NEWS NATIONAL NEWS        27/09/2017

Referendum by KRG in Iraq threatens Turkey’s trade with Iraq

The referendum carried out by the Kurdish Regional Government (KRG) in Iraq has been strongly

opposed by all of its neighbouring countries, including Turkey, Iran and the central government of

Iraq itself. All countries, with the notable exception of Israel, feel that this referendum was

premature.

 

All sorts of threats and demands have been levelled at the KRG before and after the referendum.

The Iraq central government is understandably not all happy with the prospect of a large part of its

country breaking away. It had already given the KRG a great deal of autonomy and will feel very

much as if it has been stabbed in the back by this referendum before any full negotiations to the

future make-up of Iraq could be carried out.

 

Turkey and Iran are also very concerned. They both have large populations of Kurds and are

worried that an independent Kurdish state on their borders will encourage their Kurdish

populations to demand more self-governance.

 

Turkey and Iraq have conducted joint military exercises on the Turkish Iraq border over recent

days. It has been a fair sight to see military units of these two countries, who have been at odds

in the past, training together.

 

Turkish President Recep Tayyip Erdoğan threatened on September 25th to cut off the pipeline that

carries 500,000 to 600,000 barrels of crude per day from northern Iraq to the Turkish port of

Ceyhan, to intensify pressure on the Kurdish autonomous region over its independence referendum.

The loss of this supply, combined with the 1.8 million bpd of supply cuts by the Organization of the

Petroleum Exporting Countries and non-OPEC producers, has raised concerns of tighter supply.

 

Turkey’s threat resulted in Brent oil prices to reach near 26-month highs, hitting USD 59.49, the

highest since July 2015 and more than 34% above the 2017 low. 

 

Erdoğan has also threatened to invade Iraq, after the country's Kurds voted for independence in a

non-binding referendum, saying that the “separatist” referendum was unacceptable and that 

economic, trade and security counter-measures would be taken.

 

As of today, Turkish Airlines has stopped flights to Erbil. Road traffic between Turkey and northern

Iraq through the Habur border crossing appears to be continuing but Turkey says that it is

restricting vehicles coming in from Iraq. The pipeline bringing oil from Iraq through Turkey is still

open.  

 

Cutting off economic ties will be a big blow to Turkish exports to Iraq, most of which go through

the Habur border crossing. Exports to Iraq totalled USD 8,670 million in the 12 months up and

until the end of July 2017. Imports from Iraq totalled USD 1,274 million for the same period. This

means that USD 9,944 million in total trade with Iraq is at risk. Of course, many of the exports to

the part of Iraq outside KRG control could be diverted to go by air or sea, but such an alternative

means of transport would be costly and unfeasible for many of the smaller and medium sized

exporters.  



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