One place where Turkey’s ‘zero-problems with neighbors’ policy seems to be working is in the Kurdistan Region of Iraq. In just five years, Ankara has used its soft power to turn a once conflicted relationship with the Kurdistan Regional Government (KRG) into an economically and politically profitable one. Still, even this alliance has its limits. Ankara may be highly engaged in the Kurdish oil market, but it will not fully support the KRG’s quest for economic independence. Nor is Turkey willing to completely alienate Baghdad for its Iraqi Kurdish ally. Despite tensions between Turkish Prime Minister Recip Tayyip Erdogan and Iraqi Prime Minister Nouri al-Maliki, Ankara remains vested in the Iraqi oil sector and committed to Iraq's territorial unity. These ongoing ties, as well as political trends in Iraq, will further challenge the KRG’s energy ambitions and create greater pressure for an Erbil-Baghdad energy compromise.
Thus far, the Turkish-KRG alliance has been a mutually beneficial one. By partnering with Iraqi Kurdish president Massoud Barzani, Ankara has been able to address a number of economic and foreign policy concerns simultaneously; checking the Kurdistan Workers' Party's (PKK) militancy in border areas, mediating Syrian Kurdish nationalists, forming a stronger defense against Iranian influence; and becoming a regional energy hub. In return, the KRG has used Turkish investments to develop an alternative energy market that has helped expand its autonomy and challenge central government authority. With Ankara’s support, the KRG has circumvented Baghdad’s payment and export restrictions by reviving cross-border trucking operations, enabling it to access undisclosed revenues and refined petroleum products and partially pay international oil company (IOC) costs.