Powder Keg Alert: Kurdish Referendum In Focus As Erdogan Threatens Oil Flows, Military Strike

Update: 

The Iraqi parliament has voted to close border crossings with Kurdistan and return oil fields (including north of Kirkuk) to the control and supervision of the federal government.

As Bloomberg notes, “parliament also voted to prevent companies from carrying out exploration work in joint and disputed areas subject to lawsuits.”

Oil exports, the government says, “should only be done via federal government.”

Original post

Do you want the Kurdistan region and Kurdish areas outside the region to become an independent state?

That’s the question some 5.6 million eligible voters in Kurdistan and other Kurdish-controlled areas in northern Iraq will be asked in a referendum on Kurdish independence on Monday.

Kurds

The highly contentious vote comes amid heavy criticism from Turkish Sultan-for-life Recep Tayyip Erdogan and Iraqi Prime Minister Haider al-Abadi who calls the referendum “an unconstitutional decision against the social fabric of our citizens” that will not be recognized.

“Is it a crime to ask people in Kurdistan to express in a democratic way what they want to have for the future?” Masoud Barzani, President of Iraq’s Kurdish regional government asks, rhetorically.

Over the weekend, Barzani said that although Kurdistan will go through with the vote after “reaching the conclusion that only through independence can we secure our future,” he remains “ready to engage in ‘very long’ talks with Iraq government.” That feeling isn’t mutual.

Barzani also said Peshmerga forces will continue to cooperate with Iraqi troops and the U.S.-led coalition. That underscores the complex dynamic at play here – the Peshmerga have always been an important part of the fight against extremists in Iraq and as you’re probably well aware, the Kurds are also key players in the Syria conflict, much to the chagrin of Turkey’s Erdogan who lumps the Syrian Kurds together with the PKK, with whom he is locked in an intractable death match (he bombed what Ankara claims was a PKK “hideout” in northern Iraq over the weekend).

On Monday, Erdogan repeated his “we could arrive all of the sudden, in the middle of the night” shtick. He’s used that patently absurd phrase before. Here’s AP:

Turkish President Recep Tayyip Erdogan is threatening a military intervention in Iraq in response to the Iraqi Kurdish region’s referendum on independence from Baghdad.

Erdogan, speaking at a conference in the Turkish capital of Ankara as Iraqi Kurds voted in their region on Monday, said that Kurdish independence was unacceptable to his country and that this was a “matter of survival.”

He pointed to Turkish military exercises currently taking place on Turkey’s border with the Iraqi Kurdish region.

Erdogan said: “Our military is not (at the border) for nothing.” He also added: “We could arrive suddenly one night.”

Apparently, he’s going to disrupt the flow of Kurdish oil in retaliation. “Let’s see where — and through which channels — will they sell their oil. We have the valve. The moment we shut the valve, that’s the end of it,” he mused.

Sources tell Bloomberg that so far, “oil shipped from fields controlled by central government’s North Oil Co. and by self-governed Kurdish region in north are being exported normally through Ceyhan port in Turkey.” Still, Erdogan’s comments have the potential to push up prices.

Turkish PM Binali Yildirim says the vote sets up a “hot conflict.” In another fit of rage, Erdogan predicted it would have “terrible consequences.” So far, the only “consequences” are a weaker lira as USDTRY gained as much as 1% to a session high 3.5308:

USDTRY

“A few people have asked whether the Kurdish referendum will have any market impact — it’s bad news for TRY with Turkey’s large Kurdish population that has been pushing for independence for years,” Bloomberg’s Mark Cudmore wrote a few hours ago, adding that “the large anti-immigrant AfD vote in the German elections won’t help TRY sentiment either — Turks make up the largest non-German ethnic group in Germany, which is partially why it’s Turkey’s largest trade partner.”

Needless to say, Tehran isn’t pleased with the events in Kurdistan either, given that both Iraq and Syria are essentially Iranian client states. “It’s untimely and wrong,” Iran said of the vote today.

So we’ll see how this plays out. For now, we’ll leave you with a quote from Viktor Szabo, a portfolio manager at Aberdeen Asset in London:

I do expect some more harsh rhetoric from Turkey. This vote is not about imminent independence, but about better bargaining position with the central government. The risk to my view is a potential military escalation, but I don’t see the point in going there.

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2 thoughts on “Powder Keg Alert: Kurdish Referendum In Focus As Erdogan Threatens Oil Flows, Military Strike

  1. The Kurds are a leave me alone and I’ll leave you alone group. They have stayed out of most politics in the three countries that want their help when fighting their enemies but look down on them they are not needed. We have helped them at times and appeased their enemies on other occasions (Saddam and his gas from the USA). They have fought for their freedom and deserve it.

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