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Ties that bind in Turkey

Energy and economic interdependence between Turkey and the KRG will transcend political crises

From the air, the extent to which Istanbul is pushing ever outwards becomes clear. The barren hills and wasteland have become construction sites for countless clusters of high-rise apartments buildings. Closer to the airport, tankers unloading petroleum products are a reminder that the oil and gas required to meet the demands of a swelling population must be imported, with 29% of Turkey's oil coming from northern Iraq.

This overwhelming reliance on imports (99% for natural gas and 90% for oil) is a matter of concern for the government. No surprise, then, that energy minister Berat Albayrak, unveiling a new strategy for the sector, says one of the goals is to "decrease the country's dependence on foreign resources".

Given that most Iraqi oil bought by Turkey is now produced in areas controlled by the Kurdistan Regional Government (KRG), with the Kurds already upsetting Ankara by raising their flag in Kirkuk and talking about independence, the thought arises that energy relations might become strained. Not so, said Gün Kut, professor of international relations at Bosphorous University in Istanbul, as thick fog rolled off the famous waterway nearby: "Turkey's red lines have been crossed several times, but it's not reacted because of Turkey's dependence on Iraqi oil from the Kurdish region."

Kut says there are two other reasons why Turkey is restrained. Iraqi Kurds have cooperated with Ankara in pushing the Kurdish separatist group, the Kurdistan Workers' Party (PKK), "eastwards towards the Iranian border. Secondly, northern Iraq has opened itself up as a major destination for Turkish goods and there's a huge amount of Turkish investment there."

If the KRG were to declare independence, Kut continued, some would fear that "Turkish Kurds would become involved and try to create their own state". But most analysts doubt this because the PKK "don't have the military power to divide Turkey and they have no one to help them. The Iraqi Kurds won't advance the PKK cause because of their strong reliance on Turkey for oil exports."

Turkish sensitivities

Mithat Rende, a former Turkish diplomat and energy analyst, downplayed the idea of Kurdish independence as he gazed out over Taksim Square in central Istanbul. While the Iraqi Kurds had built many of the institutions of state, he doubted that "they would be able to survive as a completely independent unit. They would also have to think about the reaction of their neighbours, and they would certainly have to think twice about Turkey's sensitivities. For they need Turkey for their oil exports and revenues."

If the day came when Iraqi Kurds opted for independence, Rende continued, then "Turkey would not recognise it, for we back Iraq's territorial integrity. We would go on dealing with it as a federal region of Iraq."

The hold we have on the Iraqi Kurds is that we guarantee their oil money—Gün Kut

Rende also says that Turkey, with an eye on protecting the interests of Turkomen Iraqis, disagrees with the assumption that the Kurds have taken control of Kirkuk. He says the city "remains a complex issue to be resolved among the Kurds, the Turkomens and Arabs. You can't just go in and grab it. Many thousands of Turkomens have been kicked out of Kirkuk and you can't just say it's been 'Kurdishised' overnight." In claiming control of Kirkuk, he added, the Kurds are "biting off more than they can chew".

At present, Turkey places the revenue from northern Iraqi oil exported through Ceyhan into a Turkish bank account, before transferring 17% of it to Erbil and 83% to Baghdad, in line with the Iraqi constitution. "Of course, this is an infringement of the sovereignty of the Iraqi government," Kut said, "but it's a de facto situation. The Iraqi government protests, but it gets its money. And the hold that we have on the Iraqi Kurds is that we guarantee their money."

The strong political and economic interdependence between Turkey and the KRG has been strengthened by strained ties between Ankara and Baghdad. "With a different government in Baghdad," Kut said, "Turkey wouldn't be so keen on developing and deepening its relations with the northern Iraqi authorities. The very sectarian and exclusivist style of the central Iraqi government alienates Turkey. So when you have tense relations with Baghdad and need the country's oil that passes through Kurdish-controlled areas, you have to forget some of the red lines and cooperate with the Kurds."

Instability drives diversification

Ultimately, Turkey's best interests are served by stability. "Turkey is a large economy that functions entirely on imported oil," Kut said. "Whenever there's instability, in the Caucasus or the Middle East, the flow of oil and its price fluctuate. So for Turkey, it's very important to diversify its suppliers."

As well as looking for more diverse import sources, energy minister Albayrak says Turkey "will invest heavily in local coal reserves" as fuel for power stations, using "the latest green technologies". It would also step up efforts to develop nuclear power and renewables. Turkey's first nuclear station, at Akkuyu in Mersin province on the Mediterranean coast, is due for completion in 2023, with a second planned at Sinop in the north.

The new energy strategy also envisages the expansion of liquefied natural gas regasification facilities, on land and offshore. Separately, under a 2013 agreement between Ankara and Erbil, the KRG is due to export 10bn cubic metres a year of natural gas to Turkey from the Bina Bawi and Miran basins. Genel Energy, the operator of the fields, hopes to find a partner for the export project this year.

The prospect of more gas reaching the country comes against the background of decline since 2014 in domestic consumption, from 48.7bn cm to 46bn cm. Salihe Kaya, an energy expert at Seta, an Ankara think tank, says "this doesn't mean Turkey won't want to import Iraqi gas. On the contrary, the plan is to develop storage capacity to help transform the country into a gas hub." At present, there is only one gas storage facility, at Tuz Gölü. The target is to raise storage from the current level, of 2.7% of consumed gas to 20%, in line with the best European practice.

So while the line on the energy triangle connecting Turkey with federal Iraq remains shaky, the one to Kurdish northern Iraq looks solid, despite political and security vicissitudes.

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