by Denise Natali | Al-Monitor
The proposed energy framework between
Turkey and the Kurdistan Regional Government (KRG) has raised hopes for
independent Kurdish oil exports and a viable way to pay international oil
companies (IOCs) in the Kurdistan Region. Some think the framework could
eventually give the Kurds an alternative revenue source that replaces Ankara
for Baghdad as the region’s financier. Yet, while encouraging Kurdish energy
development, Turkey still has made no clear commitment to an independent
pipeline that would circumvent Iraqi state sovereignty. This is because
Ankara’s endgame is not only securing Kurdish crude, but maximizing Turkish
commercial interests in Iraq. Doing so will likely entail negotiations with
Baghdad that include Erbil, but which prioritize Iraq’s territorial integrity,
secure Ankara’s interests and seek concessions from the Kurds.
Turkey’s quest for Kurdish crude is not
surprising, given its geographical proximity to the region, domestic energy
needs and growing influence over the KRG. Ankara is not only well-positioned to
continue "bartering" operations with Erbil — exchanging trucked,
Kurdish hydrocarbons for diesel products — but to further entrench its energy
interests by establishing a state-affiliated company that would invest in
Kurdish oil fields. This tactical move would allow Ankara to circumvent
Baghdad’s blacklist of companies without jeopardizing its state-led (TPAO)
hydrocarbons investments in southern Iraq.
Still, beyond creative media reporting
and sporadic, inflammatory remarks by Turkish Prime Minister Recep Tayyip
Erdogan, Turkey has taken no real steps to promote viable, independent Kurdish
exports that would jeopardize Turkish investments in the rest of Iraq. Erdogan
may have stated the KRG’s rights to sign its own energy deals within the
framework of the Iraqi constitution, but he has affirmed that Turkey’s
interests were to increase volumes of the existing pipeline. To ease concerns
by Iraqis and international partners, Turkish Minister of Energy Taner Yildiz
further indicated that Turkey remains committed to southern Iraq. He also
suggested ways that Turkey could develop a joint project with his “Iraqi
brethren,” including a third pipeline that would export southern Iraqi crude to
Turkey.
A deeper look at the proposed Turkey-KRG
energy deal reveals that talk — or threats — of an independent pipeline has
largely been a mantra of the KRG and vested business interests, but which has
not materialized on the Turkish side of the border. Some IOCs are certainly
building feeder pipelines inside the Kurdistan Region, but these internal
pipelines represent cheaper and more efficient means to transport crude from
remote fields to storage facilities and quasi-refineries, and not a
Turkish-backed independent line. These internal pipelines will likely continue
to help source the local market and border trucking exchanges. With
negotiation, they could potentially be connected to the existing Turkish-Iraqi
line.
In fact, given the larger geopolitical
trends and vested commercial interests in the region, Ankara may be leveraging
Kurdish crude as a means of getting the best energy bargain with Baghdad. Doing
so will require a rapprochement with the Iraqi government — an effort supported
by the US as it attempts to engage Iraqi and Turkish officials on shared energy
interests despite personal tensions between Erdogan and Iraqi Prime Minister
Nouri al-Maliki. The United States also continues to affirm its commitment to
Iraq’s territorial integrity and warns the KRG against challenging Baghdad’s
authority over energy contracts and exports without a national hydrocarbons
law.
Indeed, Ankara will likely pursue its
energy interests with the KRG regardless of US warnings, much the way it
continues to import small quantities of Iranian crude with gold payments
despite sanctions. The KRG also has become more resilient to US admonitions,
insisting it is equal to Baghdad and disinterested in any federal
energy-management plan. Involved parties insist that bilateral energy deals
involve private business exchanges and do not violate the constitution or Iraqi
sovereignty.
Still, external influences over a
large-scale Ankara-Erbil export scheme should not be underestimated. Thus far,
no regional allies and foreign governments have shown support for a bilateral
energy deal that would violate Iraqi sovereignty. It also is unlikely that IOCs
or foreign governments would buy into a proposed “escrow account” that would
give Ankara control over Iraqi oil and export payments. The high risk of legal
retaliation by Baghdad against Turkey, banks and private companies involved
would prevent disbursements in any direction until fundamental decisions over
hydrocarbons, including an oil or revenue-sharing law, are negotiated. Turkey’s
energy calculus also will be shaped by Baghdad’s next bidding round, the Syrian
crisis and the survivability of the cease-fire with the Kurdistan Workers
Party.
The real question, then, is not whether
Ankara and Erbil will deepen their energy ties, but the nature of these
commercial exchanges, who benefits and the extent to which they will alter the
existing political order. While Turkey affirms that an energy framework could
lead to a "win-win-win" situation between Ankara, Erbil and Baghdad,
the final agreement will likely be a state-to-state energy deal. In this
outcome, the KRG will remain an essential partner, but not necessarily on terms
that Erbil can fully control.
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