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 Kurdistan oil minister talks about the allegations of smuggling crude to Iran 

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Kurdistan oil minister talks about the allegations of smuggling crude to Iran  2.8.2010 

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August 2, 2010

ERBIL-Hewlêr, Kurdistan region 'Iraq', — Following the publication of a New York Times article on July 8 accusing the Kurdistan Regional Government (KRG) of illegally smuggling hundreds of millions of dollars in crude oil and refined products via tankers to Iran, the KRG has been continually facing critics and pressure from local media, people, Iraqi government as well as the U.S. government.

In an exclusive and rare interview with Rudaw, here Dr. Ashti Hawrami, Kurdistan's Minister of Natural Resources, at length discusses KRG’s oil policy answering all of those questions and allegations.

Q: Many things have been said about you and your ministry. It is said that Kurdistan crude oil is illegally exported to Iran and you are not listening to the government of the Prime Minister Barham Salih who wants to stop the oil trafficking? What is your response to that?

HAWRAMI: All those words are efforts to complicate the situations here.               

Sitting in his office in Erbil, Dr. Ashti Hawrami, Kurdistan's Minister of Natural Resources, at length discusses KRG’s oil policy answering all of those questions and allegations. Rudaw photo.
We are all following one policy which is the policy of the Kurdistan Regional Government (KRG). We have all been sworn in. Under the instructions of president Barzani, we are all, from the prime minister to myself have promised to protect our policies and rights- our constitutional rights in the oil field.

The policy that I am talking about is the policy planned by the fifth cabinet. Now we, with the support of the [current] prime minister are all keeping on that policy. We will not go beyond our constitutional rights and neither will we give up any.

The constitutional rights have been set in the constitution by the representatives of the Kurdish people. I do not have the right to compromise on those constitutional rights. We do not violate the constitution either. So those who say Hawrami does this and that, they are merely trying to disturb out oil policy.

The New York Times report is concurrent with a specific political situation, that is, the situation of forming a government in Iraq. I do not look at the report as an attack on me. But rather, I see it as an attack on the Kurdistan region’s oil policy. I have only been a target in that effort to fail the Kurdistan oil policy. But the oil policy is the policy of the KRG and of the Kurdistan president, as well the Kurdistan parliament’s policy. It was discussed in and passed by the parliament. Those who are working to deform the policy are those who do not understand, unfortunately some of them are from Kurdistan, and the others are those who are against the Kurdish interests.

Q: I realize that oil policy is not easy to explain. There are some concerns over the inability of the KRG to explain the oil policy to the people of Kurdistan?

HAWRAMI: I respect and understand those concerns, and wish the people understand and respect the Kurdistan oil policy which took too much efforts and courage to start. We started five years ago, back then we had only two hours of electricity in both Erbil and Sulaimani. Now we have twenty hours of electricity [per day]. If we had not started this project we would not have this much electricity now. Only three – four years ago we had to use about 15- 20% of the Kurdistan’s budget to buy gasoline in order to generate few hours of electricity. 700 million to one billion dollars were spent annually in that regard. No longer is that money spent. This means we have increased electricity and saved money at the same time. Now we extract oil and refine it in the Kurdistan refineries thus provide fuel for the power stations. It has been a year since we have started extracting gas as well.

If we hadn’t started that project, Kurdistan would have been in a very bad situation now in all of the aspects. Imagine living in this hot summer with the amount of electricity we had in those years. Imagine spending money on buying fuel for our power stations instead of spending it in all those fields which we still need to improve.

Now more than 40 companies from 17 different countries work here in the oil and gas fields. They have invested more than 10 billion dollars in Kurdistan. They have brought so much many opportunities; they carry out training and exercise [on the local people]. Now industry is gradually starting in Kurdistan. If the electricity sector was not improved [due to the Kurdistan oil policy] none of the referenced achievements would have been secured. If we still had to wait on Baghdad,
www.ekurd.netor still had the mentality to keep the fortune for the future, as our opposition party calls for, Kurdistanians’ living standard, investment and jobs would have been in a very bad shape. Our policy is premised on a correct base. What we have so far done is transparent.

We have a few refineries in which we refine our oil. Some of the oil-finished products, such as gasoline and natural gas, are sent to the electricity and energy stations. What is left the KRG sells in order to pay the companies working in refining crude oil. The crude oil is extracted by Norwegian and Turkish companies. The extraction is not free; we pay these companies according to the contracts. They companies are paid by [the money made in] selling the finished goods.

The refineries are also owned by the private sector. A good refinery costs about 300 to 400 million dollars. For refining each barrel of crude and producing gasoline, benzene, Kerosene we have to pay. We pay them from selling the oil byproducts in the refineries.

Whatever revenue is left will go to a special bank account of the [KRG’s] Finance Ministry. And we bid out whatever we sell. Opposition or any media channel can attend the [formal announcement of] those bids. They can attend and find out how much oil byproducts are sold, and then they can go to the border to check and see if any more than that oil is exported! Or some say Kurdistan crude oil is exported and sold. If they have any evidence which proves that the [exported] crude oil is Kurdistan’s crude oil, then let them bring it forward.

Q: well, Abdulla Mala Nuri, a Gorran member in the Kurdistan parliament says he does have evidences proving Kurdistan’s oil being illegally smuggled to Iran. And not only that but he also says that he has evidences that almost all the money made in the smuggling goes to the PUK and PDK?

HAWRAMI: Mala Nuri’s information is baseless. If he has evidences let him take them to the parliament. In that case it is his right to do so, but if he does not do so then what he says are nothing but lies to deceive the people.

Q: But he says he has evidences?

HAWRAMI: Then he has to prove his claims. Words are easy to say, but what is important is to show commitment to the words. If he has evidence, he should take them to parliament and show the people that Kurdistani crude oil is exported. If so, then the government will deal with the situation. But as I said these are lies. Kurdistan crude oil is not exported. Sometimes people mistake between oil and oil products. So if he talks about crude oil then he is mistaken. He [Mala Nuri] says the day natural minister was in parliament 384 tankers of oil were sent to Iran from Taq Taq. That many tankers is equal to 100.000 barrel/day. It is clear that we do not have that capacity. We cannot even export 20.000 b/d via tankers. Even our border gates cannot handle 1000 tankers a day. Anyway, if there is evidence and there is insufficiency in the government’s performance so bring them forward and let’s fix the problems. But baseless speech is for confusing the people not for helping them. This would facilitate the enemy’s attack on Kurdistan’s oil policies.

Q: Have you opened a special account for the oil revenues as it is required by the Kurdistan oil and gas law?

HAWRAMI: Yes we do have that account in the Finance Ministry of the KRG. It is not a big account, because we do not export oil. But that account had been created and observed and the account must be created to sort out the oil deals and money with Baghdad and vice versa. If we reach the stage of a continuous extraction and production of oil and continuous export of oil, then we will have to send the oil revenues to the Iraqi oil revenues box. That box has not yet been set. Neither have we reached a stage which we need such a box, but we have opened an oil bank account which is under the finance ministry’s jurisdiction.

Q: But the minister of finance says they do not control the oil revenues?

HAWRAMI: No they do. After the issuance of oil and gas law by the Kurdistan parliament, whatever money is left after paying the refineries and extraction companies will be sent to the Finance Ministry’s account. But the amount is not a significant amount as the referenced parliamentarian had talked about. It may produce the amount that the parliamentarian had talked in one year, not in one month as he had said. And the money is not for the political parties, it goes to the government. The account in the finance ministry is a closed account. The money in that account is not used now. We have to wait until we agree with Baghdad on the way that money should be spent.

Q: The Iraqi oil and gas law package, which has yet to be passed by the parliament, talks about the distribution of oil and gas revenues. Are you not spending the oil revenues because of that law package?

HAWRAMI: yes, and because the oil revenues box has not yet been set up in Baghdad.

Q: Some say that you are not giving the oil revenues to Baghdad’ because you are unsatisfied with the %17 share of Kurdistan’s oil?

HAWRAMI: No. That is something we have left to political agreements. We are waiting for one thing which is the issuance of an oil and gas law in Baghdad. According to the article 112 of the Iraqi constitution as that law is issued all the Iraqi oil and gas revenues shall go to that box. The expenses will be drawn from that box and then the money will be redistributed on the Iraqi regions according to the population of each region. Under the supervision of the parliament that money will then be distributed on the Kurdistan region as well.

That account/box has not yet been set in Baghdad. The money that comes to Kurdistan is coming in the form of budget [cash].

We are telling Baghdad that this money should not come in the form of budget, because if it is i then it will like we are receiving wages. For example, Iraq now talks about exporting 10-12 million b/d of oil, if that much oil is exported then the Iraqi annual budget will reach 500 billion dollars, but the Iraqi budget might be set at 200 billion dollars. Thus the extra money has to be set aside and cannot be spent in its respective year. Therefore, the 300 billion dollars will stay in Baghdad and we will not be participating in spending it. We will be only participating in spending what we spend now. This is not constitutional.

The constitution says after deducting the expenditure money the oil revenues have to be distributed on the regions. If we constitutionally deal with the oil revenues then we will have 17% of the 300 billion extra dollars too. This is what we are in conflict with Baghdad for. But if we let the box to be dealt with as it is now, then the box would become a safe for them and will deprive us from its money.

Q: Is your problem with Baghdad over sending Kurdistan oil revenues to the Iraqi oil revenues box located in the US?

HAWRAMI: Our oil revenues are called the internal revenues. They are not sent outside. The revenue deposited outside is the revenue of selling crude oil to the outside world. We do will not sell and have not sold crude oil. What we have sold were through the Iraqi national oil networks and pipelines which is sold by [the State Oil Marketing Organization] SOMO. SOMO has to have sent the money to that box you are talking about.

What we sell inIraqi oil company Kurdistan is petroleum-finished products. Iraq sells several kinds of finished products. And does not send the incomes obtained from selling these finished goods to the US located box. All the provinces and regions can sell finished goods. But there must be a law for using oil and gas in the internal sectors. Iraq has Dora and Beji refineries. Iraq refines oil and gives us [fuel oil] as much as it wishes. And Iraq has not built any refineries in Kurdistan; therefore we have to rely on the private small refineries in order to fulfill our power station needs.

Q: How will you deal with the so-called “black oil” that comes from south of Iraq to Kurdistan and then exported from Kurdistan to Iran?

HAWRAMI: the Iraqi oil ministry deputy was here. They say they do not sell black oil to utside. They have decided to sell the black oil to the factories and internal private sector with a lower price for the internal needs. Therefore, some of the black oil comes to Kurdistan in this regard. We agree with coming of black oil to the three provinces of Kurdistan for internal use, but not to be exported. Earlier only the Ministry of Interior used to observe it. From now on we will take part in observing the black oil as well. The tankers queuing up nearby the border points have to be only those that come from the Kurdistan refineries which we sell in open bids. We do not want Iraqi black oil to pass through Kurdistan. SOMO says they are not currently allowing black oil to be exported. If they do not permit black oil to be exported, that will mean we won’t let tankers carrying black oil to go through even though if they have SOMO permission documentations.

Therefore, the people who are carrying SOMO documentation to export black oil are either carrying forged documents, or SOMO lies to us. That is why we have asked for coordination between the KRG and the Iraqi government. When they are issuing permission to a company to export 10.000 barrels of black oil, they have to let us know so we can facilitate their export. If we are not told about the deals that SOMO makes, then we have to prevent their export via our border points. This is to say, if SOMO does not inform us about the deals then we will doubt any documentations the tanker drivers have with them.

Q: You have said that if there is evidence proving export of crude oil of Kurdistan, even one tanker, and then you will resign. Are you sure that there is no barrel of Kurdish crude oil exported to Iran?

HAWRAMI: Since I have been here, we have not permitted exporting Kurdistan’s crude oil. And I am sure no Kurdistani crude oil has been exported. Both the oil extraction companies DNO and Genel Energy are unable to export oil in tankers. And whatever oil has reached the refineries, have been under our direct supervision. That is why we are 100% sure that Kurdistani crude oil has never been exported. Except for the four months in which crude oil was exported via the Iraqi pipelines. And that was carried out via SOMO. Even though we are constitutionally allowed to sell our oil, whether by tankers, through pipelines or bicycles. When I say we have not exported oil that does not mean we do not have the right to do so.
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