Iraq's Kurdistan seeks greater clout
through oil policy
August 11, 2012
BAGHDAD/ERBIL,— Iraqi Kurds are upping the
ante with their go-it-alone oil policy, luring some
of Big Oil's biggest players and again challenging
Iraq's central government to a showdown over a
shared export route.
It's a risky gamble. The Kurds' handling of the
crude beneath their self-ruled territory is
deepening a longstanding rift with Baghdad. It also
threatens to drive a wedge between Iraq and
neighboring Turkey, even as Syria's nearby civil war
challenges old regional alliances.
The Kurdistan Regional Government this week
restarted oil exports through a pipeline controlled
by Baghdad after halting them for months over a
payment dispute. Some oil industry observers see it
as a sign of goodwill by the Kurds. Given current
oil prices, it's also a $9 million a day trial
balloon to see how far they can press their luck.
"The Kurds are ... once again showing that they can
use oil to pressure Baghdad," said Iraqi political
analyst Hadi Jalo.
The Kurds plan to ship 100,000 barrels a day for now
to test Baghdad's willingness to make good on what
the Kurds say are overdue payments related to a 2011
compromise deal. That tentative agreement calls for
Baghdad to sell Kurdish-produced oil through the
pipeline. Each side takes half the revenues.
The Kurds stopped shipments in April, claiming
Baghdad failed to hand over their share of the
sales. Baghdad in turn accused the Kurds of
withholding billions of dollars in unreported oil
payments and of smuggling oil out of the country.
If this week's gambit pays off, Kurdish Minister of
Natural Resources Ashti Hawrami says export volumes
could be increased. But if Baghdad does not release
back payments the Kurds demand, he is threatening to
shut the taps again at the end of the month.
Iraqi Oil Ministry spokesman Assem Jihad said a
government committee is working on ways out of the
crisis. "We hope that all the problems will be
resolved," he said.
Kurdish leaders have a reason to feel empowered.
Four of the world's ten biggest international oil
companies have now signed up to hunt for oil in
their mountainous northern region.
The deals and dozens of others infuriate Baghdad,
which deems them illegal. The central government
believes the Kurds have no right to sign unilateral
agreements with foreign oil companies and wants
exports to travel through state-run pipelines. The
Kurds say Iraq's constitution allows them to sign
deals on their own.
Oil companies are willing to gamble on the Kurdish
region, which holds up to 45 billion barrels in
reserves, because the terms there are more generous
than Baghdad's. Far better security and rapidly
improving infrastructure are other draws.
Exxon was the first oil giant to defy Baghdad and
sign on with the Kurds last year, joining several
mostly small and mid-sized firms. Baghdad responded
by banning it from Iraq's fourth post-war bidding
round but did not touch the Irving,www.ekurd.net
Texas-based company's prized stake in the country's
8.6-billion-barrel West Qurna-1 oil field.
Its competitors took that as a green light to pursue
deals of their own. San Ramon, Calif.-based Chevron
Corp., Total S.A. of France and Russia's Gazprom
Neft have all forged Kurdish exploration deals since
Gala Riani, head of Middle East analysis for the
consulting firm Control Risks, said the oil majors'
Kurdish debut "certainly strengthens the Kurds'
"Each case sets a precedent showing that companies
are willing to take on the risk of being penalized
by Baghdad," she said.
Besides, it would be legally difficult to expel
companies such as Exxon that are already working in
Iraq's south, and any expulsion would create
logistical headaches for the companies' remaining
exploration partners, said Robin Mills, head of
consulting at Manaar Energy Consulting & Project
Management in Dubai.
"Interruptions to Exxon Mobil's West Qurna-1 in
particular would be a severe blow to Baghdad's
production growth plans," he added.
Still, Baghdad authorities for now have the upper
hand so long as they control Kurdish exports, Mills
That could change.
The Kurds have reached out to Iraq's northern
neighbor Turkey about setting up export pipelines
that would bypass routes controlled by Baghdad. Last
month they began exporting directly to Turkey,
bartering oil and gas for refined fuel meant for
A furious Baghdad responded by accusing Turkey of
"participating in the smuggling of Iraqi oil." From
its standpoint, Turkey's growing energy ties with
Iraq's Kurds amount to yet another slight by Ankara.
Relations between the two countries turned
particularly sour after Iraq's fugitive Sunni vice
president, Tariq al-Hashemi, who is wanted on
terrorism charges, first sought refuge in Iraq's
Kurdish north and then traveled onward to Turkey.
Al-Hashemi calls the charges politically motivated.
The deteriorating security situation in Syria, which
like Turkey has its own Kurdish minority, only
complicates matters. Shiite-led Iraq has been
reluctant to join predominantly Sunni Turkey in
pushing for the removal of Syrian President Bashar
Assad, a member of the minority Alawite sect, an
offshoot of Shiite Islam.
But Iraq's Kurds are increasingly throwing their
support behind Turkey and its Sunni Gulf Arab allies
in seeking Assad's ouster, according to analyst Jalo.
"The Kurds think that they should bet on the winning
horse, which in this case is the Sunni alliance.
This will worsen relations with Baghdad," he said.
The president of Iraq's autonomous Kurdish region,
Massoud Barzani, "thinks that by siding with Turkey
and the Gulf states, he might be rewarded by
stretching his influence and power to the Kurdish
areas in northern Syria," Jalo added.
By Adam Schreck - AP
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