Prime Minister Erdogan’s visit to Erbil in March 2011, and President Masoud Barzani's visit to Diyarbakir in November 2013 brought Turkey-KRG relations to a new higher stage. While I intend to avoid unjustifiable economic determinism, the importance of the impact of Turkish national market expansion as a strong factor underpinning this strengthening relationship should not be underestimated.

Broadly speaking, market expansion is the driving force behind the processes of regional and global economic integration. Hence, the impact of the evolutionary pressures of national markets need to be taken seriously in assessing the foreign policy formulations in countries with matured market economies. The development of the Turkish national market has created an economic condition whereby Turkish market forces cannot be contained within its political borders without compromising the country’s economic growth. Turkish regional and global foreign policies, therefore, must create conditions that are supportive of greater regional market domain for Turkish firms. For a better understanding of the evolutionary economic pressures that modern Turkey is facing, it is important to view the Turkish market from historical and evolutionary perspective.

Turkey inherited the legacy of the Ottoman Empire, which ruled a large part of the Middle East and Europe. Development of markets became central to the post-Ottoman Turkish state’s modernization process. Turkey also had the blessing of not being blessed with a significant amount of oil. In the absence of the subsidizing power of oil revenues, which have inhibited development and value reorientation in many Middle Eastern countries, Turkey had to depend on its manpower for developing its economy. A gradual improvement of Turkish human capital followed and Turkish industrial output increased. In the modern times, the Ottoman heritage provides an Islamic charm to Turkish market expansion into Middle East and a sense of historical legitimacy to its regional economic expansionism. This regional economic expansion has led to an impressive level of economic growth in Turkey in the last decade. While Turkey’s economic expansionism is vital in sustaining Turkey’s economic performance, it also plays a central role in the growth of Turkey’s political influence in the Middle East. Modern Turkey is gradually consolidating its position as a regional power. The rise of Turkey also enhances the credibility of its project for membership in the European Union. Turkish EU membership could add strategic and economic value to the European Union, and increase the economic competitiveness of the EU in global markets.

By adopting a free market economy, encouraging foreign investment in the Kurdistan Region, and promoting close economic ties with its neighbors, particularly Turkey, the KRG is aligning itself with Turkey’s economic ambitions. These factors have potential to turn the Kurdistan Region and Turkey into long-term strategic partners.

What are the implications of Turkey’s rise for the Kurdistan Region?

Recent Turkish economic performance is directly linked to its economic expansion into the Middle East, including the Kurdistan Region. This is of profound implication for Turkey, the Kurdistan Region and other market economies across the Middle East. It suggests that while the Kurdistan Region needs Turkey as a close regional economic partner, Turkey also needs Kurdistan and the wider region for the growth of its markets, and the strengthening of Turkey’s sphere of influence. In addition to Turkey’s need for access to regional markets, the Kurdistan Region is uniquely important to Turkey for its vast reservoir of natural resources, as well as its strategic geographic position. This encourages Turkey to follow foreign policies that engage the Kurdistan Region to achieve its regional economic objectives. Such factors leave Turkey with little room for short-term approaches to Kurdistan or Turkey's other economic partners in the region. Nor should such sound and responsible Turkish foreign policies be derailed by populist politics inside Turkey.

Gradual economic integration between Turkey, the Kurdistan Region, and other market economies in the Middle East benefits stability within the region as well. Such integration increases the interdependence between the region’s countries and, with its harmonizing impact, lowers the likelihood of conflict among them. The current Turkish government has recognized this fact, and is appropriately capitalizing on it. An increasingly assertive Turkey may even emphasize less its EU membership project, and lead the process of Middle Eastern economic integration as a more promising option.

The Turkish government is under pressure from internal political forces that favor the revitalization of the less tolerant Turkish state of the last century. These forces may even be able to delay the Turkish internal adjustment aimed at internalizing and solidifying the recent progressive Turkish foreign policies toward regional economic integration. However, any such distraction will undermine Turkish economic growth. Given the Turkish structural market pressures, this opposition is unlikely to prevent the realization of Turkish-led regional economic integration in the long run.

The Position of the Kurdistan Regional Government (KRG)

The KRG’s economic and foreign policy position can be summarized in the following three key points. The KRG aims to:

  • Align itself with the dominant global economic forces that are shaping the modern global political economy and benefit from regional and global economic integration;
  • Increase the Kurdistan Region’s security through closer economic links and political ties with other regional and global market economies and, in effect, support gradual regional economic integration;
  • Seek greater international political and symbolic recognition of the Kurdistan Region by capitalizing on the Region’s increased economic power and its stabilizing democratic political system.

By adopting a free market economy, encouraging foreign investment in the Kurdistan Region, and promoting close economic ties with its neighbors, particularly Turkey, the KRG is aligning itself with Turkey’s economic ambitions. These factors have potential to turn the Kurdistan Region and Turkey into long-term strategic partners. The constructive, mutually beneficial, and modern economic policies adopted by Turkey and the Kurdistan Region suggest that Turkey can neither ignore nor bypass the Kurdistan Region in expanding its sphere of influence in the Middle East. Therefore, as long as the internal and external political forces intent on derailing the process are kept at bay, Turkish/KRG mutual economic and geopolitical imperatives suggest that the correct way forward is further economic integration and closer socio-political ties between the Kurdistan Region, Turkey and the other market economies in the Middle East.