(Bloomberg) — Turkey can choose to “close the valves” on oil exports from Iraq’s Kurdish region through the Turkish port of Ceyhan, President Recep Tayyip Erdogan warned as Kurds voted Monday in a referendum on independence from Iraq.
The landlocked Kurdish enclave in northern Iraq can ship as much as 700,000 barrels a day through the pipeline to Ceyhan on the Mediterranean. The Turkish president’s comments served as a reminder that Iraq’s semi-autonomous Kurdistan Regional Government depends on good relations with neighboring Turkey for most of their oil sales and revenue. Turkey, which has its own restive Kurdish minority, opposes the Kurdish independence referendum in Iraq.
“Let’s see where the regional government will flow its oil, through which channels and where it will sell it,” Erdogan said in Istanbul on Monday. Turkey, which is both a customer and a conduit for Kurdish oil, is ready to intervene as it did in Syria, he said, referring to a cross-border military operation last year. “We may arrive one night, suddenly.”
Oil pumped at fields controlled by the KRG and the central Iraqi government’s North Oil Co. was flowing normally through the export pipeline on Monday, according to two people familiar with the matter, asking not to be identified because the information is confidential.
Iraq’s Kurdish enclave could hold 45 billion barrels of crude reserves, more than OPEC member Nigeria, according to KRG data. The region pumped about 544,600 barrels of oil a day in 2016 and is expected to boost output to 602,000 barrels this year, consultant Rystad Energy said in April. Last year’s production represented about 12 percent of the supply from Iraq, the second-biggest producer in the Organization of Petroleum Exporting Countries.
The referendum isn’t limited to the three Kurdish governorates, or provinces, of Iraq; people in the disputed, oil-rich area of Kirkuk are also participating in the poll. Iraq’s central government also condemned the KRG for including Kirkuk in its referendum and has threatened to retaliate.
Turkey and Iran, which also has a population of Kurds, have been among the most outspoken opponents of the referendum and were among the first to act. Iran’s Tasnim news agency reported that Iranian airspace bordering the Kurdish region had been closed at the request of Iraq’s government, and that the Iranian military was conducting exercises in frontier provinces.
The vote was “laying the ground for hot conflict,” Turkey’s Prime Minister Binali Yildirim said Monday. Turkey now considered the Iraqi government the sole counter party in its arrangement over oil exports to Turkey’s Mediterranean coast, he said. Kurdish exports averaged 515,000 barrels a day last year, according to cargo tracking compiled by Bloomberg News. Shipments averaged 583,600 barrels a day year to date, the data show.
Turkey would shut border crossings with Iraq’s Kurdish region in both directions, Erdogan said, without specifying the timing of the closures or elaborating on whether they would apply to all goods and people.
With assistance from Dana Khraiche and Selcan Hacaoglu. To contact the reporters on this story: Onur Ant in Ankara at firstname.lastname@example.org; Khalid Al-Ansary in Erbil at email@example.com. To contact the editors responsible for this story: Nayla Razzouk at firstname.lastname@example.org Bruce Stanley.
Copyright 2017 Bloomberg News.
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