Pipeline politics in the Kurdistan Region

A complex diplomatic dance between three old foes at the heart of the Middle East that involves many billions and very high political stakes began to emerge this week at an historic event in Erbil, the capital of the autonomous region of Kurdistan in Iraq.

The event was the third annual Kurdistan-Iraq oil and gas conference in a place which had no energy industry just a decade ago and which is now seen as the last frontier of onshore oil production in the world.

The prestigious conference was attended by nearly a thousand senior energy executives, including from nearly 60 foreign companies in the region, and by senior diplomats. But all eyes were on the energy ministers for Turkey and Kurdistan, Taner Yildiz and Ashti Hawrami respectively.

The first remarkable point is that Yildiz was at the conference. Last year, the aviation authorities in Baghdad pointedly banned him flying into Erbil in a crude and counterproductive display of sovereignty. This year, the minister first flew to Baghdad to meet ministers before visiting the conference in Erbil.

The evidently good personal chemistry between Yildiz and Hawrami is testimony to a long sought-for and radical reshaping of relations between Turkey and Kurdistan. Just a few years back they were near to armed conflict with strong fears that success for Iraqi Kurdistan would encourage separatist Kurds in Turkey.

However, the development of a brand new energy sector with about five per cent of the world’s oil and a century of gas has irreversibly changed the equation. Turkey is seeking to become a world economic giant but has few energy resources itself and needs reliable supplies from its neighbour. Turkey becoming a new hub for secure and diverse energy supplies will also benefit Europe and the UK.

In the past year, Kurdistan has been trucking oil to Turkey. The road to the border is jammed with lorries and tankers and Turkey is the principal trading partner of the Iraqi Kurds.
But trucking is not a sustainable export route and in the last year a new pipeline has been constructed. It is now ready, tested and tried and will export up to 350,000 barrels of oil per day in the coming year. This could rise to two million bpd in the coming years. The Kurdistan region will soon become a net contributor to federal coffers in Baghdad and account for a substantial proportion of the much-needed oil revenues of the country.

Yet some in Baghdad, where successive regimes have repressed the Kurds and conducted genocide, are wary and suspicious. Many retain a Baghdad-knows-best approach and chide the Kurds for smuggling oil and acting outside the federal constitution agreed in 2005. They claim that the Kurds will transform economic into political independence.

The Kurds feel they have waited long enough to see the fruits of their natural wealth. There are huge pent-up demands for infrastructure – schools, hospitals, roads, bridges – as well as diversifying their economic base through developing tourism and agriculture. Some public services are far ahead of those in the rest of the country but improving the quality of health and education is a priority for its people.

The Kurds insist that they have the right to exploit and export energy as they see fit within the constitution while all revenues are shared by the Iraqi people. The Kurds should receive 17 per cent of all revenues, though this is about 10 per cent in practice. The sticking point with the export revenues is how Turkey pays for them. Do revenues go to Baghdad or to Erbil to be shared out or can they be held in a state account in Turkey until Erbil and Baghdad finally agree a robust and reliable revenue sharing formula? Maximum transparency can reassure the federal government that exports are properly measured and monetised.

Behind these technical matters is a debate about whether Iraq can stay together. The Kurds insist that Iraq as a whole will benefit from their greater economic dynamism which flows from their superior security having enjoyed a headstart over the rest of the country – Saddam Hussein left in 1991. Their prime minister Nechirvan Barzani told the conference that it is ‘very difficult to trust anyone who wants to decide our destiny’ and that its new energy sector means that ‘the door has been opened to the world.’ He added that the Kurdistan region was a ‘security pillar of Iraq.’

An amicable resolution, supported by Ankara, is eminently achievable without anyone losing face. We can then come to see this hiatus as a storm in a teacup before Iraq finally accepted that it is a binational and federal country and that all will gain from the new natural wealth of the Kurds and their new links with the Turks. It is a win-win position which can turn foes into friends and is now moving towards its finale.

As Yildiz put it: ‘let’s not break each others’ hearts but talk to each other.’ Given the old hatreds and rivalries in the Ankara-Erbi-Baghdad triangle this will be an historic volte-face and one that could transform the Middle East.

Gary Kent is director of the all-party parliamentary group on the Kurdistan region in Iraq, and is writing from Erbil on his 18th trip to Iraq since 2006. He writes in a personal capacity.

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