manage the ISIS threat and address refugee flows, irregular internal migration, and the disruption of economic activity.