Amberin Zaman reports in Al-Monitor that the Turks are resigned to an independent Kurdish state in northern Iraq, while Washington considers it inevitable.

“Turkey holds the key, or rather the spigot, to Iraqi Kurdistan’s economic survival. In May 2014, the KRG began exporting oil, its main source of revenue, independently via a newly built pipeline to Turkey. That Ankara agreed to allow the Iraqi Kurds to use Turkish export terminals to sell their oil was seen as the surest sign yet of Turkey’s tacit acceptance if not outright encouragement of eventual Kurdish statehood,” Zaman wrote.

Despite his often ferocious rhetoric, Turkey’s President Tayyip Erdogan seems to be mending political fences, with Russia as well as the United States. Turkey’s stock market ranks at the top of the emerging market list in dollar terms year to date, and was the strongest performer among emerging markets today (up 1.5%).

We’ve thought Turkey undervalued since the beginning of the year. If Erdogan can reconcile his ambitions with the requirements of his neighbors, political risk will continue to decline and Turkish stocks should continue to perform.