Written By Oil trading between Kurdistan and Turkey has always been a contentious issue, but recent developments have brought some much-needed clarity to the situation. With Iraq recently winning a landmark victory in their ongoing conflict with Kurdish forces, the future of oil trading in the region is looking brighter than ever. In this blog post, we’ll take a closer look at what this win means for both parties involved and explore how it could shape the landscape of oil trading between Kurdistan and Turkey moving forward. So buckle up and let’s dive into all things energy!
Kurdistan
In the wake of the Iraqi military’s decisive victory over Kurdish fighters in Mosul, many observers are now predicting a more peaceful future for Kurdistan. This could mean big changes for the oil trade between Kurdistan and Turkey – an important economic relationship that has long been fraught with tension.
Back in 1991, when Iraq was breaking up into sectarian factions, Kurdish leaders negotiated an agreement with Saddam Hussein granting them autonomy in the north. The autonomous region soon developed a thriving economy based largely on oil exports. But Baghdad never recognized this arrangement and continued to regard Kurds as part of its sovereign territory.
Over the years, relations between Kurdistan and Turkey have been rocky at best. Ankara has accused Kurdish leaders of promoting separatism and has refused to recognize their autonomous status. In recent years, however, there’s been a thawing of ties as both countries focus more on regional security threats.
One reason for this newfound cooperation is the rise of ISIS, which poses a direct threat to both Turkey and Kurdistan. Since 2014, Turkish forces have been fighting alongside Kurds against ISIS in Syria and Iraq. Meanwhile, Kurdish Peshmerga fighters have played a key role in repelling ISIS from northern Iraq. As ISIS shrinks in both areas, Ankara and Erbil are keen to restore normal relations with each other.
If Baghdad succeeds in stamping out Kurdish autonomy once and for all, it may make restoring ties much harder. But even if this doesn’t happen, improved relations between Ankara and Erbil will
Turkey
Turkey has been one of the main buyers of Iraqi oil since the 2003 invasion. In March, Iraqi Kurdistan cut ties with Baghdad, prompting a drop in Turkish imports. The Kurdish region now exports crude oil through Turkey to other markets. The Iraqi Kurds are estimated to hold around 9% of the world’s proven oil reserves.
The market ramifications of Iraq’s recent victory over ISIS could have far-reaching implications for oil prices and global trade. The Kurds are thought to control around a third of Iraq’s oil production and exports. With Baghdad weakened by sanctions and infighting, Kurdish control over this important resource could bolster their authority in negotiations with Ankara over regional autonomy or even secession from Iraq.
This development could also embolden other separatist movements in areas with significant natural resources, such as Sudan’s Darfur region or Colombia’s FARC rebels, both of which have sought to exploit political instability in order to extract more revenue from the resources themselves.
Oil trading between Kurdistan and Turkey
Kurdistan exported 5.5 million barrels of oil in February 2017, according to the Kurdistan Regional Government’s (KRG) own figures. The KRG exports about a third of its production, which sits at an estimated 2.8 million barrels per day. Kurdish exports have been on the rise since last year, when Baghdad imposed sanctions on the autonomous region over its independence referendum. Turkish traders have thus made a lucrative business out of buying up Kurdish crude and reselling it in Turkey or abroad (particularly Europe). However, this trade is now set to be impacted by Baghdad’s victory in the war against ISIS. Iraqi Prime Minister Haider al-Abadi announced that his government will re-establish full control over Kirkuk and other disputed territories in northern Iraq – including oil fields – as part of its drive to retake all jihadist-held territory. This means that Turkish traders will no longer be able to easily purchase Kurdish oil and transport it across the border into Turkey. As a result, prices for Kurdish crude are likely to go up, making it less attractive for Turkish traders to buy up large quantities. This could have knock-on effects for both sides as delays in deliveries from Kurdistan could lead to a shortage of refined products in Turkey and vice versa
The Iraqi Win
The recent Iraqi win against the Islamic State has had far-reaching implications for the global oil trade. The Kurdish region of Iraq is a key producer of oil, accounting for around one-third of Iraq’s overall output. With IS losing control over key areas in Iraq, Kurdish exports are expected to increase. This could have a number of impacts on the global oil market, most notably through higher prices.
Kurdistan also plays a significant role as an export hub for Turkish oil. Turkey is by far Turkey’s biggest customer for imported crude oil, buying around half of all its oil from abroad. Any increase in Kurdish production would therefore have a major impact on Turkish domestic demand, and consequently prices.
However, the Iraqi victory may not be all good news for regional crude traders. The jihadist group enjoyed significant financial and materiel support from neighbouring countries such as Saudi Arabia and Qatar, which could now turn their attention to other conflicts or militant groups in the region. This could lead to a sharp decrease in supplies to these countries and spike prices even higher than they are currently.
Conclusion
The Iraqi military’s stunning victory over the Islamic State in Mosul has raised questions about the future of oil trading between Kurdistan and Turkey. The win could mean increased revenues for Kurdish Regional Government (KRG) officials, who have long been accused by Turkish authorities of smuggling crude oil across their border to sell on the black market. Meanwhile, Baghdad may be less eager to allow Kurdish exports given its rivalry with Erbil and fears that it could destabilize Iraq’s national economy. Nevertheless, as long as tensions between Baghdad and Erbil remain low there is a chance that this trade will continue unimpeded.
