The Financial Times reports that "several Turkish officials confirm Ankara struck a secretive framework agreement this year with the Kurdish Regional Government for Turkish state energy companies to take stakes in the region's oil and gas fields.
"They add the deal is still so sensitive that it is unlikely to be acknowledged publicly until after a visit by Prime Minister Recep Tayyip Erdogan to Washington this week," the report said.
Washington has been unhappy with Turkey's growing links with the Kurdish enclave that spans three of Iraq's northern provinces, fearing it will encourage the independence-minded Kurds to break away altogether from the federal Iraqi republic established under U.S. tutelage after the 2003 invasion.
A Kurdish delegation arrived in Baghdad May 6 in an apparent bid to patch up relations with the Shiite-dominated central government of Prime Minister Nouri al-Maliki.
Baghdad insists that it alone has the authority to control energy exploration and exports.
The KRG, which has headquarters in the Kurdish city of Erbil, is equally adamant it has the right under the post-2003 federal constitution to conduct its own exploration and sell its oil and natural gas to whomever it wants.
Baghdad is locked in an increasingly bitter, and seemingly intransigent, dispute with the Kurds, who under U.S. protection have run their own affairs in their enclave since 1992.
This centers on Kurdish claims that the northern city of Kirkuk, and its nearby oilfields which hold about one-third of Iraq's oil reserves of 150 billion barrels, and the KRG's insistence it controls the 5 billion barrels that lies under the Kurdish zone.
The KRG has incensed Baghdad by luring oil majors like Exxon Mobil and Chevron Corp. of the United States and Total of France, into signing production agreements with it, giving Erbil's oil drive a hefty stamp of international legitimacy.
This and Ankara's moves to transform Turkey into a major energy hub as part of Erdogan's ambitious push to restore Turkish power in the region, has caused some dismay in Washington.
The concern, shared by Baghdad, is that this alliance could encourage other restive regions of Iraq, including the Shiite south that holds most of Iraq's oil, to seek more autonomy, possibly signaling the break-up of the Iraqi state.
The Americans also fear this will weaken Nouri and allow Iran to achieve dominance over its former enemy.
Erdogan's recent landmark peace deal with Turkey's own rebellious Kurds, who've waged a separatist war since 1984, has boosted his reputation as the strongest Turkish leader since Mustafa Kemal Ataturk, who founded the modern Turkish state after World War I.
Under that peace agreement, greatly aided by the KRG, fighters of the outlawed Kurdistan Workers Party, known by its Kurdish-language initials PKK, based in southeastern Turkey will relocate in Iraqi Kurdistan.
The first of several thousand fighters began arriving in KRG territory this week.
Erdogan's peace plan strengthens Erbil's moves toward oil and gas independence from Baghdad.
Add in the possibility of the Kurdish minority in war-torn Syria, whose enclave contains oil reserves, joining this emerging Kurdish entity and the long-expected redrawing of the region's geopolitical map could begin.
PKK leader Abdullah Ocalan, serving a life-in prison sentence in Turkey, has mused about a "stateless union" between Kurds in Turkey, Iraq, Syria and Iran, with oil as the economic glue.
Meantime, Turkish companies are lining up to acquire stakes in the KRG's oil and gas sectors.
Both sides have kept this pretty quiet because of political sensitivities but Baghdad has retaliated by barring Turkish companies from Iraq.
Turkey's state oil company TPAO was dumped from an exploration deal in 2012. But there are still around 1,000 Turkish companies operating in the KRG zone.
So Erdogan's on a roll now, even if Washington isn't wild about his move into Iraqi Kurdistan, and it seems there's nothing to obstruct the Turkish embrace of the KRG's energy resources.
Once Ankara completes promised oil and gas pipelines from Iraqi Kurdistan to export terminals on Turkey's Mediterranean coast, the KRG will be totally free of the only outlets available right now, which Baghdad controls.
Gas prices end long slide
Obama called on to ban oil trains