BAGHDAD (Reuters) - Iraq's Trade Ministry has stopped registering Turkish companies, it said on Thursday, as the neighbours sparred over Ankara's refusal to send back a fugitive Iraqi vice president who was sentenced to death in absentia.
The ministry insisted the move was made for "regulatory and statistics" purposes, but Turkish businesses in Baghdad were worried the decision was taken because of the dispute between the two capitals and a government source told Reuters it was political.
Vice President Tareq al-Hashemi can remain in Turkey as long as he needs to, Prime Minister Tayyip Erdogan said on Tuesday. An Iraqi court sentenced Hashemi to death by hanging on Sunday after being convicted of running death squads, a charge he says was politically motivated.
Iraq is Turkey's second biggest export market after Germany, with trade volume reaching nearly $12 billion (7.4 billion pounds) in 2011, Turkey's economy minister said during a visit to northern Iraq early this year.
But Iraq's Prime Minister Nuri al-Maliki and Turkey's Prime Minister Tayyip Erdogan have publicly traded insults several times this year as relations have soured.
Kadhim Mohammed, an advisor in the ministry of trade, said the decision to stop registering companies - which will prevent any new Turkish firms opening in Iraq, but should not affect existing ones - had "nothing to do with politics".
"There are some administrative and regularity problems," Mohammed told Reuters. "It is a mere business thing
He said the measure was ordered by the trade minister on Wednesday and did not know how long it would last.
A government official who works on trade issues, however, told Reuters the move was motivated by politics.
"The decision was taken for political reasons since Hashemi is there and also due to the last visit of the Turkish foreign minister to Kirkuk," he said.
Last month, Iraq said Turkey had violated its constitution by sending its foreign minister without permission to visit Kirkuk, a city at the heart of a dispute between Baghdad and the country's autonomous Kurdistan region.
The Turkish embassy in Baghdad told Reuters it had been informed that a temporary freeze would be applied to all foreign licensing eventually, but that those from Turkey were being covered first because Turkey is Iraq's biggest trading partner.
According to the trade ministry, 1,529 foreign companies are registered in Iraq, up from 109 before the U.S.-led invasion in 2003.
Reporting by Aseel Kami; Editing by Barry Malone and Robin Pomeroy