The proposed paper aims to explore the nexus of relations between the Kurds of Northern Iraq and Turkey as they have developed since the US invasion and occupation of Iraq in March 2003. The two US-led invasions of Iraq in 1991 and 2003 altered the political balance in Northern Iraq. The creation of a “safe haven” for Kurdish refugees in the early 1990s eventually led to the establishment of a de facto Kurdish entity in northern Iraq based in Suleimaniyah. The situation was further complicated after the US invasion and occupation of Iraq in 2003. As Iraqi Kurds became the main local allies of the US authority in Iraq, opportunities were created for strengthening Kurdish autonomy by turning Iraq into a federal state, enlarging the area of the Kurdish-controlled Iraqi territory and potentially achieving independence. Turkey reacted with a vehement opposition to the increasing autonomy of northern Iraq’s Kurdish provinces at the diplomatic level. The inclusion of the oil-rich Kirkuk province into the Kurdish territory was rejected, while the elimination of all PKK bases and the discontinuation of all its activities in northern Iraq was demanded. Meanwhile, a countervailing trend was observed in the field of economics. Trade between Turkey and northern Iraq grew exponentially, while numerous Turkish companies invested in Northern Iraq. Despite tension at the high political level, economic cooperation flourished and added a significant dimension in the matrix of Turkish-Iraqi-Kurdish relations. This paper aims to examine the role of economy in alleviating high-politics tensions and suggesting a mutually beneficial modus vivendi, in parallel with the dynamics of Kurdish nation-building in northern Iraq and south-eastern Turkey. The role of significant parameters of the question will be also taken into account. The question of control over Kirkuk oilfields and the relations of northern Iraq with the Iraqi central government will be explored. Besides, the impact of the United States and the PKK on the dispute will also be examined. Finally, the possible impact of the new Obama administration on the status of Northern Iraq and its relations with Turkey will be evaluated.