Economic problems resulting from US sanctions and the decline in the value of the Turkish lira will increase the already record high trade deficit, currently half of which is related to energy imports. In 2017 it amounted to 77 billion USD, more than twice the amount of 2016. Erdoğan is determined to create a politically dominant state. To this end he needs to ensure energy independence, which can be done through the occupation of the oil fields in Kirkuk, and the acquisition of the gas fields of Cyprus.
Last year Turkey consumed more than 1 million barrels of oil a day. Energy spending increased from 27.16 billion USD in 2016 to 37.19 billion USD in 2017, which made up 50% of the trade deficit.
The increase in oil prices will affect the trade deficit even more, while 75% of its value will be energy imports. The average annual barrel price in 2017 was 54 USD, and this year the average cost is about 70 USD, and the price will continue to rise. All of this is a drag on Turkish economy. To counteract the negative balance sheet, Recep Erdoğan will take more determined steps to ensure energy independence. This, however, will lead to turmoil in the region.
1. Kirkuk, one of the oldest and largest oil fields in the Middle East, is located in the Kurdish autonomous area in northern Iraq. Iraqi Kurdistan took control of them in 20113) and decided to connect Kirkuk with the existing pipeline to Ceyhan to bypass Baghdad and sell Iraqi oil on the international market without the consent of the Iraqi authorities. After the Iraqi part of the Kirkuk-Ceyhan pipeline had been taken over by ISIS and partly destroyed, the Kurdish authorities created a pipeline transmission network, and so were able to export 300,000 barrels a day to Anatolia.In October 2017, the region was retaken by the Iraqi army. The government in Baghdad has committed itself to building a new transmission line from Kirkuk to the Turkish border (around 350 km), where it will merge with the existing oil infrastructure leading to Ceyhan.4) Both the Iraqi and Kurdish authorities want Turkey to be perceived as the most important oil importer from the Kirkuk fields (other countries adjacent to Iraq are self-sufficient in terms of oil), Erdoğan has a different strategy for this area.. Kurdish oil fields can produce up to 1 million barrels a day, which equals Turkish demand. In 2016 Erdoğan declared “If the gentlemen desire so, let them read the Misak-i Milli (National Oath) and understand what the place means to us,” The Turkish president referred to an Ottoman Parliament-sealed 1920 pact that designates Kirkuk and Mosul as parts of Turkey.
Ankara wants to regain these regions lost in 1926 as a result of the Treaty of Ankara regulating the border with Iraq, which was then a British colony. The agreement signed in 1926 stipulates that although the areas do not belong to Turkey, Ankara has the right to initiate military action in case of destabilization in the region. Thus, the agreement between Turkey, United Kingdom and Iraq is Erdoğan’s pretext for increasing Turkey’s military presence in Kurdistan.
In August 2018 Erdoğan said Turkey was taking steps to save Iraq’s Qandil (and possibly Sinjar) area from being a “nest of terror”. It took the form of the Tiger Shield operation, whose aim was to combat the Kurdistan Workers’ Party (PKK) with its headquarters and training bases in Northern Iraq.8)Both Ankara and Baghdad treat it as a terrorist organization threatening both countries. As a result Turkey has created 11 military bases in the Kurdistan area and doubled the number of soldiers stationed there. The Iraqi authorities, however, are afraid of the growing involvement of Turkey on Iraqi soil.
[The map of Turkey according to the Ottoman Parliament-sealed, 1920 National Oath that designates today’s Kurdistan Region, Mosul, Syrian Kurdistan, Aleppo, parts of the Balkans and Caucasus as Turkish soil.]
While an outright takeover of Kirkuk is not imminent, Ankara realises that the incorporation of Kirkuk into its economic sphere or creation of a Turkmen vassal-state will solve a large part of its energy problems. However, Erdoğan, being a statesman, will take his time in reaching his goal. The leader of the Iraqi Turkmen Front (ITF) said last month in support of Turkey: “An attack on Turkey is an attack on all of the region’s Turkmen,” he added “The situation of the region’s Turkmen — in both Iraq and Syria — is all connected,” he said: “As Turkmen, a strong Turkish lira is good for us.”
2. Turkey under the pretext that some areas of the coastal sea zone in Cyprus (like Block 3, which Gefira team analyzed in February) fall under the jurisdiction of Ankara-dependent Turkish Cypriot government (Northern Cyprus) intends to extract gas from the Cyprus Exclusive Economic Zone (EEZ). At the beginning of this year the Turkish navy prevented the Italian Eni group vessel from operating in the Cypriot economic zone. Erdoğan already made a statement addressed to the authorities in Nicosia and Athens:
“„We warn those who overstep the mark in Cyprus and the Aegean. (…) They are standing up to us until they see our army, ships and planes”.
The statement of the President of Turkey confirms the greater military involvement in this part of the Mediterranean and the intensification of the exercises. At the beginning of the month Foreign Minister of Turkey Mevlüt Çavuşoğlu said that Turkey could start drilling in the Eastern Mediterranean this autumn as the country had already purchased a platform. A conflict in this area is inevitable.President Erdoğan warned Cyprus and international gas exploration companies that the violation of Turkish interests would have bad consequences. We expect that if Ankara takes over Cypriot gas blocks, Israel will be on the side of Cyprus, which has its own interests in this area and whose troops are stationed there. In September, Greece, Israel and Cyprus will hold a summit about gas exploration in the Eastern Mediterranean and Turkish plans to drill in the region. Ankara is not invited.
3. Maintaining good relations with Qatar is essential for Turkey. Both Turkey and Qatar are supporters of Muslim Brotherhood and it is said that Qatar’s row with the Gulf countries is about its assistance to the brotherhood.22) Turkey is still a staunch supporter of Morsi, the abolished Egyptian Muslim Brotherhood president of Egypt. Ankara and Doha are strategic partners on political, economic and military levels. Qatar supplied Turkey with 1.5 billion tonnes of LNG.23) Ankara is Qatar’s important and natural security ally.As part of the 2014 military cooperation agreement, Turkey created a military base in Qatar, and in the aftermath of the 2017 Gulf Crisis decided to increase its contingent there.24) Ankara’s presence in Qatar is a better security guarantor than the US, which sacrificed their staunch ally Hosni Mubarak of Egypt. Turkey also provided Qatar with food by plane when the other countries of the Gulf blocked the latter’s supply lines.25)Doha repays Ankara by promising to help to the amount of USD 15 billion in the form of support for “many economic projects, investments and deposits” and a currency swap.26) In return for further military presence and support for Qatar through Turkey, Doha may repay further investments and financial measures aimed at stopping the decline of the Turkish lira.
Military forces have changed governments in Afghanistan, Iraq, Yemen, Libya but failed to do so in Syria. The goal is the same as with the actions against Venezuela, Iran and Turkey. Before the election the Gefira team predicted that the financial attack on Turkey would stop after the election, but we were wrong. We also said that Erdoğan would not give in, and we were right. Erdoğan’s plan for Turkey is the restoration of the Ottoman power and its role in the region and in the world. To accomplish that, he has to shrink its trade deficit and secure his energy supply.
