Turkey’s oil diplomacy with Iraq's
By David O'Byrne - FT
July 30, 2012
Turkish oil trucks at Turkey-Iraqi Kurdistan border. Photo:
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Ordinarily, news of six road tankers carrying tiny
quantities of unrefined crude oil 700km to a coastal
port would not warrant much comment.
But the fact that six Turkish tankers have carried
crude from Kurdistan region in Iraq's north to the
Turkish port of Iskenderun is a different matter.
The trucks entered Turkey on Thursday carrying crude
extracted by companies operating in northern Iraq in
defiance of the central government. Their final
destination was unclear but it appeared the crude
would be exported from one of several port
facilities around the bay of Iskenderun, two of
which are operated by Botas, Turkey’s state pipeline
According to an announcement this month by Taner
Yildiz, Turkey’s energy minister, the cross border
trade will be allowed to increase rapidly, with
crude being traded for petroleum products to be used
in the Kurdish enclave. This trade flourished before
the US invasion of Iraq in 2003 and was allowed to
continue until 2007, when it was stopped following
protests from the Iraqi government.
Iraq’s central government in Baghdad and the
Kurdistan Regional Government (KRG), which has
enjoyed effective autonomy since the early 1990s,
have continually failed to reach an accommodation
over the exploitation of hydrocarbon reserves in the
Baghdad maintains that all of Iraq’s mineral
resources remain the property of the Iraqi state and
that the KRG has no right to sign contracts with oil
companies for their extraction or to organise
The KRG has ignored Baghdad and signed production
sharing contracts with more than 40 operating
companies, including the LSE quoted Genel Energy,
headed by former Tony Hayward, former boss of BP.
Last week, Baghdad banned Chevron from bidding for
licences elsewhere in Iraq after it reached a deal
with the KRG.
Baghdad says the contracts – which give operators a
share in oil profits – are illegal, as it only
recognises service contracts under which operators
are paid an agreed fee.
However, three years ago Baghdad allowed crude from
the region to be exported through Iraq’s main crude
export pipeline to Turkey’s Mediterranean oil hub at
Ceyhan, with the KRG receiving a share of the
revenue. Oil companies were allowed to claim
expenses but no profits.
Those exports ended in April after the KRG
complained it had received no money since May 2011.
Soon afterwards, Yildiz said Turkey would allow the
trade to resume.
The decision looks risky for Ankara. Turkish
officials has stressed that recognising the KRG’s
right to control its oil in no way amounts to
recognition of the enclave’s independence from
With its own sizeable and often restive Kurdish
population, Turkey is keen avoid the creation of an
independent Kurdish state on its south eastern
border – even one reliant on Turkey for revenue from
However, with Baghdad appearing increasingly
unwilling to compromise its Kurds, the KRG will look
to Turkey for a solution. Turkey appears keen to
provide one in return for the stability an
established hydrocarbon trade will bring.
Clearly, that cannot be provided by a few road
tankers, and plans have already been mooted for
Calik Enerji, a Turkish company whose chief
executive is the son in law of prime minister Tayyip
Erdogan, has applied for permission to build an oil
pipeline from the Iraq-Turkey border to Ceyhan.
another Turkish company, has applied for a license
to import gas from fields in the Kurdish enclave.
Either pipeline, if completed, would lock Turkey and
the KRG into a long term, mutually beneficial
Equally significantly, it would oblige the KRG to
address the issue of the Kurdistan Workers Party (PKK),
a Kurdish separatist group fighting to establish a
Kurdish state in south east Turkey which operates
from bases in northern Iraq.
Described as a terrorist group by both the US and
the European Union, the group has frequently
targeted Turkey’s pipeline infrastructure. In the
past month it claimed responsibility for sabotaging
the Kirkuk-Ceyhan oil pipeline and the Iran-Turkey
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