Iraq is a promising frontier for foreign companies. But now the renewed war is destroying the past few years' progress. German companies are among those abandoning the country, leaving potential riches untapped.
"What's happening here is a tragedy. I can only hope that reason and peace return to Iraq at some point," says construction entrepreneur Erst-Joachim Trapp from the town of Wesel in western Germany's Rheinland industrial heartland. He's visibly moved when he talks about Iraq. His family-owned company, which he manages together with his son, has been active in Mesopotamia since the early 1950s.
Trapp first went to Iraq in 1952, when he was just seventeen, to serve as his own father's interpreter. The deep contacts he developed over decades were very helpful for the company's business in Iraq. "It's crucial to have good partners who live in the country and know their way around," he told DW. At the end of the day, he said, it doesn't matter very much whether a king or a parliament governs in Baghdad. "Locally, the power is with the sheikhs. That's been the case for centuries and it's still the reality today. If you have good contacts with the local sheikh, you're pretty secure in business terms."
New dangers for old structures
It was in this context that Trapp's construction company started a project in 2012 in Anbar province in western Iraq. Current developments took the company by surprise. "When we started there two years ago, we were told that this area in the far West, close to the Syrian border, was the safest. But now, that's exactly the area where al Qaeda or ISIS has taken control," the 77-year-old entrepreneur said.
Construction continues at the site, but exclusively with local staff and workers. German engineers have been pulled out for security reasons. Siemens and other international firms have likewise sent their people to safer regions, or pulled them out of Iraq altogether.
Anbar ranks with Niniveh and Salaheddin as one of the three most conflict-ridden regions of Iraq at present. That's confirmed by Steffen Behm, Middle East and North Africa specialist at the German Chamber of Industry and Trade (DIHK). That's why DIHK is counseling German companies to take precautions and pull out their staff. "There are reports that Indian and Turkish workers are being kidnapped. That's a very clear sign that the region isn't safe right now, and that dangerous incidents are possible at any time."
DIHK has two offices in Iraq. One is in Erbil, the capital of the autonomous Kurdistan region. The other is in Baghdad, the national capital. DIHK's local experts support German firms in their search for reliable local business partners and consult closely with the German Foreign Ministry on security issues.
Great opportunities, but big problems
At the moment, according to DIHK, 30 German companies have long-term representatives or subsidiaries in central Iraq, in or near Baghdad, or in the southern metropolis of Basra. The northern Kurdistan autonomous region hosts about forty German firms.
DIHK's Steffen Behm: Iraq's foreign exchange reserves offer lucrative infrastructure contract possibilities
Steffen Behm says that most of them are in the business of logistics, construction, health services, electric power generation or power distribution. "German firms' interest in Iraq grew strongly after 2008," he told DW. "But it has ebbed again somewhat over the past two years, because of the worsening security situation."
Iraq was Germany's sixth-largest export market amongst Arab countries last year, with total exports of 1.3 billion euros ($1.77 billion). In comparison to the United Arab Emirates, at 10 billion euros, or to Saudi Arabia, at 9 billion euros, that's not very much.
But if one takes a longer-term view, Iraq is an interesting market, and not only because it has the world's second largest oil reserves, says Behm. "Iraq has foreign exchange reserves of about $80 billion. The money is basically meant to be invested in infrastructure projects, but for the time being it's on ice, because the Iraqi Parliament hasn't agreed on a budget for 2014."
Caught between hopes and fears
That's why a backlog of deferred projects has been building for the past several months. If and when a national budget is agreed, then a number of projects would come back on stream very quickly, and at that point, Behm says, lucrative contracts will again be available for German companies - but only for those that have kept themselves well positioned in the meantime.
"Those that are already on the ground, those that stayed even during the embargo period, they'll be able to quickly return, once the situation has stabilized to some degree. But for new players, I expect restraint to continue for a while yet, because of the higher insecurity."
Construction entrepreneur Ernst-Joachim Trapp echoes Behm's caution, and won't make any predictions about further developments in Iraq.
"If I knew what will happen, I'd make an excellent advisor to Obama and many others," he said with a laugh. "The Iraqi people and the leaders I know are actually quite sensible people, so I hope that they find a solution, a way to reunify the country and build a better future for it."