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Iraqi Kurds to sell gas directly to Turkey-minister
ISTANBUL (Reuters) - Iraq's semi-autonomous Kurdish region may begin selling natural gas directly to Turkey within two years, its energy minister said on Tuesday, a move likely to anger the central government and further strain Baghdad's ties with Ankara.
The Kurdistan Regional Government (KRG) in the north of the country and Baghdad have rowed for years over issues including late payments for crude, the legality of the regional government's oil deals and disputed territory.
Baghdad accuses the Kurds of smuggling their oil abroad, mainly to Iran, and wrecking the central budget by denying it revenue.
"Even if there's no consensus with Baghdad, we will continue to sell natural gas and oil to Turkey," KRG Minister of Natural Resources Ashti Hawrami told the Caspian Gas Forum in Istanbul.
"We plan to sell 10 billion cubic meters of natural gas to Turkey, and later Europe in the long-term," he said, adding that sales were expected to begin within 18 months to two years.
The KRG is obliged to attract investment from abroad, he said. "If we left everything up to Baghdad this would not work."
Once the poorest region of Iraq, Kurdistan is now at its most prosperous, having been largely insulated from the insurgency and sectarian violence in the south, and the regional government has increasingly become less reliant on Baghdad.
For now, the region largely depends on receiving 17 percent of the national budget, but the KRG estimates there are about 45 billion barrels of oil reserves in the north, most of it as yet untapped.
While there are no official figures for gas reserves in Kurdistan, Iraq as a whole has the world's 10th-largest reserves at 112 trillion cubic feet, according to U.S. Department of Energy data.
Most Kurdish oil is still pumped into the national pipeline system. One pipeline carrying about 60,000 bpd already feeds directly from Kurdistan's Tawke oilfield into the main pipeline to the Turkish port of Ceyhan.
The move to bypass Baghdad could further strain ties between the central Iraqi government and Turkey, which has forged solid political and trade ties with Iraq's Kurds in recent years.
Iraq is currently the second-biggest market after Germany for Turkish exports, amounting to more than $8 billion last year. But according to Turkish Economy Minister Zafer Caglayan, about 70 percent of Turkey's exports to Iraq are to the north.
If the Kurdistan region were a country, it would still be Turkey's eighth-biggest export market, according to his estimates.
Turkish officials have been locked in a war of words with Iraqi Prime Minister Nuri al-Maliki since December, when he ordered the arrest of Sunni Vice President Tareq al-Hashemi, based on allegations that he ran death squads.
Turkey, the majority of whose people are Sunnis, has accused Shi'ite Maliki of stirring ethnic tension. The Iraqi prime minister has accused Turkey of meddling in its affairs.
Turkey has heavily courted the Kurds, along with Iraq's Sunni Arab parties in recent years, but Maliki and Shi'ite parties have remained allied to Iran.
(Reporting by Evrim Ergin; Writing by Ece Toksabay; Editing by Jonathon Burch and Jane Baird)
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