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Analysis: Turkey-Iraq fight won't harm oil

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by Ben Lando
Washington (UPI) Oct 22, 2007
As Turkey's military bares its teeth across the border with Iraq, oil prices sit comfortably above the $80-per-barrel mark. Any incursion will likely not affect the work of Iraq's oil sector today but could stifle investment, especially in the KRG, and put Turkey's oil sector -- a vital transit route for the world's oil supply -- at risk.

"It looks like the institutional investors are looking for almost any event to emphasize with people who may not be as familiar with Middle East geography or politics as they ought to be to help push up the price of oil," said Bulent Aliriza, an energy expert and director of the Center for Strategic & International Studies' Turkey Project.

Oil raced to the $90-per-barrel mark last week and is starting this week off the same way.

Aliriza said any Turkish incursion would not create a new war zone around Iraq's oil fields or pipelines.

The Kurdistan Workers' Party, or PKK, which Ankara says is using bases in northern Iraq mountains to plan and carry out attacks in Turkey, is threatening to respond to the Turkish military by targeting Turkish pipelines.

Attacks by the PKK over the weekend have put more pressure on Ankara to act. The PKK uses violence to forward the Kurdish autonomy agenda and is recognized by Turkey and the United States as a terrorist organization. The group ambushed Turkish troops Sunday, killing 17, wounding 16 and taking eight hostages.

The United States and the European Commission have issued tempered statements supporting Turkey. Last week Turkey's Parliament approved cross-border action to route the PKK from the northern Iraqi mountains where at least 3,000 are based. Turkey's leaders claim the right to hunt the PKK but say it is in the planning stages while other solutions work their course.

The KRG, as well as the Iraqi and U.S. governments are urging restraint, while Turkey claims the three aren't doing enough to put an end to the PKK.

"The politics of the situation are pretty extreme right now," said Paul Sullivan, an Iraq expert and economics professor at the National Defense University.

"The Turks are the number one investor in oil development in the north of Iraq now," he said. "There are a lot of contradictions here. They are also the most important investor in just about every industry in the north right now."

Turkey, Iran, Syria and Iraq all have a sizeable Kurdish population but are wary of any moves toward an independent Kurdistan.

The fate of Iraq's northern oil, both in and outside the KRG territory, is in the hands of Turkey's military planners. The Kurds fear, but experts doubt, the Turkish incursion would go beyond the Qandil Mountain area.

Sullivan said a "short-term incursion" would not affect oil production. The closest pipeline -- which flows to a port in Turkey and is regularly hit with Sunni insurgent attacks -- barely runs through the KRG area, just before it enters Turkey, and the oil fields and active exploration are not near the border.

"It will certainly affect potential investment in the sector," he said, "and there's a great deal more that could be done in that part of Iraq for oil development."

Less than a quarter of Iraq's proven reserves -- the third largest in the world -- are located in northern Iraq, and most of that is outside the KRG area. But the country is massively underexplored, and experts say Iraq's reserves could be double what have been found so far.

There are potential consequences for Turkey, as well, if it enters Iraq, including any effect the blowout would have on its relationship with Washington. No one wins if Iraqi Kurdistan turns to violence and unrest, including current and future investors.

Turkey is already a major transit hub of oil flow to the world, as well as a growing consumer, with many more projects in the works or on the drawing board.

The new BTC pipeline -- from Baku, Azerbaijan, through Tbilisi, Georgia, to Ceyhan, Turkey -- is expected to see 1.2 million bpd flow through it next year, and the PKK says it will bomb it in retaliation.

"If (the PKK is) getting bombed and their people are getting killed the BTC is an economic lifeline for southeastern Turkey, including transport fees and also including the oil that Turkey takes out of the pipeline," Sullivan said. "And surely if it gets real nasty the BTC is at threat."

(e-mail: [email protected])

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