JOURNAL: The PKK's Opportunity to Win Strategically

Current tightness in the oil markets (peak oil?) has presented the PKK, the Kurdish guerrilla group fighting the Turkish government, with an amazing opportunity. It can become responsible for sending oil prices over $100 a barrel and sowing panic in global markets.

How? This objective can be accomplished through a series of attacks on the BTC pipeline that runs from Azerbaijan to the Turkish port of Ceyhan (in a fashion similar to earlier attacks that PKK has made on less substantial pipelines). With over 750,000 barrels of oil flow a day (1 m a day next year) over 1,092 miles of pipeline, ongoing disruption would result in:

• An immediate price spike that would likely exceed $100 a barrel, an important psychological barrier. This is pricing power in the oil market on par with Saudi Arabia (see the 2004 brief: "A Shadow OPEC" for more).
• A major loss of income for Turkey from pipeline fees, as contractual caveats kick in. Also, substantial disruptions and price hikes for not only Turkish customers, but European customers too. This could put the final nail in coffin for Turkey's EU bid.
• Global recognition of their situation/cause and immediate international pressure on Turkey to resolve the crisis. At a minimum, if Turkey opts for violence, the disruption of the BTC would be a strategic timer on the conflict -- as in the longer it persists, the greater the international pressure to end it.

If peak oil is actually in play already, as this report from the German government concludes, the price spike we see will not be met with increased production from the big producers. It will be sustained as long as the disruption persists. As a result, it could become the first global example that oil pricing power has shifted from producers to disruptors and that a shadow OPEC is not only possible, but inevitable.

Comments

[Z]

Interesting Idea, but the PKK could overplay its hand. Also, Turkey could just as easily use the threat of high oil prices to bring pressure to bear on the Kurdish leadership i.e. "If you wont help us control the situation we will have to act and we wont be responsible for the blow to the world economy."

Turkey itself could also cut off kurdish oil from the rest of the world, holding both hostage. The west has to pay high prices, the Kurds miss out on all the profits. Turkey could likely gain tacit support for this from oil producers (namely Iran and Russia.) I realize this is a Global Guerrillas forum, but the nation state and therefore geopolitics still exist (for the moment at least.

The PKK certainly does have leverage, but if they push things too far it could backfire.

[Duncan Kinder]

The PKK has expressly threatened to attack the BTC pipeline.

See, eg.

" LOS ANGELES, Oct. 19 -- Turkey has stepped up protection for its section of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline following the rebel Kurdistan Workers' Party (PKK) threats to attack the line.

A senior official in the Turkish ministry of energy said security measures have been stepped up, saying it is normal to have some threats against important pipelines when Turkey is expected to launch a military offensive into northern Iraq. "
http://www.ogj.com/display_article/309669/120/ARTCL/none/Trasp/1/Turkey-tightens-security-against-Kurdish-rebels/

[gmoke]

Asked Maureen Dowd and Dana Priest about climate change and peak oil while they were both at Harvard this week. Dowd said that George W. Bush has made America green and Priest referred me to the Washington Post environmental reporter when I asked her if anybody in the national security establishment was looking at these issues.

We are slipping into what may be really desperate situations without the least awareness of those in power and those who are supposed to be looking for "news."

[Tangurena]

John, you're thinking like a westerner here. An attack on BTC by PKK would trump all the western attempts to keep Turkey from invading Iraq. Failure to keep that area pacified (the head of the PKK has called the kurdish areas in Iraq "southern kurdistan" as an explicit threat to Turkey), means the end of Turkey as a nation. Their pride means that they aren't going to take it sitting down, and the resulting mess will be a surprise to most westerners. Many of the westerners had been telling the Turks that they'll have to go to Irbil and discuss things, but doing so would acknowledge the Kurds in Iraq as a legitimate nation - which will only happen over their dead body.

France and Cyprus utterly hate Turkey, and they've vowed to keep Turkey out of the EU. While Turkey had been trying to get in, I expect their efforts have been in vain. With the islamic-wards tilt of their recent elections, it looks to me like Turkey has effectively turned their back on Europe. I suspect that the Turkish occupied portion of Cyprus is somewhat similar to pre-intefada palestine. I don't think you've factored in the hatred involved, and the amount of hate going on is going to be a shock to most people.

[John Robb]

T, have a strong appreciation for the hatreds involved. I've spent lots of time in the greater Kurdistan area. As a result, I believe that this is definitely headed towards violence.

However, the global connectivity of Turkey's economy is a vulnerability that can/will be exploited by the PKK. It would put Turkey on the horns of a dilemma.

[plucky_underdog]

Turkey also has an ownership interest in the oil flowing through BTC - the Turkish National Oil Company (TPAO) is a 10% partner in the GCA fields in the Caspian.

10% * 750000 * $90 = about 7 million dollars a day. How many soldiers and helicopters, and what "technical advice" from a friendly Uncle Sam at nearby Incirlik with goodness knows what sensor packages at his fingertips, will that pay for?

[Cash]

Another factor in the peak oil argument is peak exports. Producer nations need more of their oil for domestic use, thus the amount of oil available for export is likely to drop more rapidly than the overall oil production curve. Jeffrey Brown's Export Land Model at theoildrum.com offers some potentially chilling insights. This magnifies and multiplies the impact of any disruption of the BTC pipeline. In another year, taking a million barrels a day off the world market would be a jolt worse than anything Katrina caused.

[Shaunak]

Actually I think they could make a healthy profit without blowing up so much as a pipe bomb.

How do they do that?

1. Decide on a date in the near future for a specific attack on the pipeline.

2. Inform the media that you're going to blow up a section of the pipeline to prove that the Turkish government is powerless to stop you.

3. Wait for the inevitable rise in crude prices as the market factors this information in.

4. Short crude just before D-day.

5. D-day arrives, no attack, prices cool down.

6. Cover your positions and make a healthy profit.

Come to think of it, there are many ways for them to make a profit simply because they've shown that they're capable of disrupting pipelines and the media believes them.

Any bits of propoganda they throw out will be factored in by the already jittery markets.

Also, correct me if I'm wrong, but I believe the current supply crunch in petroleum is because of a lack of refining capacity, as opposed to peak oil, and is expected to ease as new refineries come online in 2008 and 2009.

[pm2075]

Can anybody tell me whatever happened to the disclaimer about government agencies not knowing about the risk of peak oil. Is that still true or what is the latest?

[Cash]

"Also, correct me if I'm wrong, but I believe the current supply crunch in petroleum is because of a lack of refining capacity, as opposed to peak oil, and is expected to ease as new refineries come online in 2008 and 2009."

A refinery problem would be reflected in high refined product prices --- gasoline, diesel, etc -- while the current high crude oil prices reflect: 1) continued high demand from China, India, et al without a matching increase in production from OPEC; 2) in the U.S., the declining value of the U.S. dollar; 3) speculators and hedge funds jumping aboard oil as the next hot investment, one reason for the current volatility in crude prices ($94+ to $90- to $96+ within a week).

OPEC announced a 500,000-barrel increase in production early last month, and less than a week later UAE announced it was taking 500,000 barrels offline for maintenance work. Last time I checked, global crude oil (as opposed to "all liquids") production had dropped by 700,000 to 1 million bpd over last year.

[Mikyo]

Why so much effort to predict the exact peak date?

"If it be now, 'tis not to come; if it be not to come, it will be now; if it be not now, yet it will come: the readiness is all"