Erbil, capital of Kurdish-controlled northern Iraq, is moving towards implementing concrete plans to export the region’s oil and gas reserves to Turkey, which will strengthen its relationship with Ankara and further antagonize Baghdad. The Turkish government is preparing to set up an escrow account at a state-owned Turkish bank to collect proceeds of Kurdish Regional Government (KRG) energy sales. Turkey and Iraqi Kurdistan signed a package of breakthrough contracts last week that will see the semi-autonomous region’s oil and gas shipped to international markets via pipelines through Turkey.
While Ankara-Erbil links are crystallizing, Iraq’s central government is mired in conflict over oil rights. The extent to which Erbil will share oil and gas proceeds with Baghdad is a major point of contention. Kurds believe the national charter gives them free reign, to a point. The Kurdish Regional Government takes 17 percent of the total national proceeds and Baghdad, they contend, gets the rest. Baghdad however believes the central government alone has the authority to govern Iraqi energy contracts.
The Iraqi parliament has yet to adopt an oil-and-gas law that would settle the matter. According to Adnan al-Janabi, chairman of the Iraqi parliament’s oil-and-gas committee, “I don’t think [parliament has] the ability to bring about a consensus for promulgating an oil-and-gas law, and a revenue-sharing agreement, two things that are essential to keeping Iraq together.” An energy deal between Turkey and Kurdistan, says Baghdad, would be “an encroachment on the sovereignty of Iraq.”
Iraq’s central government wants Turkey to support Kurdish exports being made through Iraq’s central State Oil Marketing Organization. On November 27th, Iraq warned Turkey that the impending deal would “seriously harm relations.” Baghdad’s December 1st decision to ban Turkish private planes from flying to Iraq’s autonomous Kurdish region demonstrates that Baghdad is prepared to push back against Turkey’s political maneuverings.
Ankara-Baghdad relations turned frosty in the wake of Iraq’s contentious 2010 election. Ankara supported the secular/Sunni Allawi block which lost out to Nouri al-Maliki’s Shiite party. As Soner Çağaptay contends, Turkey is uneasy about the potential for a “Shiite axis” along Turkey’s southern border. Fear of Iranian/Shiite influence could, in part, explain Turkey’s efforts to tighten political and economic ties with the predominantly Sunni Kurds of northern Iraq despite the political imbroglio they confront with their own Kurdish population.
Turkey believes Iraq provides the biggest challenge and opportunity in terms of competing with Russia and Ukraine to become a major European energy transit hub. According to International Energy Agency estimates, Iraq is capable of accounting for half of the growth in the world oil market. Oil and gas pumped through Turkey from both Azerbaijan and Iraq would allow Ankara to compete, and would bring Ankara a step closer to the energy security, economic opportunity, and enhanced political clout it so desires.
The agreement between Ankara and Erbil is driving a larger wedge in the already frosty relations between Ankara and Baghdad. Geography and regional circumstances make Ankara’s relationship with Erbil more important than its relationship with Baghdad. Ankara must tread softly, however. An empowered Kurdish region may jeopardize Iraqi stability, introducing greater tensions between a Turkey backed by Erbil and a Baghdad susceptible to Iranian influence.
This article was first published in Global Risk Insights.