No end in sight for Iraq oil dis­pute

PM Barzani calls for a so­lu­tion to the Iraqi oil dis­pute

The Kurdish Globe - - FRONT PAGE - Al-Mon­i­tor

Nechir­van Barzani, prime min­is­ter of the Kur­dis­tan Re­gional Government of Iraq, is crit­i­ciz­ing Bagh­dad for threat­en­ing to can­cel the con­tracts of com­pa­nies op­er­at­ing in the coun­try’s south­ern oil fields if they refuse to stop deal­ing sep­a­rately with the Kurds.

“In­stead of warn­ing com­pa­nies to choose be­tween the KRG or Bagh­dad, it’s in Iraq’s in­ter­est to co­op­er­ate more and ... for the KRG and Bagh­dad to sit down and find a so­lu­tion,” Barzani told Al-Mon­i­tor in an ex­clu­sive in­ter­view.

His com­ments are likely to add fuel to the dis­pute sim­mer­ing be­tween the KRG and the cen­tral government in Bagh­dad, which ar­gues that the semi­au­tonomous Kur­dis­tan Re­gion has no le­gal author­ity to ex­port oil or sign agree­ments for devel­op­ment. The Kurds, how­ever, main­tain that Iraq’s con­sti­tu­tion gives them the right to do so. They have al­ready signed con­tracts with a num­ber of multi­na­tional com­pa­nies, in­clud­ing Chevron, ExxonMo­bil, and Gazprom. In Jan­uary, Iraqi Oil Min­is­ter Ab­dul Ka­reem Luaibi or­dered ExxonMo­bil to de­cide be­tween Kur­dis­tan and south­ern Iraq.

“This ap­proach for Bagh­dad to tell ExxonMo­bil to choose be­tween Kur­dis­tan and Iraq, in our view, is a very wrong ap­proach, be­cause... that oil be­longs to all of Iraq,” Barzani said. “Those com­pa­nies that now deal with the KRG are aware of our right in the Iraqi con­sti­tu­tion. That’s why they came to the KRG.”

Iraqi Prime Min­is­ter Nouri al-Ma­liki, how­ever, has ar­gued that the Kurds’ oil pol­icy threat­ens to splin­ter the coun­try’s frag­ile fed­eral state by tempt­ing its other oil-rich re­gions to also strike in­de­pen­dent deals. This dis­pute, along with broader se­cu­rity con­cerns, has un­der­mined Bagh­dad’s drive to boost oil pro­duc­tion, now av­er­ag­ing around 3 mil­lion bar­rels per day (bpd), to more than 8 mil­lion bpd by 2017.

“If you have one part of the coun­try pro­duc­ing and ex­port­ing and sell­ing the oil, then Basra, the south­ern part, will do the same, and the other gov­er­norates will do the same, and this will have no government plan­ning,” said Ab­dul­lah al-Amir, the prin­ci­pal per­sonal ad­vi­sor to Hus­sein al-Shahris­tani, Iraq’s deputy prime min­is­ter for en­ergy af­fairs, in an in­ter­view with Al-Mon­i­tor. “There will be no [cen­tral] government rev­enues be­cause each gover­norate will do what­ever it wants. This is against the con­sti­tu­tion of Iraq.”

Amir said Kur­dis­tan should sub­mit all its oil con­tracts to Iraq’s Oil Min­istry for ap­proval and claimed that at present only one-third of the KRG’s oil rev­enues are be­ing trans­ferred to the cen­tral government. “There is no record of what is hap­pen­ing to the [other] two-thirds of pro­duc­tion, where the rev­enues are go­ing, what prices the oil is sold at,” he said.

Ear­lier in Fe­bru­ary, a dis­pute over pay­ments to oil com­pa­nies work­ing in Kur­dis­tan prompted the Iraqi par­lia­ment to in­def­i­nitely post­pone a vote on the na­tional bud­get. Some law­mak­ers called for cut­ting Kur­dis­tan’s share of the bud­get from 17% to no more than 12%. The Kurds say they are en­ti­tled to 17% of the fed­eral bud­get, which is fi­nanced largely through the sale of crude oil, in­clud­ing from Kur­dis­tan. They claim that they al­ready re­ceive much less than that.

“Our 17%, af­ter sub­tract­ing the bud­get for the Iraqi pres­i­dent’s of­fice, the Min­istry of De­fense, the Min­istry of In­te­rior ... in fact is 11.5% of the to­tal bud­get of Iraq,” Nawzad Hani Mawlood, the gov­er­nor of Er­bil province, told Al-Mon­i­tor. He added that the Kur­dis­tan Re­gion re­lies on this rev­enue to pay wages for civil ser­vants and other op­er­at­ing ex­penses.

Ten­sions were al­ready on the rise be­fore the bud­get bat­tle. In De­cem­ber, Kur­dis­tan had stopped ex­port­ing oil through a fed­eral pipe­line and in­stead be­gan trans­port­ing it by truck across the bor­der with Turkey. Th­ese ex­ports are mod­est, some 10,000 to 20,000 bpd, ac­cord­ing to Robin Mills, head of con­sult­ing at Dubai-based Manaar En­ergy. This means Kur­dis­tan has a long way to go to achieve Prime Min­is­ter Barzani’s goal of ex­port­ing around half a mil­lion bar­rels a day by the end of this year and 1 mil­lion a day by 2014.

“To have a really self-sus­tain­ing in­dus­try, they need ei­ther a solid agree­ment with Bagh­dad on pipe­line ac­cess or an in­de­pen­dent pipe­line,” Mills said. The KRG has been dis­cussing de­vel­op­ing plans to build a pipe­line to ex­port Kur­dis­tan oil through Turkey, though Mills ques­tions the like­li­hood of an agree­ment tak­ing shape any time soon.

The clash over oil is part of a larger feud be­tween Kur­dis­tan and Iraq’s Shi­ite Arab–led ad­min­is­tra­tion over land and au­ton­omy. “[The oil dis­pute] is just a front to a more ex­is­ten­tial con­test over fed­er­al­ism, land, and author­ity,” said an Amer­i­can oil in­vestor who has worked in Iraq and spoke on con­di­tion of anonymity. “I think the oil is­sue is a symp­tom and not a cause. So long as it is go­ing to rep­re­sent it­self as a democ­racy, Iraq can­not be gov­erned as a uni­tary, cen­tral­ized state. There is no way Sun­nis and Kurds would will­ingly sub­ject them­selves to that level of cen­tral­ized Shi­ite con­trol.”

Late last year, both the Kurds and Bagh­dad de­ployed troops to a dis­puted area along Kur­dis­tan’s south­ern boundary. In re­cent weeks, the area has been shaken by a wave of bomb­ings, in­clud­ing a sui­cide at­tack that killed at least 15 peo­ple in the oil-rich city of Kirkuk.

De­spite the stand­off, Kur­dis­tan’s prime min­is­ter doesn’t ex­pect the con­flict to es­ca­late into war. “Maybe there will be ten­sions some­times, prob­lems ev­ery­where, but war, I don’t think so,” Barzani said. “We both are not stupid, so war, no. I don’t ex­pect it.”

Mills, the con­sul­tant, agreed that open con­flict is un­likely. “[It] would be dis­as­trous for both sides,” he said. “It would em­bolden Sun­nis in west­ern and north­ern Iraq who are op­posed to the Bagh­dad government and would in­vite in­ter­ven­tion by Turkey and Iran.”

Bagh­dad can’t af­ford to fight the Kurds right now, ac­cord­ing to Gov­er­nor Mawlood, be­cause it has its hands full with pos­si­ble spillover from neigh­bor­ing Syria. He be­lieves that if Syr­ian Pres­i­dent Bashar al-As­sad falls, Sunni Mus­lims there will come to power and could incite Iraq’s Sun­nis to rise up against the Shi­ite-led government.

“So the com­pe­ti­tion is be­tween Shi­ites and Sun­nis in Bagh­dad, not the Kurds,” as­serted Mawlood. “We don’t take part in that. [Ma­liki] needs the sup­port of Kurds be­cause he wants to stay prime min­is­ter. So he needs the votes of Kurds for this po­si­tion, but he is mak­ing a mis­take.”

Kur­dis­tan Re­gion's Prime Min­is­ter Nechir­van Barzani

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