Kurdish oil exports, one remaining Baghdad noose that Kurds must break
cott, the bill may have been passed due to a “technicality” with a thin majority obtained but not involving the Kurds who are such vital components of the coalition and in the union with Iraq is a dangerous development.
Oil sharing and foreign oil contracts are not new bones of contention between the Kurds and Baghdad. Oil exports in Kurdistan have been very much stop-start for a number of years. The source of discontent in the 2013 budget was the amount set aside to pay oil companies in Kurdistan, with the Kurdistan Regional Government (KRG) insisting it is owed $3.5 billion for costs accumulated by foreign oil companies over the past 3 years whilst Baghdad has allotted only $644.33 million in the latest budget.
This issue was one of the main reasons the 2013 budget was not ratified although the Iraqi cabinet approved the budget in October.
The frequent theme from Baghdad over the past several years is that oil contracts signed by KRG are illegal, in spite of the stipulations afforded in the national constitution. Therefore it is hardly surprising that Baghdad continues a hard-handed approach in dealing with the oil sharing issue. Ironically, passing a national hydrocarbon law gathering dust since 2007 that would end all disputes is not even seen as an immediate priority.
The State of Law had argued that Kurds were not entitled to compensation as they had not contributed their fair share to national exports.
As Kurds have insisted for years, any revenue from oil exports in Kurdistan will go to a central pot where Kurds will take their allotted share. Narrow-minded political goals in Baghdad, has failed to realise that a strong oil industry in Kurdistan is a bonus for all Iraqis. Baghdad may have costs of foreign oil companies to cover but what about the billions of surplus revenue that follows? Anyone would think Baghdad is taking a financial loss in dealing with Kurdish oil.
Baghdad has continuously refused to pay Peshmerga costs which are stipulated in the constitution. Yet it has been paying salaries of Sahwa Council Sunni militia for a number of years to appease Sunnis and has even increased their salaries in this year’s budget to try and dampen Sunni demonstrations.
Furthermore, whilst Kurdistan develops at a rapid pace but fails to receive fair share of revenues it needs, the province of Nineveh failed to spend around $6 billion of its $10 billion share in the 2012 budget. There is a similar pattern in other provinces.
Next steps for the Kurds
Undoubtedly, the budget issue will make prospects of reconciliation worse between Erbil and Baghdad. The continued halt of oil exports by Kurdistan may seem logical, but it’s counter-productive as Kurdistan needs to press-ahead with its oil industry and economic growth.
The KRG oil ministry confirmed it will not send any agreed quantities of oil unless Baghdad pays the relevant costs to foreign companies.
Control of oil exports is one remaining noose that Baghdad has around the Kurds. If the Kurds have an independent oil infrastructure and an oil pipeline purely on Kurdish soil, it greatly diminishes Baghdad’s bargaining power.
Kurdistan has greatly flourished in recent years whilst the south continues to lag behind, do the Kurds continue with ties in Baghdad or take unilateral measures in deciding national interests?
It begs the question of whether Baghdad sees the Kurds as true partners and looks to Kurdish achievements as an achievement for all of Iraq or does it want to see Kurdistan undermined, regress and stagnate? The Kurds would say recent disputes over Dijla Operations Command, halting of oil exports and now the national budget answers that question.
Baghdad has been intent on scaring oil companies from working in Kurdistan for a while. Giving the option to oil companies of either “us or them” is anything but the tone of partnership.
Kurdistan needs to break that noose, develop an inde- pendent oil pipeline and accumulate revenues directly and pay foreign companies from their own budget.
This stance was also suggested by Iraqi Kurdish MP Muhsin al-Saadoun as a measure against the federal government for side-lining the Kurds.
Naturally, Maliki led coalition hit back by threatening to deduct Kurdistan Region’s share of the federal budget.
Either way, something has to give and inaction by the Kurdish leadership is a non-starter. Kurdistan must ensure the destiny of Kurdish affairs is determined by Kurdish hands.
What real benefit have the Kurds ever received from Iraq’s immense oil wealth since Iraq’s creation? Now Kurdish oil must be the source of Kurdistan’s prosperity and to give back to its long-time suffering people and should not be viewed as somewhat of a curse.
The Shiite-government announcement of the formation of a new military force under the name of the “al-Jazeera and Badiya Force” situated in the disputed city of Sinjar, which borders Syria is yet another confrontational step by Maliki. A pro-Assad Baghdad is vying for control of its Syrian borders, possibly due to pressure from Iran, with signs this week that the violence is spilling across the border. Kurds have a far different view of Assad and are unlikely to relinquish border control in their own territories to propel Baghdad’s goals in Syria.
Baghdad decision not to pay foreign companies could well be a punishment for Kurdistan’s growing partnership with Turkey and its anti-Assad stance.
Since Maliki assumed a second term in office, Iraq has been in decline. With Sunni’s growing boldness in standing-up to Shiite dominance, who will be around to broker the next government or mediate between Sunnis and Shiites? It certainly won’t be the Kurds.
A previous statement by Kurdistan President Massoud Barzani summed up current sentiments, "Iraq's citizens are simply tired of Baghdad's ... language of threat and intimidation, which in the cynical pursuit of narrow political agendas only serves to create division and strife."
Iraqi President Jalal Talabani and Kurdish regional President Massoud Barzani open a ceremonial valve during an event to celebrate the start of oil export from Kurdistan in June 2009.