Iraq Kurds defy Baghdad over oil to Turkey

ERBIL, Iraq, July 12 (UPI) -- Iraq's independence-minded Kurds have reportedly escalated their feud with Baghdad by shipping oil to neighboring Turkey, defying the central government, which insists it alone can export energy.

This followed reports in May that the landlocked, semiautonomous Kurdish enclave, which has its administrative capital in Erbil, and Turkey planned to build a new pipeline direct from the Kurdish zone to the Ceyhan terminal on Turkey's Mediterranean coast.

Meantime, Turkey, with ambitions to establish itself as a strategic energy hub between east and west, seems to be trying to keep everyone happy by offering a similar deal to Baghdad as well.

Ankara's maneuvering is also interwoven with Turkey's drive to restore itself as the region's paramount power, which puts it in direct competition with Iran.

Thus these energy plans could lead to significant shifts in the geopolitical landscape.

Turkish Energy Ministry sources said Wednesday Ankara is preparing to send a technical delegation to Iraq, supposedly at Baghdad's behest, to discuss building a new oil pipeline linking Iraq's mega-fields in the south in Basra province to Ceyhan.

Iraq already has twin oil pipelines running to Turkey from its Kirkuk fields in the north, which the Kurds claim as part of their ancestral lands under the Ottoman Empire.

"Ankara's approach of offering concessions and projects to both Baghdad and Erbil seems to be gaining ground," the U.S.-based private intelligence consultancy Stratfor observed.

"Wednesday's announcement represents an important leap forward for Turkey's ambitions in Iraq and, if successful, will make Turkey the premier enabler of foreign investment and development plans for both northern and southern Iraq."

The amount of oil the Kurds are shipping to Turkey, all by truck, is quite small and appears to be part of a barter deal. Turkey refines the oil and ships it back to Kurdistan, some as diesel to fuel power stations.

But the envisaged Kurdish pipeline is something else again, a major undertaking initially involving 1 million barrels per day. That could seriously damage Baghdad's relations with Ankara and impact on Iran.

Those plans were unveiled in Erbil in May by the Kurdistan Regional Government's natural resources minister, Ashti Hawrami, during a visit by Turkish Energy Minister Taner Yildiz.

KRG officials said the first phase could be completed by the end of 2012, with the project wrapped up by August 2013.

Ankara is also talking with Erbil about a possible gas pipeline from Kurdistan that Hawrami said at the recent Caspian Gas Forum in Istanbul could eventually pump 353 billion cubic feet a year.

Turkish plans are likely to annoy Iran, which seeks to draw its former enemy Iraq within its orbit, not just to defang it militarily but as a conduit for Shiite expansion westward and southward in to the Sunni-dominated Arab heartland.

"Iran will staunchly resist any Turkish encroachment," Stratfor noted, while the Shiite-dominated government in Baghdad "is unlikely to abandon Tehran overnight.

"While Turkey's economic levers are impressive, Iran has several tools at its disposal to challenge Turkish ambitions -- namely Shiite militant proxies, intra-Kurdish rivalries and strong sectarian links to southern Iraq.

"Turkey's stealthy maneuvering in Iraq via energy channels reveals the country's ongoing transformation into a significant regional power," Stratfor said.

Kurdistan currently produces 100,000 barrels of oil a day, but that flows into the national pipeline grid controlled by Baghdad.

The enclave sits on an estimated 45 billion barrels of oil. There are no official figures for its gas reserves, but estimates go as high as 100 trillion cubic feet.

Iraq's overall oil reserves stand at 143.1 billion barrels, and gas reserves at 110 tcf, with another 150 tcf in untapped fields.

Erbil suspended crude exports via the Baghdad-controlled network in April claiming the central government owed the KRG $1.5 billion and had not been paying Erbil the full 17 percent share from oil exports.

Tensions between Erbil and Baghdad escalated sharply in October 2011 when the KRG signed an exploration agreement with Exxon Mobil of the United States.

Baghdad was furious because Exxon is also the key operator of the giant West Qurna Phase 1 field in the south and defied the central government by dealing directly with the Kurds.

Baghdad fears other oil majors could follow Exxon's lead, bolstering Kurdish separatist aims at a time when other Iraqi regions, such as the oil-rich south, are also demanding greater autonomy.