Iraqi Kurdistan referendum poses challenge for Turkey – Financial Times

11:20 • 21.09.17

By Mehul Srivastava (Istanbul), Erika Solomon (Erbil) and David Sheppard (London)


As international opposition to an independence referendum in Iraq’s Kurdistan region mounted, Turkish tanks rolled up to northern Iraqi border, kicking up clouds of dust as they conducted drills. Footage of the military exercise was broadcast across Turkish television — a clear warning to the Kurdistan Regional Government, which called next week’s vote in the autonomous oil-rich region. Ankara has joined Washington, Tehran and Baghdad in pressuring the KRG to call off the referendum, fearing that it risks destabilising the region and emboldening Kurds elsewhere to push for secession. For Turkey the spectre of Kurdish independence presents a particularly complex challenge. Ankara has been fighting Kurdish militants inside Turkey for more than three decades. Yet Turkey and the KRG are staunch allies, economically and militarily. For nearly a decade, Turkish President Recep Tayyip Erdogan has championed Masoud Barzani, the KRG leader, as a counterweight to the Kurdistan Workers’ party (PKK), the outlawed group that has waged an insurgency against Turkey. The PKK has hide-outs in the Qandil mountains, 90km from Erbil, Kurdistan’s capital, and the KRG has tolerated Turkish operations against the militants inside its territory. The regional government has even allowed Turkey to build military bases in areas it controls. There are also strong economic links between Ankara and the KRG. Turkish companies have helped build the KRG’s infrastructure, including constructing a $550m airport in Erbil, and some 1,300 Turkish companies operate out of the autonomous region.

But perhaps most critical are the oil and gas links between the two. Landlocked Iraqi Kurdistan exports at least 550,000 barrels of oil per day — the KRG’s main source of income — via a pipeline through south-east Turkey to the Mediterranean. The KRG has also worked with Rosneft, the Russian oil company, to expand the existing pipeline, invest in production and build a new pipeline to connect Kurdish gasfields to Turkish power plants. But Mr Barzani’s determination to push ahead with a referendum is testing the KRG’s relationship with Ankara. For Mr Erdogan, it has raised the prospect of a domino effect, one that risks stirring up his country’s restive Kurdish minority into reviving talk of breaking away from Turkey. He has threatened sanctions against the KRG, describing the referendum as an “eclipse of reason”. The tough stance appeals to Turkish nationalists and provides an opportunity for Mr Erdogan to broaden his domestic support base. But he also has to balance Turkey’s economic and strategic interests. A western diplomat said Ankara had benefited greatly from its relationship with Mr Barzani’s Kurdistan Democratic party (KDP) and was unlikely to risk that to put serious pressure on the Kurdish leader — even as military exercises on the border continue. “I think there are reasons Turkey may support it [the referendum], even if, in public, Mr Erdogan has to cater to his base,” the diplomat said. “Remember the Turks have [military] bases in northern Iraq, thanks to the KRG.”


Turkey does have levers it can pull to help ensure Mr Barzani treats the referendum’s results as symbolic, rather than binding. It could expel KRG representatives in Turkey, recall Turkish consular staff, halt Turkish Airlines flights that are crucial to the government, and reduce exports to the region, including electricity, said Inan Demir, an analyst at Nomura. “Most important of all, [it could] restrict oil,” Mr Demir wrote in a note to clients. It “would be an especially forceful move — in October 2016 [latest data available] 85 per cent of all the oil that KRG produced was sold via the Turkish port of Ceyhan”. But cutting off the oil pipeline would affect Turkey too — Mr Barzani’s government pays transit fees to Ankara and Turkey is heavily reliant on imports to meet its own fast-growing energy needs. Such a move would also damage Turkey’s goal of becoming a reliable transit route for energy exports from the Middle East and Russia to Europe, and Ankara is considered unlikely to take action that could raise tensions with Moscow. Instead, Mr Erdogan is keeping all his options open, analysts and diplomats said. “He is baring his teeth and threatening to close the wallet,” said one diplomat. “But that doesn’t mean he’s willing to do either — with Iran likely to step in the minute he pulls out, Mr Erdogan will remain engaged with Mr Barzani. All the other options are far more distasteful.”




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