ALACO DISPATCHES: Turkey risks blowback with Kurdistan sanctions

ALACO DISPATCHES: Turkey risks blowback with Kurdistan sanctions
The citadel of Erbil, Kurdistan's capital.
By Yigal Chazan of Alaco September 26, 2017

As Iraqi Kurds prepare to celebrate what is anticipated to be an overwhelming vote for independence in the September 25 referendum, their elation will be overshadowed by uncertainties and dangers. In casting their ballots, they defied pressure from Baghdad and international powers and risked falling out with neighbours, especially Turkey, which currently affords Iraqi Kurdistan an economic lifeline.

Turkey has established strong commercial ties with the semi-autonomous Kurdish region of Iraq in recent years, exporting billions of dollars of goods and playing a key role in the development of its infrastructure. For its part, Erbil sees Ankara as a critical energy partner. A pipeline carrying oil from Kurdistan passes through Turkey to its Mediterranean port of Ceyhan, from where it is delivered to international markets.  

In advance of the non-binding referendum, Turkey voiced strong opposition to the ballot, and has been conducting military exercises on the border with Kurdistan, in an alarming downturn in relations.  For the Kurds of northern Iraq, even more concerning was a warning by Turkish President Recep Tayyip Erdogan of possible sanctions, which might impact Kurdistan’s oil and future gas exports.

Turkey, like Iran, is worried that an independent Kurdistan could heighten demands for greater autonomy amongst its Kurdish minority. Ankara also regards itself as the protector of the Turkoman community, ethnic Turks, in the highly contested oil city of Kirkuk, which lies just beyond the borders of Kurdistan but is claimed by the Kurdish Regional Government (KRG).

While Erdogan’s tough stance plays well with his nationalist supporters, he knows that his rigid position over the Kurdish referendum risks harming Turkey’s own financial and security interests in the region, and could undermine relations with Russia, which is establishing strong economic links with Kurdistan. Moscow has been noticeably quiet about the referendum. Unlike other key players in the Middle East, it did not urge the KRG to cancel the vote.

On September 25, the day of the referendum, Erdogan suggested that Turkey would be prepared to take unspecified military action and suspend Kurdish oil deliveries through the Ceyhan pipeline if Kurdistan pursued independence.

“After (this referendum vote) let’s see through which channels the northern Iraqi regional government will send its oil, or where it will sell it. We have the tap. The moment we close the tap, then it’s done,” he warned. His Prime Minister Binali Yildirim had earlier threatened to close Turkey’s border with Kurdistan and deny it access to Turkish air space.

Any interruption to oil deliveries – through the pipeline or truck shipments – would be a big blow to the Kurdish economy, which has long been reliant on the money generated by the region’s considerable energy reserves. The dependency has become more acute following the collapse of an oil export and revenue sharing deal with Baghdad over two years ago. But the fall in crude prices has meant that current production is well short of budgetary needs, with the territory struggling to sustain a bloated public sector, millions of refugees fleeing IS violence, as well as its Peshmerga forces.

However, if Ankara was to impose punitive sanctions on the KRG, they might backfire in several ways, depending on their severity. They could provoke tit-for-tat restrictions on Turkey’s exports and some of the 1,300 Turkish companies operating out of Kurdistan; and Erbil may review its willingness to allow Turkey to pursue Kurdish Workers’ Party, PKK, militants hiding in the Qandil mountains in the north of Kurdistan.

Sanctions could also complicate Russian state-controlled oil company Rosneft’s recent investments in the Kurdish oil sector and plans for the construction of a $1bn pipeline delivering gas from the region to Turkey, and onwards to European markets. The deal would help Rosneft compete with Russia’s energy giant Gazprom on the export of gas to Europe.  

While Moscow and Ankara have now resolved their dispute over the Turkish army’s downing of a Russian jet in Syria in late 2014, their relations could come under strain if Turkey jeopardised Russia’s economic engagement in Kurdistan. If it were to do so, Turkey would also be acting against its own interests.

Ankara stands to benefit from the Rosneft pipeline as it will help satisfy growing domestic gas demand and play an important role in establishing the country as a regional energy supply hub for Europe. Moscow already delivers Russian gas across the Black Sea to Turkey through the Blue Stream pipeline and a second pipeline, taking a similar route, is under construction. Significantly, Russian President Vladimir Putin is set to visit Ankara later this week to discuss regional developments, with the Kurdish referendum likely to feature high on the agenda.

Erdogan will doubtless be mulling over possible blowback from any actions he takes against Erbil. Iran has already banned flights to and from Kurdistan and closed its borders. In an effort to ease international and regional nerves, KRG officials have stressed that they won’t declare independence unilaterally. They see the vote as strengthening their hand in negotiations with Baghdad over self-determination and disputes about budget allocation, oil sales and the status of Kirkuk.

So while Erdogan does not have to worry about imminent secession, his threat levels have reached such a pitch that nationalist supporters may view him as weak if he now retreats. For Turkey and Kurdistan’s sake, the hope is that any measures he imposes will not be too punitive.

Yigal Chazan is an Associate at Alaco.  Alaco Dispatches is the business intelligence consultancy’s take on events and developments shaping the CIS region.