[email protected]

December 14, 2012, Friday

Kurdistan oil: a strategic shift

The oil and natural gas fields of northern Iraq controlled by the Kurdistan Regional Government (KRG) could be the next battlefield of the Middle East.

Even if that does not turn out to be the case, and I think a military clash is not very likely, these fields will definitely be the main factor reshaping the strategic relations of Turkey with the Middle East. I came to northern Iraq last week for a three-day visit upon an invitation from Arbil's Işık University to join a conference on the Turkish economy. With my colleagues from Zaman, we had the opportunity to hold very informative meetings with a number of eminent personalities from the KRG, including Sinan Çelebi, the minister of trade and industry, and Sefin Dizai, a government spokesman.

Arbil gives the impression of being a city with a dual nature: Skyscrapers, luxury hotels and wealthy malls form the Arbil arising from oil revenue, while the old bazaar, with its poor shops and dilapidated houses, is the traditional Arbil that received a flow of Kurdish villagers from the 4,500 villages that were destroyed during the war. Oil production is limited to 300,000 barrel per day for the moment; two-thirds of this is exported to Turkey by truck. Minister Çelebi told me that potential production is estimated to be 1 million barrels per day. Iraq possesses the largest oil reserves in the world, and a sizeable amount of them are in Kurdistan. Energy experts estimate that the Kirkuk region alone has 7 percent of the world oil reserves. It is therefore not very difficult to understand why Kirkuk is so disputed between Arbil and Baghdad. Mr. Çelebi told me that natural gas reserves, not yet exploited, can satisfy the consumption of Turkey (over 40 billion cubic meters per year) for 300 years to come and

that he considers northern Iraq a natural part of Anatolia.

All this energy wealth has to be exported through pipelines across Turkey, which has a common frontier with the KRG. According to The Washington Post (Dec. 11), Turkey is negotiating “a massive deal in which a new Turkish company, backed by the government, is proposing to drill for oil … and build pipelines.” The KRG recently signed contracts with energy giants such as ExxonMobil, Gazprom and others. The KRG officials we met in Arbil asserted that the strategic rapprochement with Turkey is the only way to secure the KRG's autonomy and welfare. A high-ranking Turkish official told us that “if Turkey loses this opportunity, it will go down in history.”

Indeed, Turkey, which had only a few years ago considered the Kurdish autonomous region in Iraq a major threat to its unity, now sees it as a strategic partner, and with good reason. Iraq this year became Turkey's top trade partner, taking over the spot from Germany. Turkish exports are expected to reach $12 billon in 2012. I had been curious about the share of Kurdistan in these exports for some time now, as there are no separate statistics. I posed this question to Trade and Industry Minister Çelebi. According to him, more than 90 percent of the KRG's imports come from Turkey, and probably 20-30 percent of the Turkish goods are then resold in southern Iraq.

The northern Iraqi market obviously presents huge potential for Turkey, eager to increase its exports in order to sustain its high external deficit and to fuel its economic growth. Minister Çelebi said that, six to seven years ago, the KRG budget has been limited to $150 million, import duties being the sole source. Nowadays, budget revenues have reached $10-12 billion. Per capita income, which was about $300, has now reached somewhere between $4,000-5,000. If all the oil and gas deals are carried to fruition and the black gold starts to flow freely through the pipelines, these figures will easily multiply threefold over the next couple of years.

The Turkish-Kurdish courtship is of course not welcomed by everyone. First of all, the principal protagonist, Baghdad, is furious about this strategic rapprochement. Baghdad knows that if the north of the country is economically integrated into the Turkish economy, the way to an independent Kurdistan will be wide open. Iran also worries about the intensifying links between Turks and Kurds. But it can still include Shiite southern Iraq in its zone of influence. Washington is also worried about the Turkish-Kurdish courtship. Victoria Nuland, the US Department of State spokeswoman, declared two days ago that the US strongly opposes any Turkey-KRG oil deal as long as there is no green light from Baghdad.

These reactions are quite understandable. What is remarkable is the strategic shift exhibited by Turkey regarding the KRG. A quasi-independent Kurdish state bordering Turkey's Kurdish region is no longer considered a threat but as a historic opportunity. If Turkey can find a political solution to its Kurdish problem, I believe a new era will begin in the Middle East.

Previous articles of the columnist