Analysis: Turkey-Iraq spat may hit energy
Published: Oct. 26, 2007 at 9:00 AM

By JOHN C.K. DALY
UPI International Correspondent

WASHINGTON, Oct. 26 (UPI) — As Washington, Baghdad and Ankara
intensively seek a last-minute diplomatic solution to Turkey’s
intention to invade Iraqi Kurdistan to deal a decisive blow to
Kurdistan Workers Party guerrillas, the ominous consequences of an
invasion are becoming clearer.

While a Turkish military operation carries the possibility of
inflaming the one remaining area of Iraq relatively free of insurgent
operations against coalition forces, the destabilization produced by
an attack could quickly spread far beyond northern Iraq to engulf
eastern Turkey’s regions, which have a significant Kurdish population,
and threaten not only Iraqi oil exports but a significant portion of
Caspian production as well — both the Kirkuk-Ceyhan and
Baku-Tbilisi-Ceyhan pipelines terminate at the same Turkish
Mediterranean port.

There are already clear indications that PKK militants are considering
attacking energy assets if a Turkish military offensive is directed
against them. In seeking to avert a Turkish military assault, the
PKK’s Abd-al-Rahman Chadarchi told Al-Sharq al-Awsat in a telephone
interview that in such an instance his group would assault oil targets
"since they bring huge amounts of money to Turkey."

"The military regime in the country will use this (energy revenues) to
develop its war machine to utilize it against the Kurdish people in
Turkish Kurdistan," he told the paper.

On Oct. 20, Kurdish Roj TV carried an interview with PKK Executive
Council Chairman Murat Karayilan in which he said: "If you want to
prevent an attack by an opposing force, the first thing to do is
weaken that force’s resources. It is highly likely that the
guerrillas will attack the oil pipelines transiting Kurdistan because
they provide the economic funding for the Turkish army’s aggression."

With oil prices hovering around $90 a barrel, the consequences of such
a clash on the global economy are ominous and nowhere is this better
understood than in Ankara — Turkey imports around 90 percent of its
energy needs. Furthermore, Turkey in the past has taken massive
financial losses from a cessation in the flow of Iraqi oil to Botas’
Ceyhan terminal. During eight years of U.N.-imposed sanctions on
Saddam Hussein’s Iraq, Turkey estimated that it lost $80 billion in
transit revenues from Iraqi oil exports to Ceyhan and other trade with
Iraq.

Since the U.S. military operation in 2004 that toppled Saddam, Iraqi
oil exports have resumed to Ceyhan, but the port’s importance
increased dramatically when in May 2005 the $3.6 billion,
1,092-mile-long Baku-Tbilisi-Ceyhan pipeline began operations,
carrying Azeri crude from the Caspian. Securitywas a key consideration
in the BTC’s design and the pipeline was buried to help thwart
possible attacks. While the pipeline is secured from immediate attack,
its eight pumping stations (two in Azerbaijan, two in Georgia and four
in Turkey) are above ground, as are their electrical power grids,
presenting "softer" targets. More than half the pipeline’s length
traverses 669 miles of Turkish territory, nearly all of which contains
significant Kurdish populations, as does the route of the
Kirkuk-Ceyhan pipeline.

Turkey expects to earn about $300 million annually in transit fees
from BTC. Ceyhan is one of the largest oil facilities in the
Mediterranean, containing seven storage tanks, a jetty capable of
loading two Very Large Crude Carrier tankers of up to 300,000 DWT
tonnage and metering facilities. Ceyhan figures prominently in
Turkey’s ambitions to turn the country into a major energy transit
hub, as the projected Trans-Anatolian Pipeline running from Samsun,
which would carry Russian and Caspian oil while relieving tanker
pressure on the Turkish Straits, is also planned to terminate there.

According to the U.S. Energy Information Administration, Iraq produces
about between 1.6 million and 2.1 million barrels per day of crude
oil, of which roughly 100,000 bpd are exported via the Kirkuk-Ceyhan
pipeline. But growing insurgent attacks against the pipeline render
consistent exports problematic at best. In a worst-case scenario, if
Kurdish militants expanded their attacks beyond the Kirkuk-Ceyhan
pipeline and raided the BTC in Kurdish regions inside Turkey, the
economic losses could quickly spike oil to well over $100 a barrel as
the world struggled to cope with the loss of up to 1 million bpd
production.

Besides Baghdad, Washington and Ankara, NATO is also paying close
attention to the PKK issue. On Wednesday in Noordwijk, Turkish
National Defense Minister Vecdi Gonul, during an informal meeting of
NATO defense ministers, briefed his colleagues about the latest PKK
attacks in Turkey as well as the motion adopted by Turkish Parliament
authorizing military action.

The Azeri, Georgian and Turkish governments may not have to go it
alone in providing BTC protection, as NATO is already considering the
issue of BTC pipeline security. Speaking after a recent NATO summit in
Riga, Robert Simmons, the NATO secretary general’s special
representative for the Caucasus and Central Asia, said the issue of
protecting energy infrastructure belonging both to NATO members and
their partners was on the agenda. Given the rising level of tension
over PKK activities, the global energy community can only hope that it
is not a case of too little, too late.