Turkey reportedly signs secret energy deal with Kurds

By bne IntelliNews April 18, 2013

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Risking a big falling out with Baghdad and further censure from the US, Turkey has secretly signed an agreement with the Kurdistan Regional Government (KRG) on oil and gas imports from the semi-autonomous area in northern Iraq, unnamed sources claimed on April 17.

The accord was signed last month when Turkish Prime Minister Recep Tayyip Erdogan met Iraqi Kurdish Prime Minister Nechirvan Barzani in Ankara, said the sources, according to Bloomberg. Neither Turkish, Iraqi or Kurdish officials would comment on the claims.

According to the sources, the deal that will see the Kurdish government sell oil and gas directly to Turkey has so far has bypassed the Iraqi government in Baghdad, which has warned the Kurds not to sign separate energy accords. Turkey may also take the Kurdish government's stake in concessions operated by Exxon Mobil, one source added.

Incurring the wrath of the central Iraqi government, Ankara has been flirting with the Kurds for some time, as it eyes the large energy deposits sitting just across the border. Turkey is struggling to find the energy to power the rapid development of its economy, and international sanctions on Iran - Turkey's second largest supplier of hydrocarbons - makes finding new sources even more urgent.

However, stepping into Kurdistan places it in the centre of a potential hornet's nest as Baghdad fights to keep control of the country's energy exports. The US has expressed worries that Turkey's meddling could risk fracturing Iraq. Turkey's lust for energy, however, appears to outweigh such pressure, and even the fact that Ankara has been fighting a vicious war against Kurdish separatists for the last 30 years. In that conflict, Erdogan has led a "peace process" that is poised at a delicate stage of imminent withdrawal from Turkey by the rebel PKK.

Iraq's deputy prime minister, Hussain al-Shahristani, said on April 17 that his government has reiterated to Turkey that it doesn't allow oil agreements without central government approval, and that Turkey must respect Iraqi sovereignty.

However, Turkey insists that while international companies are working in Kurdistan, it cannot afford to sit to one side and watch them scoop an energy bonanza. The reported deal to kick start Turkish imports from the region spells a potential windfall for oil and gas companies such as Genel Energy, the largest producer in the Kurdish region. Genel CEO Tony Hayward said last week that he expects a new pipeline transporting oil from the Kurdish region to Turkey to be finished by mid-year.

Reports on April 16 claimed that a link to the Turkish port of Ceyhan - from where Kurdish crude can be shipped to international markets - will be up and running within months. Genel is currently taking oil from its Taq Taq field to Turkey by truck, bypassing the federal pipeline system in an operation Baghdad calls "smuggling" and over which it says it will sue.

The KRG signed a production-sharing agreement with Exxon Mobil in 2011, covering six blocks, and has also sealed agreements with other US companies. KRG Oil Minister Ashti Hawrami said at the time: "We believe a decentralized oil policy and the sharing of power and wealth is essential to Iraq's unity." Iraq's government insists it alone has the sole authority to export crude oil and sign deals, but Kurdistan says the constitution allows it to agree to contracts and ship oil independently of Baghdad.

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