"The Middle East, which hosts 65 percent of the world's oil reserves and Mesopotamia (Iraq), an important part of it, were Ottoman territories in the early 20th century. During its collapse, the Ottoman state was not able to preserve the oil within its lands nor was it able to process these resources. Conversely, the young republic was at least able to get royalties from Iraqi oil while it also secured its independence at the ‘table of the wolves,' settled in the aftermath of the ‘first war of apportionment'," says Uluğbay. According to Uluğbay, the last fight for the apportionment of oil is taking place.
Oil became commercialized at the end of the 19th century and transformed into an undeniable element of industrialization and economic development. “The US joined Britain, Germany and France in the fight to have control over oil fields after the end of World War I. Today, the battle is being fought to control oil and natural gas, along with routes to deliver these resources to world markets,” he says.
Uluğbay served as education minister and state minister in Democratic Left Party (DSP) administrations and is interested in a number of fields, including the economy and art. His work, first published in 1995, is still a reference book in energy-economy circles. DeKi Publications recently issued an updated edition of the book, which explains petro-political games since Ottoman times and includes additional documents on Turkey’s receivables from Iraqi oil. Sunday’s Zaman spoke with Uluğbay on the new state of Iraqi oil and the new power struggle that began with the recent war in the Caucasus region.
Petro-political moves have been made in the Middle East and the Caucasus for many years. How would you describe the new situation that emerged in the aftermath of the Georgian-Russian war in terms of oil apportionment?
The discovery of oil, the popularization of the automotive industry and the introduction of motor vehicles to the army has led industrialized countries, which lacked oil to back the process of industrialization, including Britain, Germany and France, to enter a race for control over oil fields. Considering that its own oil resources may be exhausted, the US also joined the race after the end of World War I. This started the first battle of apportionment over oil resources. Currently, the final fight is taking place to have control over oil and natural gas resources, as well as over routes to deliver these resources. Scholarly studies show that global oil production will peak in the short run, after which oil production will enter a decline. According to the research, during the 2019-2030 period natural gas production will peak. The increase in oil prices to $150 per barrel was a harbinger of this. The current decline in oil prices should not mislead us. This temporary development is a product of expectations that the world economy will soon suffer from stagnation.
What changed in the oil games after the collapse of the Ottoman Empire?
The Ottoman territory was only one of the fields in which the first fight for control over energy resources took place. Other battles took place in other regions. Back then, it was obvious that the reward for a fight for oil in Ottoman lands was massive. At that time, German and British experts who traveled to the region underlined that Mesopotamia was rich in natural resources. However, the first battle for oil in our country was carried out in the 1870s and was for Baku oil. Following this, Iraqi oil was targeted. Therefore, there has been no drastic change in the methods used for the fight to control energy resources after the collapse of the Ottoman state.
What were the other battles over oil in the Ottoman hinterland?
Some scholars argue that the real reason behind World War I was the ambition to seize oil assets in Ottoman territories. Likewise, history textbooks underline that German operations in World War II that took place in the Caucasus and North Africa were carried out to acquire oil resources in the Middle East. In addition to the justification that Kuwait was a province of the Basra Governorate in Ottoman times, one of the reasons for Saddam Hussein’s attack on this country was the allegation that it was extracting Iraqi oil in border areas. The last battle for oil in the world is taking place here as we speak.
You say in your book, “Iraq owes Turkey 30 billion barrels in royalties.” Additionally, you make mention of new documents clarifying the Iraqi oil-Turkey relationship. Please elaborate.
The first edition of the book, published in 1995, included 16 supplemental documents. The revised and expanded edition, published this year, includes an additional 25. I studied the issues regarding energy and oil since the release of the first edition. Throughout this process I had access to additional information and documents; I just wanted to share them with the readers.
I had access to the full texts of note exchanges dated 1932 which discussed the start of 10 percent royalty rights that Turkey would receive from Iraqi oil under a treaty signed on June 5, 1926. It became apparent that the amount of these royalty rights, which I calculated at 5.5 million barrels in the first edition of the book, is actually 29.5 million barrels because 3.5 million barrels were collected in the period between 1934 and 1954. The documents indicate that Turkey is still entitled to receive a total sum of 26 million barrels. It should be stressed that this is a figure from that time and that after being adjusted for inflation, this equals 30.2 million barrels of oil today.
Because there was no comprehensive study on these issues prior to the publication of “Petropolitik,” royalties to be received in connection with Iraqi oil were known as the Mosul oil royalties. They were clearly identified in budget bills. However, as I explained in my book in detail, the entitlement to royalties under the 1926 treaty should be calculated based on all revenues associated with the trade and production of oil and natural gas in Iraq’s territory. These royalties may always be claimed in any negotiations with Iraq.
So you are saying that Turkey may claim royalties from the Iraqi government. If this is the case, how can such claims be brought up in a way that would persuade the international community?
The right to royalties under this treaty may be replaced by a new one following a mutual agreement between the parties to the treaty. Unless this is done, Turkey remains entitled to receive these royalties in connection with Iraqi oil. The amount I mention in my book is based on oil production data in several other books. But the method to calculate the royalties is indicated in various documents. The fundamental documents that will serve as the basis for the calculations are the records of the Iraq Petroleum Company of that time. Therefore, it is highly likely that the amount, which will be calculated based on these documents, will exceed 26 million barrels. For this reason, these royalties may be claimed in proper venues. Additionally, the treaty, under which Turkey is entitled to receive a certain amount in royalties, has been ratified by the League of Nations.
The treaties and notes show that the Turkish Petroleum Company (TPAO), founded prior to the Iraq Petroleum Company, was granted the right to explore for oil in Iraq. Can Turkey claim this right today?
I think it is not legally possible to establish a connection between the royalties in connection with Iraqi oil and the right to explore oil in Iraq under the 1926 treaty. The claim to the royalties is still valid. Today, to receive the right to explore oil in Iraq, an application should be filed with the government to get necessary permits.
You are saying that a new strategy should be developed with respect to Iraqi oil. What is your proposal?
I mean this: If the new political structure in Iraq that is to emerge after the US and British occupation which began in 2003 ends does not grant exclusive rights to foreign companies to process Iraqi oil, Turkey may take necessary political steps to gain oil exploration privileges in this country. As far as I know, Turkey has made no such attempt yet. That said, some corporations with Turkish capital have obtained oil exploration rights in northern Iraq.
You say, “Special funds should be reserved for oil exploration.” What should Turkey’s place in the power struggle be in the Middle East and the Caucasus?
Unfortunately, Turkey failed to comply with the requirements of the oil age except in consuming oil products in large quantities while the world approaches the end of the oil age. The TPAO and private sector corporations failed to take necessary initiatives to explore for oil and natural gas. Brazil, which has a per capita income close to that of Turkey, explores for oil in many parts of the world, including the Black Sea region, whereas Turkey has yet to show the same interest. Turkey fails to explore for oil while Norway extracts oil in northern Iraq and many parts of the world.
The real problem is a lack of appropriation of risk capital needed for the exploration in this field. The problem is not a lack of a workforce. In recent years, public economic corporations and facilities were sold to domestic and foreign corporations. The total value of these came out to $35.8 billion. The total privatization revenues within the 2004-2008 period alone are close to $27.7 billion. The state could have used some portion of these revenues for oil and natural gas exploration as risk capital. Likewise, some of the large sums of taxes and levies collected from the sale of oil imported from abroad might have been reserved as risk capital for oil and natural gas exploration by the TPAO, the state oil and exploration company. Considering that oil production reached a peak, many states now pay attention to public corporations. Many states have created funds dedicated to oil exploration within their territories and in foreign countries.
It is hard to say Turkey did the same.
Yes, indeed. Turkey should reserve these funds. The TPAO and Turkish private corporations should be supported to make sure that they assume a greater role in securing oil and natural gas exploration and processing privileges through consortiums and joint ventures. Currently, China, India, Korea, Brazil, Indonesia and Malaysia are more active than Turkey on the global stage. Meanwhile, it is hard to understand why Turkey promulgated the Turkish Oil Bill in 2007, which runs counter to world developments.
How would you assess the emergence of a new global geostrategic network through oil and natural gas lines in the Middle East, Eurasia and the Caucasus?
A multidimensional network of pipelines has been evolving in the world over the years. There were a lot of options for investor countries to take oil and natural gas assets in the Caspian Basin and the Middle East to global markets. I touched upon why the Russian route was not picked. The least expensive option for the shipment of Caspian Oil to global markets is via Iran.
However, because of US-Iran tensions, this option has not been considered; this is why the Baku-Tbilisi-Ceyhan (BTC) pipeline option was taken into account. The route for Middle Eastern oil and natural gas considered by the Western world was by the Indian Ocean through Afghanistan and Pakistan. However, instability in these countries hampered the realization of this option.
Meanwhile, because of changing energy balances, attempts to take Middle Eastern natural gas and oil to China have also taken their fair share of attention. Like the Western world, China and India are eager to have Iranian natural gas and oil. For this reason, an Iran-India pipeline project is under consideration. China is investing $100 billion in Iranian natural gas and oil. Shipments of Iranian natural gas through the Nabucco project via Turkey to Europe are still under review. Likewise, the project to take northern Iraqi oil through Jordan to Israel to global markets by enhancing a pipeline constructed in 1934 is receiving a great deal of attention. This project is likely to compete with the current Kirkuk-Yumurtalık (Iraq-Turkey) pipeline.
So this race will continue…
A lot of pipeline projects that will transport energy resources will be in competition. New developments in political relations will keep the possibility of transition from one project to another alive. For this reason, Turkey’s emphasis on following the developments on a daily basis is not enough. It should estimate the probable developments and use the relevant game theory accordingly. Political and economic stability is one important factor for its ability to serve as a reliable and preferable route. Any change in the perceptions of the world on these issues may affect risk analyses and investment decisions. For this reason rulers should stay away from risky behavior and action because the world is in search of a solution on how to overcome an economic crisis.
Terror has existed since the first moves in petropolitics. What is the relationship between terror incidents in our country and petropolitics?
I addressed this in my book. For instance, during the War of Independence, insurgency and terrorism in southeast Anatolia were ignited and supported to make sure that Mosul did not fall into Turkey’s hands. It will suffice to recall one line from the text of a telegram wired by American Higher Commissioner to Turkey Adm. Mark L. Bristol from İstanbul to Washington on Feb. 20, 1920: “The British would consider using Kurds against the Turks in an attempt to keep Kurdistan under control.”
Considering the ongoing problems and developments in our country and other parts of the world, it will be seen that ethnic and religious differences play a great role in the breakout of these incidents. Terrorism is on the top of the agenda in all countries where there is a fight to take control of natural resources. Take Angola, Nigeria, Colombia, Indonesia, East Timor, Afghanistan, Iraq and others. Therefore, it would be naïve to think that natural resources do not play any role in the making of the big powers’ policies to support terror in Turkey. Remarks by British Empire Premier Henry Temple Palmerston (1855-1865) on the gist of this struggle should always be remembered: “We do not have eternal friends who would be on our side forever nor do we have permanent enemies. We have eternal interests and it is our duty to observe these interests.”
Every state has to protect its interests. Criticizing states seeking to maximize their interests would not be proper and this leads to laziness. The goal should be elevating the standards of your country and its democratic, secular and legal structure to an upper level. Societies attaining this goal would also attain social peace and harmony; such an attainment will subsequently minimize the likely impacts of terrorism and even eliminate them.
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