Erdoğan to brief Obama on Exxon’s latest play!

Shwan Zulal

By Shwan Zulal:

At the airport moment before boarding the plane bound to the US, the Turkish Prime Minister, Recep Tayyip Erdoğan, announced that Turkey has agreed a deal with the Kurdistan Regional Government (KRG) and Exxonmobil for oil and gas exploration in the Kurdistan region of Iraq. The PM only made a brief statement but confirmed months’ long speculations about the game-changing deal.

The deal could involve more than half a dozen blocks which will be defying Baghdad and against the wishes of the White House. The Obama administration has so far sided with the central Iraqi government and expressed their concerns about a Kurdish –Turkish oil deal. The White House has also warned American oil companies about the dangers of doing business in Kurdistan, which has fallen on deaf ears and the two of the largest US oil companies – Exxon and Chevron – have entered into contracts with the KRG.

It is clear that the short statement by Erdoğan was intended to make the Turkish position clear before heading to the US. Turkey has insisted and made it clear on numerous occasions that dealing with the Kurdistan region and entering into oil deals are a matter of Turkish national interest.

Among all the other issues which will be discussed in the meeting with Obama, Syria being the main topic, the oil deal with Exxon in Kurdistan will be on top of the list.

Erdogan and Obama

Erdogan and Obama

While the White House has made its position clear on Iraq and Kurdish oil deals, American oil companies have ignored the warnings. Despite the uncertainty over the export and political wrangling, International oil  companies (IOCs) have opted to go to the Kurdistan region and, in the case of Exxon, risk a significant play in the south of the country. It is ironic that a Turkish PM will be briefing the US president about a deal with one of the largest US oil companies in the world which is known to be very close to the US State Department.

The deal has an immense economic and political implication for all the regional players involved and it even overlaps on the Syrian issue, given that Kurds in Syria are going the same way the KRG has and they have borders with Turkey as well as having and controlling the oil fields in their areas.

The economic benefits for Turkey are very clear, since Turkey is largely dependent on energy imports and seeks energy security and diversifications. However the political impact is more subtle and long-lasting.

What the deal means for the Kurdistan region energy industry and the region as a political entity is even more profound. The idea of a Turkish PM going to Washington and vouching for oil deals in the Kurdistan region is in itself a big statement. Moreover, when the details are confirmed, it means that the Kurdistan region can move from exploration phase into production and export.

The oil companies in Kurdistan have been anxious about the prospect of exports while the dispute between Baghdad and Erbil has escalated. Exports have been halted and, even when they resumed, payments were not made by Baghdad.

The latest deal with Turkey will give the KRG the green light to start making plans for exports via Turkey to the international markets. Although such exports will be vehemently opposed by Baghdad, there is very little Baghdad can do to stop it, once agreed with Turkey. The payment mechanism and logistics of exports will be challenging but the determination of Erdoğan to go ahead with the deal mean those issues will be ironed out quickly down the line.

Twitter: @ShwanZulal


One Response to Erdoğan to brief Obama on Exxon’s latest play!
  1. Lorenzo Garcia
    May 15, 2013 | 21:31

    And al-Maliki and Sharistani are seating at the side, eating popcorn and watching the game.
    Obviously, Turkey and the KRG have a win-win situation.
    What a mess Mr Sharistani and al-Maliki are creating, not knowing how to exit without losing face.

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