Turkish government encourages firms to invest more in Arbil

ANKARA - Hürriyet Daily News

At least 30 are killed by a suicide bomb and an assault by grenade-throwing gunmen on a police HQ in northern Iraq’s disputed city of Kirkuk. AA photo

The Turkish government will continue to encourage Turkish energy companies to sign more agreements with the Iraqi Kurdistan Regional Government for the region’s rich oil and gas reserves despite Washington’s warnings not to take such steps risking the partition of Iraq.

“What we say is that more agreements should be inked now between Turkish companies and the regional government. These are steps for the future. At a moment when numerous foreign companies are in the region, remaining inactive on behalf of Turkish companies should not be expected,” a senior government official told the Hürriyet Daily News.

The official added that “contrary to what foreign press is reporting, there are not any hidden agreements signed between the Turkish government and the Regional Government on oil and gas or on constructing a new pipeline.”

Growing tension between the central government in Baghdad and a regional government led by Massoud Barzani in Erbil also has reflections of an international dimension as many Western powers and their giant energy companies are seeking advantageous contracts over rich Iraqi hydrocarbon reserves both in the south and in the north of the country. But the fact that Baghdad and Arbil could not settle an agreement on how to share oil and gas revenues means foreign companies cannot take concrete steps in drilling and marketing the products.

Companies like Exxon, Chevron, BP, Total and Gazprom are already active in Iraq but are under pressure from both Erbil and Baghdad to choose in which part of the country they will operate. A leading Turkish energy company, Genel Energy, is active in the region as well.

The regional government started to export limited quantities of crude oil to Turkey last July without seeking the permission of the central government, which caused strong reactions from Baghdad. The oil exported to Turkey is being refined into various products before being shipped back to northern Iraq.

Rumors that Turkey and the regional government signed a secret deal for the construction of a new pipeline to carry northern Iraqi oil to Turkey added more strain to already tense Ankara-Baghdad relations.

With concerns that the problem will further isolate the Nouri al-Maliki government, making it closer to Iran, and that partition of Iraq would be much more possible, the Americans were pressing Turkey not to engage in further deals with the northern side. In detail, Washington advises Turkey to proceed in a balanced way between Erbil and Baghdad. Denying that a secret agreement was signed, government officials assured that “all agreements reached by Turkish companies with the regional government were public and transparent.”

“The main problem is the failure of Baghdad and Erbil in reaching an agreement over the hydrocarbon law. In 2011, we were expecting that the deal could be reached within a few months. In 2012, it became much more complicated. As for now, we can’t really predict when it could be accomplished,” the officials said.

As both sides are offering very advantageous agreements to foreign companies, the official added, saying it would be unrealistic to impose pressure on Turkish companies.