The Turks, the Kurds, the Armenians, and $85 oil

So oil has zoomed above $85 for the first time, in part because traders are mildly freaked over the situation on the Turkey-Iraq border:

Turkey blamed the US for failing to clamp down on the PKK Kurdish separatist movement in northern Iraq, which it says has killed at least 30 Turkish soldiers and civilians in the past two weeks.

The Turkish parliament is expected this week to approve military operations to strike northern Iraq amid growing public and military pressure on the government to act.

In point of fact, traders ought to be scared out of their wits.  For starters, the immediate situation is even more delicate than the Financial Times is letting on.  From one of the Middle East's major dailies:

Turkish troops Sunday sent shells crashing across the Iraqi border into several villages in the autonomous Kurdish region, officials said, as a Kurdish fighter vowed that Turkey would find itself fighting a "Vietnam war" if strikes continued. Residents of a village near the northern Iraq border town of Zakhu fled after shells slammed into their homes and farms during a day-long bombardment that caused major damage but no casualties, Kurdistan regional government spokesman Jamal Abdullah told AFP.

What a mess for Team Bush — its NATO ally Turkey pitted against the most pro-American faction in Iraq, the Kurds.  And complicating matters even further is something that was way underreported in U.S. media last week — a move in Congress to label Turkey's massacre of Armenians during World War I as "genocide."

A House committee passed the resolution; the full House will probably take it up next month.  Turkey has already recalled its ambassador to Washington, and a top general has warned of irreversible damage to US-Turkish relations if it passes.  Pentagon planners are already looking for other ways to supply US troops in Iraq if Turkey kicks US forces out of the air base at Incirlik:

The Turkish authorities allow the US to use the giant Incirlik base as a main supply hub for Iraq. Unmanned aerial drone spy missions over Iraq and Iran are flown from there.

They also allow overflights of Turkish territory by US transport aircraft, allowing them to reduce the risk of being shot down by insurgents inside Iraq's troubled northern provinces.

Pentagon officials confirmed yesterday that 70% of the military cargo sent to Iraq goes via Incirlik or on routes over Turkey.

It could take months to increase operations in other logistical hubs, including Jordan, Kuwait and at the Iraqi port of Umm Qasr in the northern Persian Gulf, the officials added.

Why Democrats in Congress are choosing to take a stand over this, I have no idea.  What does it matter whether the Armenian massacre is labeled by Washington as "genocide" (which it undoubtedly is)?  It's ridiculous… but it's also fascinating from this perspective: The Democrats pushing most aggressively for this resolution — including Majority Leader Steny Hoyer and California's Tom Lantos — are staunchly pro-Israel, and because of Israel's close military ties to Turkey, the Israeli government has never looked kindly upon any characterization of the Armenian massacre as "genocide."  Ditto for the Anti-Defamation League in the United States.  Is this setback for the so-called "Israel Lobby" an anomaly — or the start of a trend?

The answer will have a big effect on US-Turkish relations, and it's tied very closely right now to the situation between Turkey and the Kurds… and ultimately, on whether oil rises to $90 or higher.

The Daily Reckoning