Oil: Turkish-Kurdish Oil Deals Upset Baghdad

Source: Voice of America

Dorian Jones

ISTANBUL — Growing tensions between Baghdad and the semiautonomous Iraqi Kurdish government over control of the country's energy reserves is threatening to pull neighboring Turkey into the deepening dispute. This past weekend, Iraq warned Ankara that such trade with the region could damage its relations with the central government in Baghdad.

Iraq's semiautonomous Kurdish regional government has started to send dozens of tankers of crude oil to neighboring Turkey. The shipments will be refined and sent back to the Kurdish enclave. Turkey said last week that it had begun importing five to 10 road tankers of crude a day from the northern region of Iraq and the volume could rise to 100-200 tankers per day.

This has angered the Iraqi government of Prime Minister Nouri al-Maliki who called on Ankara to immediately end the arrangement.

But Sinan Ulgen, head of the Istanbul-based international relations research center Edam, thinks Baghdad will be disappointed

"No, I don't think Ankara will comply, essentially for two reasons: one, relationship between Maliki government is quite problematic. Turkey accuses Maliki of trying to grab power. So Ankara does not feel any sort of need to please the Maliki government; secondly Ankara does not want to take a step that would endanger the position of the Kurdish regional government in its own dealing with Baghdad," Ulgen said.

The Kurds and the Arab-led government in Baghdad have been arguing over the right to develop and export the north's natural resources. Baghdad says the region has no right to sign deals unilaterally and that exports must go through the state-run pipelines. Kurds argue that the constitution gives them the right to sign agreements without consulting Baghdad.

Felah Mustafa Bakir is the head of foreign relations for the Kurdistan Regional Government.

"We have done nothing in violation of the Iraqi Constitution. We have respected the Iraqi Constitution and we want to help the people. We have been able to develop sector. We have been able to produce oil for 175,000 barrels a day, that we did not have single barrel in the past," Bakir said.

Despite the controversy, Iraqi Kurds have been signing contracts with international oil companies, including U.S. oil giant Exxon.

Michael Howard is an adviser to the Iraqi Kurdish energy ministry. He says the Kurdish regional government realizes the potential in selling to Turkey.

"Turkey is a growing economy at the moment, it aims to be one of top 10 economies within 10 years. They don't have a great deal of energy themselves. So they will be looking around at their neighbors for their energy security. But also Turkey could be a major a transit route," Howard said.

For years, Baghdad and Iraqi Kurdistan have been trying to hammer out a solution by passing a so-called hydrocarbon law.  Baghdad believes petroleum policy should be set at the federal level and comply with its interpretation of the constitution. Irbil, in contrast, wants to be able to award production contracts and plan export pipelines on its own terms.

Political observers say there is little hope of a solution.

Ulgen said irrespective of whether a new law is passed, Ankara is already eyeing Iraqi Kurds' energy as a vital source.

"I would expect Turkey would continue to buy oil even if the hydrocarbon law issue is not resolved. In the long run Turkey is looking at the opportunities in northern Iraq in order to allay some of its concerns over energy imports. So from that perspective in the medium and long term it will provide an alternative to Turkey's dependency on Iran," Ulgen said.

Ankara has been cutting its energy imports from neighboring Iran to comply with international sanctions against Tehran over its nuclear program.  That, analysts say, has given added impetus to its growing economic and political ties with its Iraqi Kurdish neighbors, despite what Baghdad says.