Turkey, Kurdistan and the Future of Iraq: Time for Washington to Tune Back In

With last week's headlines dominated by Egypt's presidential elections, negotiations on Iran's nuclear program, and fresh atrocities in Syria, it would have been easy to miss a major development out of Iraq that in time could have equally momentous consequences for the future of the Middle East. I'm referring to the announcement that the Kurdistan Regional Government (KRG) and Turkey have agreed — in principle at least — to build a series of pipelines that will allow the Kurds to export oil and gas directly to Turkey and, from there, onward to the rest of the world. The U.S. should be paying close attention.

Until now, the KRG's ability to develop its substantial energy riches has been held hostage to its dependence on export pipelines controlled by the central government in Baghdad. To get any oil to international markets — and, in turn, to get its fair share of revenue from those sales — the KRG has largely been at Baghdad's mercies.

Iraq's oil ministry has sought to exploit its position of strength to coerce concessions from the KRG on a long-stalled national hydrocarbons law. In particular, Baghdad has demanded veto power over exploration and development contracts that the Kurds are negotiating with international oil companies. At least 40 such contracts have already been signed over the central government's vociferous objections — including a breakthrough agreement late last year with the global energy giant, Exxon Mobil.

Baghdad has struck back on multiple fronts. Companies signing contracts in Kurdistan have been black-balled from competing for concessions in the mega-fields of southern Iraq. Kurdistan's access to Iraq's pipelines has been restricted. And as often as not, the central government has simply withheld payments that foreign operators are owed under their Kurdish deals. The latest row over compensation led the KRG in April to suspend exports altogether, which were scheduled to be as high as 175,000 barrels per day in 2012.

The oil dispute, of course, is at the center of a much larger argument, still unresolved, about the very nature of the new Iraqi state. The Kurds, scarred by a brutal history of subjugation at the hands of Arab rulers in Baghdad, are determined that their survival — political, economic, and, yes, physical — will never again be subject to the central government's diktats. Yearning in their hearts for independence, the Kurds since 2003 have reluctantly bowed to geo-political realities and agreed to work toward a unified Iraq — but only on the condition that the country evolve toward a truly federal state, with Baghdad's authority strictly limited by constitutional guarantee and the Kurdistan region's autonomy assured. Having primary say over the fate of its energy resources, and a reliable, equitable claim on Iraq's revenue stream, are for the KRG essential elements of any durable national compact. 

Baghdad, needless to say, has had a much different view. Under Prime Minister Maliki, the inclination has clearly been to revert to the modern Middle Eastern norm of a strong, centralizing state, where all political, economic, and security issues of consequence are directed by the national government. From this perspective, full-blown federalism is no recipe for stability, but rather a prescription for weakness, chaos, and fragmentation. Lebanon at best; the former Yugoslavia at worst. The KRG's oil contracts are perceived as a dagger aimed at the heart of the Iraqi state: disrupting policy with respect to the nation's most important resource; undermining the authority of the central government; and ultimately intended to underwrite a future Kurdish dash for independence that would rip the country asunder.

It's not hard to see how these conflicting visions, left unmediated, could trigger an unvirtuous action-reaction cycle. And the dynamic has only been exacerbated in the wake of the U.S. withdrawal from Iraq last December, as Maliki's bent for concentrating power is increasingly viewed — by Kurds, for sure, but by many other Iraqis as well — as veering dangerously in the direction of a new authoritarianism. Political opponents have been targeted for arrest, including Iraq's Sunni vice president. More than 18 months into his second term, Maliki — in contravention of a power-sharing agreement — has yet to yield personal control over the defense, interior, and intelligence ministries. He has further been accused of politicizing Iraq's judiciary and central bank, while subverting the army's chain of command and turning its best equipped, best trained units into his own praetorian guard. And the list goes on.

This is the fevered context for assessing the recent pipeline deal with Turkey. At an energy conference in Kurdistan's capital, Erbil, the KRG oil minister (standing alongside his Turkish counterpart) unveiled construction plans that, by 2013, could allow up to one million barrels of oil per day from Kurdish-controlled fields to be exported directly to Turkish ports and refineries. Similarly ambitious plans exist for delivery of Kurdish gas. Rather than flowing first through Iraq's central treasury, all revenues from these exports would come directly to the KRG — which, according to the oil minister, would take its fair cut before sending the remainder on to Baghdad.  

The potential significance is not hard to calculate. Under current arrangements, the Kurds are supposed to receive 17 percent of Iraq's national budget — about $10 billion this year. At current oil prices of approximately $100 per barrel, the pipeline deal with Turkey could eventually have more than three times that amount flowing annually into the KRG's coffers. Once that happens, the Kurds' vulnerability to Baghdad's economic coercion disappears, replaced by a financial model more than adequate to sustain any KRG bid for independence.

Of course, none of this can be lost on Turkey, which for decades has struggled to deal with the grievances of its own quite sizable Kurdish minority — including a devastating 30-year war against the terrorist PKK. Indeed, fear about the possible spillover effect on Turkish territorial integrity has long made opposition to Kurdish autonomy in Iraq a cornerstone of Ankara's national security policy.  

Yet increasingly that assumption has been thrown into question. The last several years have witnessed a genuine sea-change in Turkish-KRG relations. Turkish companies make up the largest group of foreign investors in Kurdistan. Iraq is now Turkey's second biggest export market, with Kurdistan responsible for the bulk of that activity. Should direct energy sales commence, the KRG could well become Turkey's most important economic relationship. 

Strategically, Turkey is clearly placing a growing premium on the valuable contribution Kurdistan could make to its energy security. Not unlike China and India, Turkey's fast growing economy (as much as 7 percent per year) cannot be sustained without huge additional energy inputs. Its current situation of heavy dependence on supplies from Russia and Iran is obviously sub-optimal — not least because new sanctions threaten to cut Turkey off from the U.S. financial system unless its imports from Iran can be significantly reduced. Ensuring that Kurdistan's ample energy supplies flow through Turkey would certainly help address that dilemma, as well as dramatically advance Ankara's aspiration of becoming one of the world's most vital oil and gas transport hubs, particularly for exports to Europe. In short, a special patronage relationship with Iraqi Kurdistan — and its estimated reserves of 40-50 billion barrels of oil and 3-6 trillion cubic meters of natural gas — could carry huge benefits for Turkey. 

Perhaps even more important, however, is the security angle. For years, Iraqi Kurdistan was viewed in Ankara as an integral part of Turkey's PKK problem, serving as the terrorist group's strategic depth and staging ground. Today, the KRG is increasingly viewed as part of the solution to Turkey's most pressing national security threat, a potential ally in delegitimizing PKK violence and encouraging a broader political accommodation that fully reconciles the Turkish state and its disgruntled Kurdish populace.

A second component to Turkey's changing security calculus concerns Iran, of course, and the intensifying regional rivalry between Ankara and Tehran, laden by a long history of conflict and Sunni-Shiite antagonism. Most acute in Syria — where Iran stands as the Alawite regime's main champion and Turkey its chief opponent — the brewing cold war is also being played out fiercely on the Iraqi front. Especially in the wake of Maliki's targeting of his Sunni vice president, Turkey seems more convinced than ever that the Shiite-dominated government in Baghdad has fallen to Iran's orbit. Personal recriminations between Maliki and Turkish Prime Minister Erdogan reached a boiling point earlier this spring, culminating in Turkish flags being burned at a demonstration in Basra. In this environment, a stable, secure (and mostly Sunni) Iraqi Kurdistan, pre-disposed to favor Turkey over Iran, and engaged in a showdown of its own against Baghdad, looks like a natural ally to Ankara, a potentially vital buffer on an otherwise dangerous southern border.  

Exactly how far Turkey is prepared to go in its new relationship with the KRG remains to be seen. For many experts on Turkey, as well as U.S. officials, it's difficult to imagine the current dalliance with Erbil as anything more than a tactical play to secure economic benefits and gain leverage over Iran and Baghdad. In this view, independence for Iraqi Kurdistan remains a bright red line that Ankara will never cross.

Perhaps. But it's increasingly hard not to consider that the ground may be shifting in very significant ways. The fact is that few of the experts would have predicted the extraordinary warming of relations that's occurred in just the past few years. The sight of Erdogan visiting Erbil in 2011, with Turkish flags flying side-by-side with Kurdish flags, was truly remarkable. So, too, the red-carpet treatment that Turkey granted visits by KRG President Masoud Barzani this past April, and Prime Minister Nechirvan Barzani just a few weeks ago. The fact is that last week's pipeline announcement was no impulse development, no quixotic response to the latest flare up with Baghdad or Tehran. On the contrary, it was the product of several years of careful deliberation and discussion, in which Erdogan was intimately involved. Rest assured that the Turks realize full well the kind of boost they are providing a possible independence narrative out of the KRG. Whatever Ankara's ultimate purpose in doing so, it appears increasingly possible that the dramatic advances in relations with the Kurds could be the harbinger of a much more important strategic transformation to come in southwest Asia.

At a minimum, U.S. policymakers would be wise to take seriously the prospect of a fundamental paradigm shift in Turkey's relations with the KRG. The implications for the security and stability of Iraq and the broader region could be huge, with equally important consequences for U.S. interests. Unfortunately, the Obama administration appears for now more or less oblivious to developments, at best an irrelevant spectator to the high-stakes geo-strategic game now playing out in the region.

It's imperative that Washington gain a much better understanding of Turkey's strategic direction with respect to Kurdistan and Iraq, and do everything possible to develop a common approach — or at least avoid unpleasant surprises. And if in fact a truly federal, democratic and unified Iraq that puts as much oil as possible onto world markets remains an important U.S. interest — as it should, especially in light of the current squeeze on Iranian oil sales — then helping the KRG and Baghdad resolve their intensifying political conflicts, including over the national hydrocarbons law, should again become a top priority for American diplomacy. While the Obama administration might like indulging the fiction that their hands-off approach to Iraq is encouraging its politicians to solve their own problems, the reality is that outside actors — be it enemies in Iran or allies in Turkey — are aggressively pursuing their own national interests and deeply involved in determining not only Iraq's future, but potentially the map of the Middle East. That's a game that America very much needs to be in, the sooner the better.