Oil the real prize of Iran’s Kur­dish ad­ven­ture

In new ar­range­ment, first de­liv­er­ies to be trucked across Iraq bor­der in com­ing days

The Daily Star (Lebanon) - - REGION - By Ahmed Rasheed, Bo­zorgmehr Sharafedin and Dmitry Zh­dan­nikov

BAGH­DAD/LONDON: Af­ter help­ing Iraq sti­fle a Kur­dish push for in­de­pen­dence, Iran is now po­si­tion­ing it­self to take con­trol of oil ex­ports from the re­gion’s gi­ant Kirkuk field, with the first de­liv­er­ies ex­pected within days, of­fi­cials and trad­ing sources said.

In the weeks since Septem­ber’s failed Kur­dish in­de­pen­dence ref­er­en­dum, Iraq has agreed for the first time to di­vert crude from Kirkuk prov­ince, which it re­took from the Kurds, to Iran, where it will sup­ply a re­fin­ery in the city of Ker­man­shah.

Iran is locked in a proxy war with its re­gional ri­val and U.S. ally, Saudi Ara­bia. As well as in Iraq, it has been ex­tend­ing its in­flu­ence in Syria, Ye­men and Le­banon, rais­ing in­creas­ing con­cerns in Wash­ing­ton and Riyadh.

Un­der the new ar­range­ment, the first oil will be trucked across the bor­der in the com­ing days.

Ini­tially Iran will re­ceive 15,000 bar­rels per day worth nearly $1 mil­lion, ris­ing grad­u­ally to 60,000 bpd, ac­cord­ing to Iraqi of­fi­cials and trad­ing sources.

Bagh­dad and Tehran have also re­vived a project to build a pipe­line to carry oil from Iraq’s Kirkuk fields to cen­tral Iran and on­ward for ex­port from the Gulf.

Hamid Hos­seini, the Ira­nian sec­re­tary-gen­eral of the Iran-Iraq Cham­ber of Com­merce, said Iran wants to build a pipe­line that can take as much as 650,000 bpd of Kur­dish oil for its do­mes­tic re­finer­ies and for ex­ports.

The pipe­line would re­place ex­ist­ing ex­port routes for crude from north­ern Iraq via Tur­key and the Mediter­ranean and would be a blow to Ankara’s hopes of be­com­ing an en­ergy hub for Europe.

It would also be ev­i­dence of a U.S. fail­ure to pre­vent a rap­proche­ment be­tween its ally Iraq and one of its big­gest po­lit­i­cal foes, Iran, which is rapidly re­gain­ing in­flu­ence in the Mid­dle East.

That is in part due to Gen. Qasem Soleimani, com­man­der of the AlQuds force, the in­ter­na­tional branch of the Rev­o­lu­tion­ary Guard, which is also tak­ing a keen in­ter­est in Iran’s oil busi­ness in Iraq.

Soleimani vis­ited Iraqi Kur­dis­tan in Septem­ber to warn the re­gion against hold­ing an in­de­pen­dence vote. He was also in­volved in the Iraqi army’s re­cap­ture of Kirkuk.

“In Iraq, Ira­nian forces are work­ing to sow dis­cord as we re­cently saw in Kirkuk, where the pres­ence of Quds force com­man­der, Qasem Soleimani, ex­ac­er­bated ten­sions among the Kurds and the gov­ern­ment in Bagh­dad,” U.S. Sen. John McCain said in Wash­ing­ton last week.

“The Kur­dish dream of be­ing a big oil ex­porter is in tat­ters,” said a source close to the gov­ern­ment in Ir­bil, who pre­dicted that “Iran will be king of the game.”

The Kurds’ bid for in­de­pen­dence an­gered Tur­key and Iran, which both have large Kur­dish pop­u­la­tions and con­demned the ref­er­en­dum as desta­bi­liz­ing the re­gion. The United States also called on Kur­dis­tan to scrap the vote.

But it was prob­a­bly in­ter­nal Kur­dish di­vi­sions that doomed the ref­er­en­dum to fail­ure, lo­cal po­lit­i­cal sources be­lieve. Oil was at the heart of this dis­pute.

The Kirkuk fields were con­trolled by Iraq’s state oil firm SOMO be­fore be­ing taken over by Kur­dish forces in 2014, when the Iraqi army re­treated in the face of at­tacks by Daesh (ISIS).

The Pa­tri­otic Union of Kur­dis­tan party, in Su­laimaniyah, then ac­cused the rul­ing Kur­dis­tan Demo­cratic Party of then Pres­i­dent Mas­soud Barzani, based in the cap­i­tal Ir­bil, of not shar­ing the oil wealth.

The PUK wanted to ex­port oil from Kirkuk to Iran.

“We tried to make Barzani ac­cept joint man­age­ment be­tween Ir­bil and Su­laimaniyah over the fields but he strongly op­posed it,” said Sherzad Yaba, a po­lit­i­cal ad­viser close to the PUK. “To put an end to the il­le­git­i­mate con­trol of the KDP over Kirkuk oil, se­nior mem­bers from the PUK con­tacted both Bagh­dad and Tehran and en­cour­aged the Ira­ni­ans to build a pipe­line to ex­port Kirkuk crude through Ban­dar Abbas port,” Yaba said.

The project lay dor­mant even though Iraqi Oil Min­is­ter Jab­bar alLuaibi and his Ira­nian coun­ter­part Bi­jal Zan­ganeh signed a mem­o­ran­dum on the project in Fe­bru­ary.

Af­ter the ref­er­en­dum, the KDP ac­cused the PUK of strik­ing a deal with Iran to with­draw from Kirkuk, which the PUK de­nies.

The re­cap­ture of Kirkuk was co­or­di­nated with Soleimani and left Iraqi gov­ern­ment troops in con­trol of half of all Kur­dish oil out­put.

As Kur­dish en­gi­neers fled the fields, out­put from Kirkuk was sus­pended and has re­mained shut for the past five weeks as Bagh­dad and Ir­bil ar­gue over the rev­enue split.

With out­put of over 300,000 bpd sus­pended since mid-Oc­to­ber, losses are ap­proach­ing $1 bil­lion, ac­cord­ing to Kur­dish in­dus­try sources.

To stop the losses, Iraq and the PUK re­sumed talks with Iran, ac­cord­ing to Iraqi and Kur­dish of­fi­cials.

Of­fi­cials from Iraq’s and Iran’s state oil firms, SOMO and NICO, met last month to iron out de­tails of oil sales to the Ker­man­shah re­fin­ery, the act­ing chief of SOMO, Alaa alYasiri, said. He also said ac­tive dis­cus­sions were tak­ing place about the pipe­line project.

Even though dis­cus­sions be­tween Bagh­dad and Tehran have been con­ducted be­tween Oil Min­istry of­fi­cials and the Cham­ber of Com­merce, the Rev­o­lu­tion­ary Guard is poised to step in.

“Any oil trans­ac­tion be­tween Iran and Iraq should be ap­proved by the Rev­o­lu­tion­ary Guard, not the Oil Min­istry,” said Reza Mostafavi Ta­batabaei, pres­i­dent of Lon­don­based ENEXD, a firm in­volved in the en­ergy equip­ment busi­ness in the Mid­dle East. Those deal­ings are over­seen by the desk re­spon­si­ble for Iran’s in­vest­ments in Iraq at the pres­i­dent’s of­fice and are run by the Rev­o­lu­tion­ary Guard.

The pipe­line project will be the Rev­o­lu­tion­ary Guard’s re­ward to the Kurds for help­ing with the re­cap­ture of Kirkuk, Ta­batabaei said.

The PUK wanted to ex­port oil from Kirkuk to Iran.

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