The tug-of-war between Iraq and Erbil, the capital of Iraqi Kurdistan, over control of the autonomous region’s oil reserves seems to be entering a new phase. On May 22, Kurdish leaders announced that the first shipment of oil from Iraqi Kurdistan had been loaded for sale in Turkey—despite fierce opposition from the federal government in Baghdad, which claims it has the exclusive right to oversee oil exports.
Ankara has previously declared that it would wait until Baghdad and the Kurdistan Regional Government (KRG) had resolved their dispute before “turning on the tap” of Iraqi Kurdistan’s energy exports. What has changed?
Keeping the lights on
The answer may be found in Turkey’s own increasing hunger for energy and rising fiscal deficits. Currently, Turkey imports 90 percent of its oil and gas, mostly from Russia and Iran. The latest figures show that Turkish energy imports in 2013 amounted to 55.9 billion US dollars, which makes about 22.2 percent of total imports and about 56 percent of the total trade deficit of the country. Should Turkey be able to find alternative sources of energy, it could substantially slash its energy bills. Iraqi Kurdistan, which is thought to be home to some of the world’s last great untapped onshore hydrocarbon reserves, could offer a remedy to Ankara’s Achilles' heel: energy insecurity.
But for Turkey to benefit from northern Iraq’s oil riches, it would require bold steps by the ruling Justice and Development Party towards resolving the country’s own longstanding Kurdish conflict. The political will to overcome the obstacles in this path may be found, however, thanks to the potential payoff it offers in other areas of foreign policy.
Over the last two years, Turkey has pursued a strongly anti-regime policy in regards to the Syrian conflict. Prime Minister Recep Tayyip Erdoğan has repeatedly called on the Syrian president to give up power, and has sheltered the Syrian opposition in his country, equipped them with military hardware, and assisted them diplomatically on the regional and international stage. Ankara’s extensive diplomacy arguably convinced the White House to assist the Syrian rebels, even though the strongest factions in the Syrian opposition are jihadists. This support to the opposition has come despite the close links between Damascus and Tehran, and Turkey’s reluctance to cross the latter, a major energy supplier.
Iran regards the survival of President Bashar Al-Assad’s regime as a priority in its regional policy. Accordingly, it has sent members of its Revolutionary Guard Corps to advise and train his forces, and used Iraqi land and airspace to transfer weapons to Assad’s regime. It has assisted the efforts of its Shi’a allies in Lebanon and Iraq to go to Syria to fight alongside the Syrian army. In retrospect, Turkey seems to have misjudged Iran’s ability to help Assad keep himself in power and reverse Turkey’s policy in Syria.
Tehran’s willingness to do so and Turkey’s silence on the issue can be explained by Ankara’s dependence on Tehran to keep the oil and gas flowing. According to the US Energy Information Administration (EIA), in 2011 Turkey imported 51 percent of its oil from Iran, falling only slightly in 2012 to 44 percent. In addition, Iran was the source of 19 percent of Turkey’s gas imports.
Accordingly, Turkey’s leaders have not just failed to confront Iran’s influence and activities in Syria, but have also lobbied to have Iranian energy exports to Turkey exempted from international sanctions. The Turkish economy simply could not cope with a fuel shortage, at least in the short term, as evidenced by Turkish Energy Minister Taner Yıldız’s statement last October that "we are importing about 5 million tons of oil, and if we [reduce more] than that, then that would threaten our energy supply security."
Understanding Ankara’s weakness, Iran has agreed to lower gas prices on the condition that Turkey double its imports—increasing Turkey’s energy bill while reducing the impact of the international sanctions. "We are willing to lower the gas price supplied to Turkey, upon condition that it will increase the volume of imported gas from Iran," Iranian Oil Minister Bijan Namdar Zanganeh said in January.
Furthermore, Iran continues to insist on charging a premium for its gas, despite Ankara’s repeated requests to lower the price and taking Tehran to an international court of arbitration . For example, documents leaked in 2012 showed Turkey was paying 330 US dollars per cubic meter for Azeri gas and 400 dollars for Russian, while Iran charged Ankara 505 dollars for the same amount.
This underscores Tehran’s leverage over Ankara, in the same way that European countries have been limited in their responses to Moscow's actions in Ukraine, and previously in Georgia, due to their massive dependence on Russian gas supplies.
Turkey faces the same problem, being even more dependent on Russian gas than supplies from Iran—Russia accounts for about 56 percent of its total imports. During the recent crisis in Crimea, Turkey was careful not to push its concerns about the fate of the peninsula’s Tatars too hard, for fear of angering the Kremlin. The incorporation of Crimea into the Russia Federation in March through a controversial referendum dashed Turkish dreams of reviving Turkic culture and renewing relations with the Tatars, who faced terrible oppression under Stalin.
Turkey, which gets 12.5 percent of its Russian gas via Ukraine, has also felt the impact of price disputes between Kiev and Moscow in previous years. In 2006 and 2009, when Moscow temporarily restricted its exports to Ukraine, customers further downstream, including Turkey, were affected. As events in Ukraine continue to unfold, Ankara could suffer once again from the same problem.
Ankara also fears that Turkey’s energy security could become the hostage of any crisis or natural disaster in its immediate neighborhood. For example, during the Georgian war in August 2008, Azerbaijan’s energy transit route to Turkey was shut down. The flow of Iranian natural gas to Turkey was also disrupted several times between 2003 and 2008 due to cold weather.
The southern solution
All these problems with Iran and Russia make a more secure energy supply from elsewhere very attractive to Turkey’s leaders. However, a deeper relationship with the KRG comes with its own problems that Ankara will have to deal with.
The KRG and Baghdad have been at loggerheads over oil and territory for the last several years. Presently, the disputes have centered on who should have authority over the export of oil and gas from fields within the boundaries of Iraqi Kurdistan: The KRG, or Iraq’s federal government?
Each has its own interpretation of the article of Iraq’s constitution that deals with oil revenue, but—rightly or wrongly—the KRG has been able to establish what seem to be irreversible facts on the ground by wooing dozens of international oil companies. Majors including ExxonMobil, Gazprom and Total and have signed more than 50 oil and gas production sharing agreements with the KRG. In addition, it has completed its own independent oil pipeline that continues to pump oil to world markets.
Underpinned partly by Turkey’s need for energy, Ankara and Erbil have forged unprecedented diplomatic, economic and political ties, but this may be at the expense of ties with Baghdad. The agreement between the KRG and the Turkish government to handle Kurdish oil is being challenged by Iraq’s federal government, which considers it an encroachment on its national sovereignty. Iraq has already sought to take the matter to the International Court of Arbitration in Paris, accusing Turkey of allowing the “smuggling [of] oil from Kurdish fields,” a process that could take years to settle.
Despite this, Ankara seems to find the goods on offer irresistible. The KRG’s minister of natural resources claims that Iraqi Kurdistan could have as much as 100–200 trillion cubic feet (Tcf) of natural gas, while its oil reserves are put at 45 billion barrels. One of the world’s oldest known oil reservoirs, in Kirkuk—an area under the de facto control of the KRG—is estimated to still contain 9 billion barrels, to say nothing of what remains to be discovered.
According to a report by Kurdish newspaper Rudaw, Turkish oil companies hold a 25 percent share of the oil exploration blocks in Iraqi Kurdistan. Lured by the promise of the Kurdistan Region’s oil and gas, Turkey established the state-backed Turkish Energy Company in 2013, which has signed a multi-billion dollar energy package with the KRG. That deal could see as much as 2 million barrels of oil and 10 billion cubic meters of gas exported to Turkey annually, through pipelines built—in part—by other Turkish state-owned companies.
However, as well as the anger this has created in Baghdad, the US has also opposed bilateral deals between the KRG and Ankara, despite being allies of both. Thus Erbil–Baghdad issues have taken on a regional and international dimension, where Ankara seems to support Erbil, while Tehran and Washington—archenemies that disagree on everything else—seem to agree on backing Baghdad’s attempts to maintain its exclusive authority over the country’s oil sector.
A final hurdle
Aside from the international dimensions of its efforts to fuel its economy with Kurdish energy, Turkey faces a high domestic hurdle: its own issues with its Kurdish population.
In doing so, Turkey has to discard longstanding fears that an economically and political viable Kurdish region in Iraq will inevitably stir up turmoil in Turkey’s Kurdish population. Indeed, the last several years of close cooperation between KRG and Ankara suggest that this fear is unfounded. Nonetheless, the only way to be sure is to eliminate the problem entirely, and reach a final settlement that resolves the grievances of the republic’s Kurdish population.
Ultimately, if Turkey’s leaders truly wish to break their country’s dependence on Iranian and Russian energy, they may have no choice but to back Iraqi Kurdistan in its dispute with Baghdad and to respond to the demands of its own Kurdish citizens.