Dubai: The oil-rich northern part of Iraq, which is under the control of Iraqi Kurds, is facing increasing economic heat from neighbouring powers over a recent referendum to establish its independence.
The Kurd region is not expected to be able bear any economic hardships for a long, especially if its oil exports through Turkey are stopped, experts say, and any economic damage could spill over to other countries involved in the dispute, they added. All oil exports from northern Iraq are exported through the Turkish port of Ceyhan on the Mediterranean, which gives Ankara the upper hand, experts say.
The Central Iraqi government says the referendum was a Kurdish attempt to have more control over the country’s oil revenues and disputed areas, including Kirkuk. The northern Iraqi city produces nearly one-tenth of the production of Opec-member Iraq, which is estimated at 4.4 million BPD, according to economic reports. More importantly, Kirkuk is believed to have nearly 45 billion barrels of crude reserves, or nearly one-third of Iraq’s total reserves.
“Turkey has the ability to exert real pressures on Kurdistan. The issue that remains is how far it wants to go,” said Nourhan al Sheikh, Professor of Political Science at the Faculty of Economics and Political Science, Cairo University. “There are 500 Turkish companies operating in Kurdistan, and the oil doesn’t go anywhere but through Turkey, which has a direct benefit because part of the oil exports are sold to Turkey at discounted rates,” she said to Gulf News.
Meanwhile, other experts say the crisis is a lose-lose situation to all parties involved. Several Arab airlines announced they are suspending their flights to Irbil starting Friday in response to a request from Baghdad. Iran closed its borders with Kurdistan. For Turkey, closing the borders means shutting the door on a major export market.
“Iraq is the third biggest export market for Turkey, with $7.6 billion exports to Iraq having 5 per cent share in total 2016 exports. Lower exports would both put downward pressure on the growth and upward pressure on the external imbalances in Turkey. Potential trade sanctions against the (Kurdistan Regional Government (KRG) would likely affect Turkish food industry,” said Jerome Audran, an emerging market credit analyst.
On the other hand, “for the KRG, the socioeconomic impact on populations would be quite serious as an embargo (if joined by Iran and Iraq) would prevent oil exports and food imports from Turkey, which are pretty large,” he explained to Gulf News.
Out of $11.9 billion Turkish exports to Iraq in 2013, nearly $8 billion went to Kurdistan.
Commenting on the neighbouring countries’ threats to impose economic sanctions on Kurdistan, former Iraqi deputy prime minister Hoshyar Zebari, who is also a close adviser to Kurdistan regional president Massoud Barzani, told Gulf News, “the Kurds people had borne many sanctions and embargoes in the past, and in my opinion, they will bear this one as well.”
However, Al Shaikh doubted the ability of Kurdistan to endure a long time economic closure. “This is impossible. It is a closed region surrounded by regional powers. It won’t be able to survive the sanctions for a long time.”
