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Kurds’ Oil Deals With Turkey Raise Fears of Fissures in Iraq

Posted by on December 5, 2013

ISTANBUL — The sharp, dry mountains that run between Turkey and Iraq have long marked a front line in the battle between the Turkish government and Kurdish separatists where cross-border attacks took many lives on both sides.

Though a rapprochement has calmed the border, the United States fears stability may now be in even greater danger. The problem is not war — but commerce. Iraqi Kurds are selling oil and natural gas directly to Turkey, infuriating Washington and the central government in Baghdad, which fear that oil independence could lead Kurds to declare a broad independence and the fracturing of the nation.

Even as sectarian killing is again spiking across Iraq, and the Syrian civil war destabilizes the region, American officials in Baghdad say the flow of oil to Turkey may be the greatest potential risk to Iraq’s cohesion.

But a year-and-a-half-long diplomatic drive by the United States to stop the flow has so far failed, reflecting Washington’s diminished influence in the region, even with its two longtime allies. Not only will trucks continue to travel daily from the Kurdish region to two Turkish cities on the Mediterranean coast, and not only will the Kurds continue to deliver oil via a pipeline to Turkey, but the parties plan to build a second pipeline, whose details have been kept secret.

“The Kurdistan deal with Turkey is a huge violation against the Iraqi Constitution because they didn’t make the deal with the coordination of the central government,” said Ali Dhari, the deputy chairman of the Iraqi Parliament’s oil and gas committee. “This means the stealing of the Iraqi wealth, and we will not allow it.”

The oil accords with Turkey, potentially worth billions of dollars, are part of a broader effort by Iraqi Kurds in recent years to cut their own energy deals — including exploration agreements with foreign companies like Exxon Mobil, Chevron and Gazprom — that sidelined the central government. The Kurds, and the Turks, say they will pay Baghdad its fair share. But officials in the capital have long claimed such arrangements are illegal.

The controversy is in part the unfinished business of the American occupation of Iraq. The failure of the Iraqi government to pass a national oil law, one of the benchmarks set by President George W. Bush when he announced the United States troop “surge” in 2007, has left Baghdad and Erbil, the Kurdish capital, in a perpetual feud over how to divide profits and who has the authority to make agreements with international oil companies.

Qasim Mishkhati, a Kurdish member of Parliament’s oil and gas committee, insisted that the wealth from the deals would be shared with the rest of Iraq, and that it was the responsibility of the regional government in the north to find international markets for its oil resources. “Kurdistan is working to increase the national income so that all Iraqis can enjoy better services and more wealth,” he said.

Although the mechanism for such payments has not been worked out, the Turks and the Kurds have indicated that they would adhere to the existing proportions for the division of national revenue, meaning Baghdad would receive 83 percent of the net profit and the Kurds would keep 17 percent.

But the alarm in Baghdad and Washington has grown with these oil deals, which appear to be part of a slow, long-term strategy by the Iraqi Kurds to pursue a path of increasing autonomy that experts say has one endgame: an independent Kurdish state.

Tens of millions of Kurds live in Iraq, Syria, Turkey and Iran, and they have long held ambitions for independence that for decades were thwarted. Now, amid the turmoil of the Middle East, Kurdish leaders are taking decisive steps to advance that dream, not just in Iraq, but also in Syria, where Kurdish factions recently declared an autonomous administration in the northeast.

The Iraqi Kurds run their own autonomous and relatively prosperous region in northern Iraq, control their own ports of entry, field their own army and intelligence service and conduct their own foreign policy. The Kurdish region also has separate visa rules, so an American, for instance, might wait weeks or months to secure a visa to Baghdad, but could buy one at the airport in Erbil. The region has also served as a safe haven for Sunni officials looking to escape the reach of the Shiite-led government, including former Vice President Tariq al-Hashimi, accused in 2011 of terrorism.

But the oil deals also highlight the drastic reshaping of regional alliances in the past few years. In 2003 Turkey, worried that the American invasion of Iraq would promote Kurdish independence, forbade American troops to use its territory to enter Iraq.

But now Turkey is in the process of making peace with its own Kurds, who have waged a three-decade insurgency against the Turkish state with bases in Iraq. In a region where Turkey has few allies these days, the Iraqi Kurds have become close partners.

For Turkey, though, the energy deals with Iraqi Kurdistan, which include oil and natural gas, underscore a persistent national challenge to secure reliable supplies of energy for its economy. Turkey boasts the Middle East’s largest economy but has few domestic energy sources. It has historically relied on two countries for the bulk of its energy — Russia and Iran — and a national priority for Turkey has been to diversify its sources of oil and gas.

The only place in the world where demand for energy is growing faster than Turkey is in China, and the only people who pay more for gasoline at the pump than Turks are Norwegians. In Turkey it can cost more than $120 to fill the tank of a compact car because of high taxes the government has levied in an effort to keep demand down

While Turkey and the Iraqi Kurdish regional government have slowly expanded their relationship in the past few years, they have recently agreed to something ambitious and broader: a multibillion-dollar pact that includes the building of the second pipeline, according to press reports and oil executives involved in the negotiations.

That deal comes as Turkish and Iraqi government officials have recently sought to mend ties that had soured in recent years, an effort that included a visit to Baghdad on Sunday by Turkey’s energy minister, who indicated Turkey would try to win Baghdad’s support for the deals with the Kurds. Turkey had supported the Sunni Muslim opposition in Iraq, angering the Shiite leadership that dominates the government in Baghdad.

“There has been a rapprochement between Ankara and Baghdad, but what I see in the energy policy of Turkey relating to Kurdistan still seems to be a fly in the ointment for the Ministry of Oil in Baghdad,” said Badr H. Jafar, the chairman of the Pearl Petroleum consortium, the largest private oil and gas investor in Iraqi Kurdistan.

The recent steps taken to improve the relationship between Turkey and Iraq — a reconciliation pushed by the Americans — now seem to be the best bet, analysts said, to achieve an agreement on an elusive national oil law to divide the country’s vast petroleum profits.

The Iraqi Kurdish leadership “is positioning itself for greater autonomy in negotiations with Baghdad, but as relations between Ankara and Baghdad continue to warm it is inconceivable that the K.R.G. will be allowed to export to Turkey without Baghdad’s consent,” said David L. Goldwyn, the State Department’s coordinator for international energy affairs during the first term of the Obama administration, referring to the initials for the Kurdistan Regional Government in Iraq.

Turkey, though, has said it will ensure that the government in Baghdad will be paid for any oil it imports from Kurdistan in accordance with Iraq’s revenue-sharing arrangement.

“If done correctly, these deals have the potential to generate huge revenues for Iraq, distributed by the Iraqi government in accordance with the Iraqi Constitution and for the ultimate benefit of the Iraqi people, including of course, the Kurdish region,” Mr. Jafar said.

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