The Fuse

High Energy Stakes for Kurdish Referendum

September 20, 2017

Guest Post by Matthew M. Reed | @matthewmreed

Matthew M. Reed is Vice President of Foreign Reports, Inc., a Washington, DC-based consulting firm focused on oil and politics in the Middle East.

There’s no sign that the Kurds are backing down from voting for their independence. They plan to hold a referendum across Kurdish and disputed Iraqi territories on September 25. With just a few days to go, no one can stop them, and “alternatives” proposed by foreign powers haven’t gained any traction yet. Although the vote may be non-binding, meaning that a formal declaration of independence might be years off, foreign powers don’t seem to care.

Although the vote may be non-binding, meaning that a formal declaration of independence might be years off, foreign powers have opposed the referendum.

The U.S., UK and France all oppose the referendum or the ultimate goal of independence, with Washington using some of the strongest language. “Holding the referendum in disputed areas is particularly provocative and destabilizing,” the White House said in a September 15 statement.

Russia has welcomed the referendum with some caveats. In August, Foreign Minister Sergei Lavrov described the referendum as an “expression of the ambitions of the Kurdish people,” but he stopped short of endorsing independence outright. Instead, he called on the Kurds to carefully consider the full ramifications of secession. In a deal seen by some as a last-minute endorsement, Russian energy giant Rosneft announced a deal this week with the Kurds to invest in vital oil and gas export infrastructure. The deal could only advance with Moscow’s blessing since the Russian government owns a 50 percent stake in Rosneft.

Russia is an exception but, more importantly for the Kurds, their neighbors have all come out forcefully against this month’s vote. Leaders in Iraq, Turkey and Iran have all declared the referendum illegitimate and dangerous. For their part, Kurdish authorities insist that it’s constitutional under Iraqi law and 10 years overdue.

President of the Kurdistan Regional Government Massoud Barzani has been talking about independence for years. Most recently, in 2014, the Kurds were primed to pursue it—or at least they appeared to be. They had secured a comprehensive energy deal with Turkish authorities in late 2013 which scaled up independent oil exports by pipeline to Ceyhan. The same deal promised Turkish investments in the KRG and future gas exports to Turkey.

Yet, with the rise of ISIS in 2014 and the collapse of oil prices later that year, independence lost its appeal, at least for a time. Foreign powers convinced the Kurds to put off any referendum until after ISIS was dealt with. Three years later—in 2017—ISIS is on the run and the Kurds are exporting more oil than ever: Almost 600 thousand barrels of crude pass to and through Turkey every day, mostly by pipeline.

The Kurds are again pushing for independence. The question now is how others will push back.

Ahead of elections next year, Iraqi Prime Minister Haider Abadi faces increasing pressure to resist the drive toward independence. He can do this in a number of ways. Perhaps the easiest option is to chase Kurdish crude exports in foreign courts. His predecessor Nouri al-Maliki tried this with limited success, but Abadi’s case to halt Kurdish oil deliveries would be much stronger if the Kurds secede from Iraq, even more so if they continue to export oil from disputed territory. Up to now, foreign courts have largely deferred to Iraq’s Supreme Court because the export issue is a constitutional matter so long as the KRG is part of Iraq. European and American courts may be less deferential, however, if the dispute was between sovereign states, one of which may not be recognized by the U.S., European Union, the UN or Arab League.

If the KRG officially files for a divorce with Baghdad, then some military posturing would be unavoidable, which of course raises the possibility of escalation.

If the KRG officially files for a divorce with Baghdad, then some military posturing would be unavoidable, which of course raises the possibility of escalation. The risk of conflict would rise even more if the Kurds sought to make permanent their administration of oil-rich territory which they took over in 2014. The status of Kirkuk has been a singular focus of authorities in Iraq and Turkey.

Turkey is currently weighing its response to the September 25 referendum. It’s true Turkey served as the midwife of the KRG’s independent oil policy going back to 2013, but much has changed since then. Inside Turkey, relations between the government and the Kurds have collapsed; minority politicians are in jail and there’s no end in sight for the war against Kurdish militants. The Turks are allergic to Kurdish independence because similar movements might spring up inside Turkey or war-torn Syria.

Turkish President Recep Tayyip Erdogan isn’t tipping his cards just yet, but he has the most leverage over the Kurds. This week he floated the idea of extraordinary sanctions against the KRG. This is no idle threat. Inside Turkey, KRG oil exports pass through the old Iraq-Turkey pipeline, which is controlled by state-owned operator Botas. Whenever the Turks see fit, they can shut the pipeline to Ceyhan without warning. This would have dire consequences for the landlocked KRG, which depends heavily on oil revenues.

A crippling pipeline closure is perhaps the most extreme option. Thus, it may be reserved for whenever the Kurds officially declare independence. But the increasingly harsh tone adopted by Turkish officials reflects genuine alarm and anger. “The referendum planned to be held by the KRG is a matter of national security for our country,” Turkish PM Binali Yildirim said this month. A week before the referendum, the Turks deployed dozens of tanks along the border as part of a “drill” not far from a key juncture where Kurdish oil crosses over into Turkish territory.

The Kurdish predicament is defined by energy and oil. These assets hold the promise of prosperity and independence—but they also serve as tripwires for conflict and sources of leverage for opponents.

Iran opposes the referendum, but unlike Turkey, it’s less worried about Kurdish unrest at home. Like Washington, which is another a close ally of the central government in Baghdad, Tehran insists on keeping Iraq intact. Iranian officials have threatened to close border crossings with the KRG if the Kurds seek independence. In the event of a showdown, Baghdad could call on Shia Arab militias with ties to Iran, some of which clashed with Kurdish security forces last year.

The Kurdish predicament is defined by energy and oil. These assets hold the promise of prosperity and independence—but they also serve as tripwires for conflict and sources of leverage for opponents.

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