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 Kurdistan oil payments overshadowed by renewed friction between Baghdad and KRG 

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Kurdistan oil payments overshadowed by renewed friction between Baghdad and KRG  8.6.2011
By Shwan Zulal -

June 8, 2011

While Iraqis struggle to delineate their future in the midst of political deadlock, violence and chaos, the fate of their most valuable and only asset is being decided behind closed doors. Only recently, the Iraqi deputy prime minister for energy, Hussein Shahristani, has made a pact with the EU to export oil and gas through the southern corridor. The deal has taken KRG (Kurdistan Regional government) by surprise.

This latest deal by the deputy prime minister who is not even an oil minister anymore has raised few eyebrows in Kurdistan and Turkey. The terms of the deal is not yet clear and the only significant information about it, was the EU has agreed to, only buy gas from Iraqi central government through the southern corridor.                                

Iraqi deputy prime minister for energy, Hussein Shahristani
Meanwhile Shahristani is ratcheting up his rhetoric and keeps insisting that Kurdistan has no authority to sell its natural resources without Baghdad's approval.  

The Norwegian DNO said on Monday, that the first payment of $103.7m USD for its oil exports in 2009 has been paid and the company described the payments as a milestone for its operations in the Kurdistan Region. DNO and its partners commenced oil exports from the Tawke field in mid 2009 and only after less than four months, production was halted because of disputes between the KRG and Iraq's central government.

DNO issued a statement regarding the latest development saying, "The payments combined with the recent positive and encouraging results from the ongoing operations, forms a solid basis for increased activities and investments within the company's portfolio in the region". The Iraqi finance minister confirmed first in may this year that oil export payment to contractors in Kurdistan Region would be processed and later KRG (Kurdistan Regional Government) Prime Minister, Barham Salih, confirmed the payment from Baghdad in a statement.

This latest payment to DNO has its own significance and in some ways confirms the legality of oil exploration and production in Kurdistan. Nevertheless, it has to be view in the context of Iraqi politics and its political ramification needs to be taken into account. Since the new Iraqi minister for oil and gas,www.ekurd.netAbdul-Karim Luibi took his office last year, he has been leaning towards accepting the Kurdish oil contracts and in favour of resolving the outstanding legal disputes. However, Shahristani has different ideas and been overriding Luibi's decisions ever since taking office.

Although parts of the payments have been approved and oil production are commencing in Kurdistan with a cap introduced by the central government, which is agreed upon by the January agreement. It is not yet clear as to what the future holds for the foreign investors in Kurdistan and Iraq, because although agreements have been made, adhering to it has not been forthcoming.
Shahristani's manoeuvring and overpowering the oil ministry as well as entering into oil and gas agreement with the EU, is clearly setting him on a collision course with KRG. It will be interesting to see what the KRG's response would be to Shahristani and EU's pact, because mutterings are coming out of Kurdistan Region about blocking the deal and making it difficult for gas going through Kurdistan on to Turkey and Europe.

In order to connect to the southern corridor, the pipelines have to pass through Kurdistan Region. Even though it may be possible to go through Syria, it would be neither politically palatable by the EU nor provides energy security the Union seeks. It all depends on what KRG would do next and how it will react to the EU deal. If KRG go ahead and make their views known privately to EU officials, we might see the deal dropped quietly to save face for both parties involved. Otherwise, if the deal goes ahead without KRG's explicit consent, the purpose of the deal would be defeated while it tries to reduce EU's dependence on Russia for natural gas.

Shwan Zulal is a Kurdish Blogger, a regular contributing writer for, interested in political and legal Reform in Kurdistan, KRG, Iraq and current Kurdish affairs, including oil exploration companies and relevant legislations. You may visit Zulal's website at

Copyright 2011


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