Tuesday, May 29, 2012

Iraq’s Kurds’ Gambit On Pipelines To Turkey May Not Pan Out

In May 2012, the Kurdistan Regional Government (KRG) announced that it had signed a deal with Turkey to build one new pipeline in conjunction with the Iraqi Oil Ministry, and that it wanted to build two more independent of Baghdad. If completed, those latter two would be a major step towards Kurdish independence, because it would free it from depending upon Baghdad for money. The problem for the Kurds is that while they are making much fanfare over the proposal, Turkey is likely just using them to pressure Prime Minister Nouri al-Maliki, which it is in the middle of a dispute with. Turkey would like Kurdish oil and gas to flow through it, but it is not ready for an independent Kurdistan.
Turkey's Energy Minister Taner Yildiz (left) and Kurdish Natural Resource Minister Ashti Hawrami (right) at an energy conference held in Irbil May 2012 at which the two countries signed a pipeline deal (Reuters)
On May 20, 2012, Turkey signed a pipeline deal with the Kurdistan Regional Government (KRG). The pipeline is already in the works. The first stage is supposed to be finished by October 2012, and carry oil from the Taq Taq field in Irbil. The second part would connect to the existing northern pipeline that is run by the Oil Ministry, and be completed by August 2013. It would have a capacity of 1 million barrels a day. More importantly, Natural Resource Minister Ashti Hawrami said that two more pipelines would be built to Turkey, one for oil and the other for natural gas, independent of Baghdad. The point of the other two lines would be to allow the Kurds to directly ship natural resources to Turkey, bypassing the central government. Minister Hawrami claimed that the KRG would take 17% of the profits from the two lines, which is its percentage of the national budget, and deliver the rest to Baghdad. Kurdistan has always wanted its own pipelines to further exploit its natural resources. Hawrami claimed that the region could easily produce 300,000 barrels a day of petroleum, and reach 2 million in a few years. Currently, Kurdistan is exporting no oil, because it is in a payment dispute with the central government. If successful, this deal would be a major coup for the KRG.

The Iraqi government is obviously upset with this news. It warned Turkey over the deal, and the Kurds. Officials have demanded that all contracts go through Baghdad. It already considers all the Kurdish oil deals illegal, because they have not included the central government. At the same time, Deputy Premier Hussein Shahristani, who is in charge of the country’s energy policy, threatened to cut petrol supplies to Kurdistan in retaliation. He held off on implementing that policy, only after consulting with President Jalal Talabani. Baghdad has been the greatest opponent of the Kurds’ oil policies, so it was no surprise that they have taken this stance. It wants one national energy policy for the country, and sees the Kurdish one as a threat. The dispute between the two is taking on added importance, because Irbil and Baghdad are in an argument over Prime Minister Nouri al-Maliki’s administration. The Kurdish agreement with Turkey then, is seen not only as a challenge to the Oil Ministry, but the premier as well.

Having its own pipelines would be a major step towards Kurdish independence. Minister Hawrami stated that if the KRG had its own oil infrastructure, it would not be dependent upon Baghdad for funds. The region already smuggles oil and derivatives to Iran and Turkey, which provides it with its own revenue, but it is a small amount compared to the 17% of the national budget it gets each year. That money provides 95% of the KRG’s needs each year. That fact is something that the Iraqi government has held over the Kurds. It’s also a major reason why the Kurds have followed their own oil policy, because they eventually want their own sovereignty. It has signed oil contracts since 2002, even before the fall of Saddam Hussein, and passed its own oil legislation in 2007. It has also aimed at getting Turkish companies to enter its market to try to get their political support. In total, it has more than 40 petroleum contracts today. At the same time, it depends upon Baghdad to export, because it controls the infrastructure. It has come to two agreements to export petroleum, but both times they broke down over paying the energy companies. The problem for the Kurds is that with oil production taking off in the south, the Iraqi government does not need Kurdish petroleum exports as much. That poses a dilemma for the Kurds, because they can protest and end its shipments all it wants, but it won’t have much affect upon policy. If it ever got its own pipelines, it would be free from all these restrictions, and be a major step towards it becoming its own country.

The success or failure of the Kurdish oil strategy really depends upon Turkey. Turkey needs oil shipments, and would like to be a major transportation hub of energy from the Middle East and Asia to Europe, which is in the Kurds’ favor. At the same time, it does not want Kurdish independence. It has its own Kurdish problem, and a Kurdish state would not help with that. Unfortunately, the pipeline deal appears to be a political ploy by Ankara. It is currently in opposition to Premier Maliki’s rule in Iraq. It has called him sectarian, is siding with his rival Iraqi National Movement, and is hosting Vice President Tariq Hashemi who is facing terrorism charges at home. The Kurdish pipeline deal seems like part of this effort to pressure the premier. Until Ankara changes its position on Kurdish independence it is highly unlikely that the KRG will ever get its way on building its own oil infrastructure, and cuttings its ties with the federal government.


Arraf, Jane, “Iraq’s unity tested by rising tensions over oil-rich Kurdish region,” Christian Science Monitor, 5/4/12

Associated Press, “Iraq warns northern Kurdish region that its oil deals with Turkey must have Baghdad approval,” 5/21/12

Brosk, Raman, “Any attempt to deduct Kurdistan’s budget is “collective” punishment, says Kurdish Blocs Coalition,” AK News, 5/3/12
- “Shahrestani suspends order to stop petrol export to Kurdistan,” AK News, 5/22/12

Hadi, Hemn, “KRGs oil production could easily reach 300,000 barrels per day, says minister,” AK News, 5/14/12

Hassan, Rebin, “KRG will produce two million barrels of oil per day by 2013, says minister,” AK News, 5/20/12

International Crisis Group, “Iraq And The Kurds: The High-Stakes Hydrocarbons Gambit,” 4/19/12

Middle East Financial Network, “Turkey Aims to Contain Iraq, Iran,” 5/20/12

Rasheed, Ahmed, “UPDATE 2-Iraqi Kurdistan to push ahead with oil export plan,” Reuters, 5/20/12

Tree, Oliver, “Iraq Warns Turkey To Halt Kurdistan Pipeline Deal,” International Business Times, 5/22/12

Van Heuvelen, Ben, “KRG claims right to independent crude exports,” Iraq Oil Report, 5/10/12


Seerwan said...

The questions are, is Iraq proper more valuable to Turkey than the KRG?

The answer is no.

While the KRG has the potential to supply all of Turkey's oil needs of about 700,000 bpd (, even if KRG reaches 2 million bpd production that is still dwarfed by Iraq's 6-12 mil bpd potential.

Additionally, there are three times as many Iraqi Arabs than Iraqi Kurds, and Turkey needs non-KRG Iraq to conduct trade with the GCC and Basra over land using railroads and highways.

Iraq is far more valuable to Turkey than the KRG.

Joel Wing said...

I think both Kurdistan and the central government are important to Ankara, and its tried to balance the two. The problem for Turkey is that they don't like Maliki, and haven't since the 2010 elections, hence their backing of Allawi. As the pipeline deal and the Hashemi case shows, they have no problem using Kurds and Sunni politicians to make their point with Maliki.

With regards to oil, they probably hope that in the long term Kurdistan and Baghdad will come up with an oil law and there won't be such an issue about getting oil from all parts of Iraq.

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