For the past year, Turkey has been allowing the KRG to export larger volumes of crude and condensates by truck through Turkey to sell in the international markets. Turkey increasingly appears to be will- ing to support the Kurdish position and allow oil and gas to flow to and through Turkey to international markets. Turkey has made it clear that it wants Kurdish hydrocarbons flowing. The difficulty for Turkish policymakers relates to what Baghdad will do and how it will react. Although Baghdad has been making threats, Ankara’s recent decisions and actions, largely aligned with the KRG, sug- gest that Baghdad’s leverage is negligible.

Turkey is interested in the Kurdistan Region’s gas, as it will give it supply diver- sification and, more importantly, a bet- ter bargaining position with its biggest gas suppliers, Iran and Russia. While the energy case is clear, the political signif- icance of doing business with the KRG is far more profound. Turkey’s domestic issues with its own Kurdish population are holding back the economy of the Anatolian Tiger. Although economic growth has been at record highs recent- ly in Turkey, the stigma of many years of conflict, lack of economic development in Turkey’s Kurdish Region, as well as the enormous military expenditure of fight- ing the PKK, all contribute to the stalling economy, not to mention the large bill for energy. By engaging the Kurdish breth- ren in the Kurdish Region of Iraq, Turkey is hoping to break the cycle of violence, benefiting both sides in a peace process that has already started. In the last five years, Turkey has made huge diplomatic strides with the Kurdistan Region. Previously, when issues arose between the KRG and Turkey, the Turkish army often ventured into the Kurdistan Region of Iraq. Now, however, Turkish diplomats meet their counterparts and receive equal treatment.

Kurdistan has as much, if not more, at stake in dealing with Turkey. The KRG understands that Turkey provides the best route to monetize and sell their abundant hydrocarbons. Turmoil in Syria is rag- ing, disputes with Baghdad and major bottlenecks in the south limit export opportunities through federal Iraq, and Iran is not a viable option for export due to international sanctions. The KRG is therefore keen to keep its most reliable neighbor on its side.

The construction of the gas–later converted to crude—pipeline to Turkey is near completion. Complications still remain regarding how to resolve the issues of payments and legality of sales, in addition to the technical issues involved in exporting varying qualities of crude. The KRG appears to be keen to connect the Kurdish pipeline to Kirkuk Cyhan pipeline behind the Iraqi metering station and revive the oil pipeline inside Turkey to connect and sell to the market. The Iraqi government offered to connect at the metering station, but because Baghdad has not paid the fees of the international oil companies (IOCs) in the Region, it is very unlikely that this will happen.

The payment issue is the biggest chal- lenge facing Kurdistan’s hydrocarbon exports. Although Turkey has come up with a solution to create an escrow account, Baghdad is unhappy with the arrangement and the US administra- tions is also not sure how the payment can work and has reservations. The KRG does not want to have the same problems with cost payments to private companies operating in the Kurdistan Region, and Baghdad still believes that the KRG has no right to export independently.

The deadline for pipeline completion was the end of September and the pipeline is near the metering station in Fishkhabur, but there are no signs of export yet. This is largely because the pipeline was convert- ed from carrying gas to carrying crude, meaning that additional infrastructure is needed to pump the oil and the duel Kirkuk –Ceyhan pipeline inside Turkey needing some maintenance, which sug- gests that more time will be needed for completion. Test flows can take place as soon as mid-December and early next year the pipeline will be operational.

While construction is ongoing, Ankara has awarded Siyah Kalem a license to import gas from the KRG. This came soon after PM Erdogan’s announcement earlier this year of plans for a Turkish operator to partner with ExxonMobil to develop gas fields in the Region. Moreover, trucking crude through Turkey and the ongoing negotiations with Genel Energy for gas supplies from Miran field are all clear demonstrations of Ankara’s willingness to defy Baghdad, and allow independent hydrocarbon export from the KRG.