The bilateral relations between Iraq and Turkey clearly improved after the visit of Turkish Energy and Natural Resources Minister Taner Yildiz to Baghdad on Jan. 18, when new protocols and agreements were signed on oil, natural gas and electric energy.
This is certainly a drastic change from 2012, when the plane carrying Yildiz to a meeting in Erbil was forced to return to Turkey because Baghdad canceled the permission for it to enter Iraqi airspace.
The relationship between Ankara and Baghdad, which had been tense and problematic since 2011, had come to the point of total rupture after Turkey sidelined Baghdad and reached separate agreements with the Kurdistan Regional Government (KRG) on the sale of Kurdish oil and construction of a new pipeline between northern Iraq and Turkey.
After Haider al-Abadi’s government took over in September 2014, and with US involvement, Ankara-Baghdad relations entered into a phase of rapid restoration and improvement. In November, Prime Minister Ahmet Davutoglu visited Baghdad followed by a return visit to Ankara by Abadi.
The Turkey-Iraq high level strategic cooperation council that had not convened since 2009 met with both countries' prime ministers and ministers participating, while the Turkey-Iraq Business Council met in Istanbul with Iraqi and Turkish businessmen.
The 17th session of the Iraq-Turkey Joint Economic Commission, which had last met in 2006, was held last week in Baghdad under chairmanship of Yildiz and Iraqi Foreign Minister Ibrahim al-Jaafari.
Key agenda items of this meeting included boosting Iraq’s oil production, increasing shipments via the Kirkuk-Yumurtalik (Ceyhan) oil pipeline, urgent measures to meet electricity power needs of Basra and other Iraqi areas, bilateral economic relations, Islamic State terror and investments by Turkish companies. Most of these issues were concluded by the signing of agreements and protocols.
Turkey has been at ease since Baghdad and Erbil agreed in December to share Iraq’s oil revenue with 83% — a 7% ratio as stipulated by the Iraqi Constitution and Baghdad's acceptance to pay the KRG its share of the national budget.
In a way, agreements Ankara signed with KRG President Massoud Barzani in 2013 on exporting Kurdish oil via Turkey and construction of a new oil pipeline for that purpose, despite opposition by Baghdad and the United States, were shelved. Both Yildiz and Iraqi Oil Minister Adel Abdul-Mahdi said the sole shipments and export route of the northern Iraq oil is the Kirkuk-Yumurtalik oil pipeline, and that the oil and its revenue belongs to the Iraqi people.
According to the agreement signed by the two ministers, the oil flow via the Kirkuk-Yumurtalik pipeline will be gradually increased to 450,000-550,000 barrels a day in the period January-March, up from the current 375,000 barrels a day. The shipment will reach 600,000 barrels a day by April 1. This pipeline has a daily capacity of 1.5 million barrels.
Abdul-Mahdi said because of the declining oil prices Iraq is facing a serious loss in government revenues, which has resulted in the decision by Erbil and Baghdad to increase the oil production and exports, to compensate any loss in income.
Another important agenda item in Baghdad was on the construction of a new natural gas pipeline, which was earlier discussed but had been suspended because of the deterioration in the relationship between Ankara and Baghdad.
In the meeting Jan. 15 in Ankara, Azerbaijani President Ilham Aliyev and Turkish President Recep Tayyip Erdogan discussed the latest situation on the Trans Anatolian Natural Gas Pipeline (TANAP) project, which will transport natural gas from the Caspian Sea to Europe.
Another option discussed was to link the Iraqi and Iranian natural gas pipelines to TANAP, which has a capacity of 16 billion cubic meters that can be increased to more than 30 billion cubic meters. At this stage, the proposed Iran-Iraq-Syria natural gas pipeline project that would carry Iranian natural gas to the Mediterranean via Syria does not seem feasible because of developments in Iraq and Syria, clashes in the region and terror threats.
Another option under discussion is to connect TANAP to the Trans Adriatic Pipeline (TAP), which runs from Greece and crosses the Adriatic to Italy. Another important issue taken up during Yildiz’s Baghdad visit was to meet the electricity needs of Basra and northern Iraq. At the moment, Turkish company Karadeniz Energy Group is supplying the power needs of Basra with three floating power stations.
Yildiz said 250 megawatt of power is generated by power ships at Basra and a new power ship of 410 megawatt will start operating to bring the total power generated to 660 megawatt.
The Karadeniz Energy Group, which operates the power transmission of the agreement Ankara signed with Barzani in 2013, is also operating the transmission of power from Silopi on the border of Turkey and Iraq to northern Iraq under the ‘Energy for Friendship’ agreement.
Meanwhile, the construction of the 400-kilowatt Cizre-Mosul power transmission line is completed on the Turkish side and agreement has been reached to complete the remaining 15% of the project in Iraq.
Spring in Baghdad
Turkish companies and businessmen are encouraged by what spring might bring in Iraq. Ercument Aksoy, chairman of the Turkey-Iraq Business Council, “Turkey-Iraq relations are simply super.” He added: "Relations with the Abadi government are progressing rapidly. Abadi is a politician who has positive views on Turkey, and he is aware of the importance of Turkish support. Senior-level contacts have become more frequent since he took over, and in February, Turkey’s ministers of economy and foreign trade will visit Baghdad. Iraq has budgetary problems because of declining oil prices, [but] they want to overcome this by increasing their oil production and exports. The road to Baghdad is wide open for Turkish companies.”
Iraq’s decision to increase oil production and sales from northern Iraq to make up for its budgetary deficit could actually push oil prices further down. OPEC, US and Saudi decisions not to limit oil production could inflate the economic hardships of Russia and Iran. Many feel that Baghdad’s decision to increase oil production could affect its current good relations with Tehran.
Although the decline in oil prices could help reduce Turkey’s energy bills, the Turkish economy is bound to be affected when two — Iran and Russia — of its key trading partners are struggling with economic bottlenecks. Therefore, this new era in Iraq-Turkey relations and the decision for Turkey to set up an industrial estate in Iraq may well prove a welcome new opportunity.