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 Iraq's Deputy PM for Energy: Connecting Kurdistan to Nabucco Pipeline Out of the Question

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Iraq's Deputy PM for Energy: Connecting Kurdistan to Nabucco Pipeline Out of the Question  24.5.2011  
By Salam Saddi and Hevidar Ahmed

May 24, 2011

, — We passed through four extremely strict checkpoints and in each one we had to explain who we were, why we were there, and who we wanted to meet. Each time they searched our bags, examined our recorders and cameras, and body searched us—by hand, electronic device, and sniffer dogs.

Finally we were whisked away by car to Adnan Palace, located in the Green Zone at the heart of Baghdad. After waiting for half an hour we were called to second floor, where Dr. Hessian Shahristani, Iraq’s current deputy prime minister and former Minister of Oil was waiting for us.

To many Kurds, the name Shahristani is synonymous with conflict. He is perceived as one Iraqi official who stands against anything that is in the interest of the Kurdistan region. Shahristani, however, smiles at this idea and calls it rather cruel.                  

Iraq's Deputy Prime Minister for Energy Hussain al-Shahristani.  Photo: Reuters
“I have a soft spot for the Kurds because of all the repression they faced during the former regime,” said Shahristani. “I am myself one of the victims of that regime and the sufferer knows the feeling of other victims better than anyone else.”

Shahristani sees himself as a relative of the Kurds through his brothers, who are married to Kurdish women. It is also not lost on him that the negative perception of him has to do with oil contracts. He says that if he has criticized something in the past, it is because it was against the Kurdish interest. He blames the wrong idea people have of him on some politicians who disagree with him on different issues.

“Those perceptions mostly have to do with oil contracts. I want the contracts to be transparent and people to know about them,” said Shahristani, “and make all the big companies fight for them so we can receive the best possible bid.”

Shahristani says that he is only trying to make sure that the oil remains Iraq’s property and that the country gets the best deals with respectable companies, for the benefit of all. He admits that this style of work doesn’t resonate with that of the Kurds.

“Everybody knows that we have signed the best possible deals in the world, and that’s in terms of the quality of the contracts, which state that the oil will still be Iraqi’s property,” said Shahristani. “Right now the price we pay to the companies is the lowest in the world, and this is an achievement for Iraqis. This view is not related to the Kurds in any way.”

In the past Shahristani has been accused by some Kurdish officials of attempts to prevent the Kurdistan region from drilling and exporting its own oil. But Shahristani dismisses those accusations and in fact wants credit for encouraging the Kurdish authorities to develop their oil industry.

“It’s the opposite. Last year when I was oil minister, we made an agreement with the Kurdish natural resources ministry to start exporting oil, and signed the agreement in August 2010. They postponed acting on it until February of this year,” said Shahristani. “This means it was us who requested that oil should be exported; however, we asked that it be exported by a national system according to the global market, and that its revenues be sent back to central bank.”

At the moment the Kurdistan region of Iraq exports one hundred to one hundred and thirty thousand barrels of oil per day, and that, according to Shahristani, is important to the country’s economy, especially with oil prices so high in the global market today.

“This is an important part and consists of 5-6 percent of Iraqi exportation, 2.1 million bpd annually,” said Shahristani. “It’s very important to the Iraqi economy, especially now that the price of one barrel of oil in the global market is more than 100 dollars.”

In 2007 a draft law on oil and gas was sent to the Iraqi parliament for discussion and approval, but because of the sectarian violence that gripped the country at the time, and deep political rifts among members of parliament, the draft remained untouched. That, in turn, caused the issue of oil and gas between the central government in Baghdad and Erbil to be suspended. According to Shahristani, the draft is now out of date and needs to be changed.

“That draft is a bit old, and a lot of things have happened regarding oil development in Iraq since it was developed. That’s why the draft should be reviewed and changes made,” said Shahristani. “In a meeting with the oil and gas committee in parliament, I talked about Iraq’s need for a new law.”

The Kurdistan region’s Ministry of Oil and Natural Resources is headed by Ashti Hawrami. In the past, Hawrami was criticized for conducting shady deals with foreign oil companies and in 2009 was called to parliament to answer to these allegations. As Iraq’s former minister of oil, Shahristani has his opinion about Hawrami’s ministry, but he prefers to leave judgment to the Kurdish government.

“I have a lot of reservations about the workings of the ministry, but I don’t want to asses it. I’ll leave that to the Kurdish parliament,” said Shahristani. “It’s a KRG ministry and they are responsible for it.”

Shahristani says that there is a good level of cooperation between Baghdad and Kurdistan’s oil ministry, but he is unhappy about the fact that the Kurdish authorities do not submit the bills of the oil companies who invest in Kurdistan to Baghdad to be checked and processed.

“The thing that surprises me is that they haven’t given the bills of foreign companies to the oil ministry for checking,” said Shahristani. “The companies that have spent money on oil fields should be compensated. If a company has drilled a field and put pipes in it, they should present the bill to the oil ministry so they can check it and make sure the amount they ask for is legitimate or not, but so far neither the companies nor the KRG have given us the bills, and I don’t understand this.”

Shahristani says that he doesn’t want to air his personal opinions of the Kurdish oil minister Ashti Hawrami, because they are not work-related. However, he believes that the work of his ministry is not transparent, as it is in Baghdad.

“I have my views on the way the agreement has been signed, and I think it’s not transparent enough and hasn’t been based on competition,” said Shahristani. “Our style in the oil ministry, of revealing everything to the foreign and local press, is very different from that of one person sitting in one room and only talking with one company.”

Another area of discontent for Shahristani is in the Kurdish reluctance to share any information about the resources in the Kurdistan region with Baghdad. This makes it difficult to accurately assess Iraq’s overall natural reserves.

“The proven reserve in Iraq is about 143 billions barrels, excluding the Kurdistan region,” said Shahristani. “And this is one of our conflict points with the KRG: that unfortunately it isn’t giving any information as to its assessments of it.”

According to Shahristani, the world will not trust a survey that isn’t conducted by experts from the oil ministry and foreign companies. It is a multi-stage process and releasing any numbers without it will not gain anyone’s trust.

“When Iraq announces that it has this much oil reserves, the world accepts it easily, but when other people reveal some numbers, people will doubt them, because they haven’t been arrived at through taking those proper steps,” said Shahristani.

Shahristani says that there are unproven reports of about 30 billion barrels’ worth of oil reserves in the Kurdistan region, and he hopes that the Kurdish authorities provide more information, which would only help maximize Iraq’s reserves.

“We are hopeful that our brothers in the KRG give us the statistics they have so we can assess it and increase Iraq’s proven oil reserve,” said Shahristani. “I can estimate it currently at 173 billion barrels; the 200 billion barrels I talked about in an international conference is not our proven reserve. I said that in some regions that have not been checked, there is a strong possibility of more oil being found, thus making the reserve reach 200 billion barrels.”

In the past few years there have been talks of connecting the Kurdistan region to the Nabucco pipeline project that extends from eastern Turkey to Europe,
www.ekurd.netand send Kurdish gas to European markets that way. But as Iraq’s deputy prime minister and a still-influential figure in the oil industry, Shahristani says such a project is out of the question, and that the Kurds aren’t allowed to get involved in it.

“Connecting the Kurdistan region to that project—a European project—is impossible, because this gas is Iraqi gas and exporting Iraqi oil and gas is only done by the Iraqi national oil company,” said Shahristani. “It’s not like any province or a region can just go ahead and export its oil and gas as they wish.”

Shahristani says that this project has in reality been one of the major areas of dispute between the Kurdistan region and Baghdad.

“I will say it openly: this has been one of our problems with the KRG,” he said. “We are against producing oil and other things and exporting it by trucks to Iran and other places. We think this is illegal and we have said that oil and gas should be exported by the federal government, and we are sure that the European countries won’t go anywhere near something that is not through the federal government.”

In speaking with Shahristani it is easy to sense that Kurdistan’s exporting its own oil and gas through a project like Nabucco—or any other means without the federal government’s consent—is a personal matter to him, and a taboo.

“We have told Turkey and the EU that contracts for oil and gas exports are only done with the federal government,” said Shahristani, “because this is the property of all Iraqis, and we will not allow anyone or any region or governorate to export oil and gas as they wish. This response is a clear response and this is not only Hessian Shahristani’s view.”

There is already an agreement between Kurdistan and Baghdad about oil and gas exports, and Shahristani expects the Kurdish authorities to remember it.

“According to our agreement with KRG, they will send us their oil and we will export it, recognizing that such work should be done this way,” he said. “And in the case that any gas is not needed locally, which I don’t believe will occur any time soon since Iraq is planning to build a few big electricity stations that need gas, it should be dealt with by the federal government.”

Shahristani says that the entire dispute between Baghdad and Erbil has been over this very issue of independent initiatives of oil export, which can’t be overlooked by the central government. He says that even if the Kurdish authorities manage to export oil or gas, other countries have been warned not to buy it.

“For four years we fought about this issue,” said Shahristani. “Only the federal government can export oil and it’s same for gas. Turkey or the EU countries will not buy gas if it doesn’t have the federal government’s approval.”

In his post as Iraq’s oil minister, Shahristani kept a black list of companies that had signed contracts with the Kurdish government. Even though he isn’t in charge of Iraq’s oil anymore, he still carries substantial weight in the oil ministry, and he emphasizes that the list is still in place.

“Our view was that any oil and gas exploration contract signed by any company without the federal government’s consent won’t be recognized,” said Shahristani. “This view is fixed and will continue be like that.”

At the end of this year, US troops are due to leave Iraq. There are concerns among some Iraqi and Kurdish officials about a surge in violence and even a civil war once the Americans are gone. But as Iraq’s deputy prime minister, Shahristani is confident that Iraq is capable of running itself, so long as other countries do not interfere in its affairs.

“Let me tell you openly that we are worried about interference by other countries,” said Shahristani. “We have spoken with Iran, Turkey, and other neighboring countries. We have even spoken with faraway countries, because some of them talk about Iraq’s future and meet with some Iraqi factions and this is a dangerous matter. It’s better for our politicians to talk about Iraqi problems inside Iraq.”

The current Iraqi government was formed—after months of negotiations and disagreements over several ministerial posts—following the general elections of 2010. Still, it is not a fully functional government and Shahristani says that he is unable to predict how the next three years will be.

“I really can’t predict how this government will continue for the next three years,” he said. “And I don’t fancy any government staying too long. I think change in a government is healthy and not a weak point. In fact, it’s the opposite; one good thing about democratic systems is that new faces and blood come to the government frequently.”

Finally, Shahristani is proud of having friendly relations with the Kurdish members of the Iraqi government.

“I’ll proudly say that in the last and current governments, they [the Kurdish ministers] were always some of my closest friends,” said Shahristani. “Ask them and I’m sure they will tell you that this guy helped us a lot.”

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