Turkey's "Zero Problem" With Iraqi Kurds Means Big Bucks

MEDFORD, MASSACHUSETTS -- On October 31, a suicide bomber from a splinter faction of the Kurdish terror group the PKK injured 32 policemen in Istanbul during national day celebrations. The bomber, from eastern Turkey's disaffected Kurdish region, trained in the neighboring mountains of northern Iraq's Kurdistan Regional Government (KRG). After a similar attack in the capital Ankara in May 2007, the Turkish government reflexively accused KRG officials of complicity in terrorism, dismissed the autonomous region's legitimacy, mobilized 100,000 soldiers and then assaulted Kurdish militant bases in northern Iraq.

Last week, in contrast, Prime Minister Erdogan and the Turkish leadership issued muted requests for calm. Some opposition politicians shrieked for retribution but the army remained unmoved. On Saturday, in fact, Turkish Foreign Minister Ahmet Davutoğlu visited KRG President Massoud Barzani in the capital Erbil to discuss trade, investment and the formation of Iraq's government. The Istanbul bombing escaped the agenda.

The KRG is home to 5.5 million of the region's only self-governing Kurds. The remaining 80% reside nearby -- primarily in Turkey -- where a 32-year-old conflict with separatists rages without a political solution in sight. Turks still consider Kurdish nationalism a strategic threat and therefore deny Kurds basic linguistic and cultural rights. Last week's incident, furthermore, is a glaring reminder that Kurdish militants still launch attacks from remote bases in the KRG.

Despite this, the relationship between Turkey and the KRG has steadily improved after a Turkish policy reversal in April 2008. Since then, President Barzani and Foreign Minister Davutoğlu received each other in their respective capitals and Turkey opened a consulate in Erbil where the Kurdish flag -- banned in Turkey -- proudly flies.

Pundits ascribe this rapprochement to Davutoğlu's "zero problems" policy with neighboring countries. In regional context however, Turkish-KRG détente is unique. Elsewhere, Turkey's EU ascension is a charade, relations with Armenia are frozen, Cyprus remains divided between Greeks and Turks and the former alliance with Israel has rapidly deteriorated.

Why, then, has this odd couple grown steadily closer? Money. Economic opportunity is pushing these natural enemies into each other's arms.

Turkish contractors, wooed by the KRG's relative stability after the fall of Saddam, flocked across the border to build infrastructure, telecommunication networks, airports and Iraq's largest mall. In a few years, rising capitalists from mixed Turkish-Kurdish hinterland cities like Gaziantep amassed 75% of the KRG's foreign direct investment. These "Anatolian tigers" integrated the two economies despite political-military obstacles. Today, 3,200 Turkish firms operating in the KRG facilitate $9 billion in bilateral trade - Turkey's sixth largest export market.

While the KRG benefitted from Turkey's soaring economy, Ankara's strategic planners lusted after the vast hydrocarbon potential of northern Iraq. They sought energy resource security to underwrite ambitious growth targets befitting a G20 global economic power. Turkey is an intermediary, however, only facilitating the flow of oil from Iran and the Caspian basin to the Mediterranean and Europe. Direct access to nearby energy reserves could hedge domestic supply against Iran and Russian volatility.

It was no coincidence Turkish overtures to the KRG began in April 2008 as crude oil surpassed $115 per barrel (a 100% increase in 24 months). Within a few months, as oil prices peaked at record levels, TPAO -- Turkey's state-owned oil company -- received certification to explore Iraqi reserves. That spring, the KRG investment board recorded its highest capital inflows for any period between 2003-2010.

Qubad Talabani, KRG representative in Washington D.C., confirmed this trend. "Commodity trade opened political opportunities with Turkey but our future relationship will be driven by energy investment," he remarked to me.

The Istanbul suicide bombing was likely a failed attempt by Kurdish rejectionists to scuttle the blossoming friend between Ankara and Erbil. By avoiding recrimination and proceeding with normalization, both sides passed a crucial test proving the relationship has matured and moved into a new era.

In a volatile region, an army of visionary merchants are reshaping geo-politics. The Turkish government, in a policy U-turn, is capitalizing on the strategic framework charted by the private sector. No doubt significant hurdles lie ahead, but the evolution of Turkish-KRG relations is a positive step and potential model for emulation elsewhere.

The day of the blast, Kurdish officials visited the Turkish consul in Erbil to honor his country's national day. A Turkish diplomat in Washington D.C., lauding this gesture, remarked to me: "We are focusing on the bigger picture, we still have problems with logistical support for terrorists coming from KRG but we are addressing this in coordination with the KRG and not unilaterally. I believe we are on the right track."