Kurds' oil deal with Tur­key 'en­dan­gers Iraq's bud­get'

The Kurdish Globe - - NEWS -

The feud be­tween Iraq's cen­tral gov­ern­ment and the fed­eral Kur­dish re­gion over oil is reach­ing crit­i­cal mass, the head of par­lia­ment's trea­sury com­mit­tee says.

Haidar Al Abadi, a se­nior leg­is­la­tor, has warned the gov­ern­ment's pro­jected 2014 bud­get will fall apart if Kur­dis­tan does not hand over rev­enue from in­de­pen­dent oil ex­ports to north­ern neigh­bor Tur­key that be­gan re­cently.

Such ac­tion by the Kur­dis­tan Re­gional Gov­ern­ment, which is de­fy­ing the Bagh­dad regime of Prime Min­is­ter Nouri al-Ma­liki by pur­su­ing its own oil and gas ex­ports out­side the Oil Min­istry's con­trol, will leave the cen­tral au­thor­ity no op­tion but to halt all state spend­ing in the en­clave. Kur­dis­tan's share amounts to around 17 per­cent of over­all state ex­pen­di­ture.

The loss of that rev­enue could be crip­pling, un­less the KRG, which the fed­eral gov­ern­ment ac­cuses of act­ing il­le­gally, can gen­er­ate enough in­come from oil sales to sus­tain it­self.

The KRG says the first 2 mil­lion bar­rels of crude, pri­mar­ily from Kur­dis­tan's Tawke field, through the newly con­structed pipe­line that be­gan op­er­at­ing in early Jan­uary, will be sold at the end of the month.

The Kurds are ex­pected to pump 4 mil­lion bar­rels to Tur­key's Cey­han ex­port ter­mi­nal on the east­ern Mediter­ranean by Fe­bru­ary.

Abadi said the draft bud­get for this year will have a deficit of around $18 bil­lion be­cause of a sharp rise in state spend­ing.

The deficit was cal­cu­lated on the prom­ise that the KRG would hand over rev­enue from oil ex­ports of 400,000 bar­rels per day, al­though the cur­rent level is only about 225,000 bpd.

"They're not con­tribut­ing, so why should they get some­thing out of it?" he de­clared.

Time is run­ning out, he stressed. The new bud­get must be ap­proved be­fore par­lia­ment is dis­solved in ad­vance of elec­tions sched­uled for April 30.

It's not known how the Kurds will re­spond, but they have a lot rid­ing on this en­ergy boom, which could lead them to de­clare the in­de­pen­dent state they have long sought and fought for.

The dis­pute be­tween Bagh­dad and the KRG in Er­bil, po­lit­i­cal cap­i­tal of the Kur­dish zone that spans three north­ern prov­inces, is mov­ing into dan­ger­ous ground.

Nei­ther side is in­clined to­ward com­pro­mise against the back­drop of re­newed in­sur­gency, in which al-Qaida ji­hadists seized the western towns of Fal­lu­jah and Ra­madi Dec. 30 and de­clared an Is­lamist emi­rate.

The last thing Ma­liki can af­ford as he seeks a third four-year term is an open con­flict with the hardy Kurds who fought Baathist rule for five decades and are also locked in a face-off with Bagh­dad over con­trol of the oil-rich Kirkuk re­gion.

Lurk­ing in the back­ground is the ex­pec­ta­tion that once the Kurds, who have their own mil­i­tary forces, be­come eco­nom­i­cally vi­able through their en­ergy re­serves they'll break away from the fed­eral Iraqi state, pos­si­bly trig­ger­ing its even­tual breakup.

Bagh­dad threat­ened this month to boy­cott Turk­ish com­pa­nies and can­cel con­tracts with Turk­ish firms as the rift with the Kurds and their new en­ergy pa­tron in­ten­si­fied.

Tur­key has no en­ergy re­sources, so the Kurds will be pro­vid­ing low-cost en­ergy for do­mes­tic con­sump­tion, but Ankara's prime goal is trans­form­ing it­self into the key en­ergy hub be­tween Rus­sia, the Caspian, the Mid­dle East and Europe.

The 4 mil­lion Kurds are sit- ting on, by their tally, 45 bil­lion bar­rels of oil. Th­ese are listed as part of Iraq's re­serves of 143.1 bil­lion bar­rels, the world's fifth­largest re­serve of con­ven­tional oil. Kur­dis­tan has nat­u­ral gas re­serves of 110 tril­lion cu­bic feet.

The Kurds' deal with Tur­key in Novem­ber calls for Kur­dish oil ex­ports of as much as 2 mil­lion bpd and 454 bil­lion tcf of gas.

The Woods MacKen­zie en­ergy con­sul­tancy of Ed­in­burgh, Scot­land, es­ti­mates most of the Kur­dish re­serves re­main un­tapped, with only 12 bil­lion bar­rels of oil and 24.5 tcf of gas so far dis­cov­ered.

Iraq is cur­rently pro­duc­ing 2.9 mil­lion bpd, with ex­ports to­tal­ing 2.4 mil­lion bpd. Its plan to push pro­duc­tion to 3.4 mil­lion bpd by year-end is start­ing to fal­ter.

The Oil Min­istry has al­ready low­ered its pro­duc­tion tar­gets for the next few years, mainly be­cause th­ese were, as in­dus­try an­a­lysts warned, far too am­bi­tious.

This has made find­ing a set­tle­ment of the po­ten­tially ex­plo­sive dis­pute with the Kurds all the more ur­gent.


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