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Kurds Complete Game-Changing Pipeline to Turkey

Bottom Line: Kurdistan’s leverage over the central Iraqi authorities in Baghdad gets a major boost with the much-anticipated completion of a pipeline directly to Turkey.

Analysis: Kurdistan’s leverage over its oil and gas independence from Baghdad has increased with the official completion of a pipeline directly to Turkey. The pipeline was completed in the third week of October and its significance should not be underestimated: It essentially provides direct, unhindered access to the international market for Kurdish products, and Kurdistan has large enough reserves to meet US needs for seven years. This pipeline will be a game-changing development for Kurdistan and for its relations with Baghdad and Turkey.

Recommendation: There is little Baghdad can do at this point to halt the Kurds’ moves towards oil and gas independence. However, we recommend closely monitoring the internal political situation following 21 September elections in the Iraqi Region of Kurdistan. Since then, there has been no solid movement towards the formation of a new government. Turkey has suggested, through its academic voices, that it would potentially welcome an alliance between the Barzani-led Kurdish Democratic Party (KDP) and the opposition Change Movement (Gorran), which fared better in the polls than the traditional government partner, the Talabani-led Patriotic Union of Kurdistan (PUK). Emboldened by its electoral progress, Gorran appears to think its negotiating stance is perhaps greater than it is, setting tough conditions for forming a government with the KDP. We also point out the first legal battle with an oil company on the territory of the Kurdistan Regional Government (KRG). A consortium of Dana Gas, Crescent Petroleum and Pearl Petroleum has filed legal action in a London court for clarification of their contractual rights with the KRG. The consortium claims that the KRG owes it $1 billion in payment arrears, while the Kurdish government claims it owes nothing and argues that the consortium violated its contractual terms. This first legal battle in the KRG could somewhat dull the euphoria over the new pipeline for other investors.




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