W.G. Dunlop, AFP
Last updated: 23 June, 2012

Oil key to any Iraqi Kurdistan independence bid

Iraqi Kurdistan’s efforts to ramp up its oil production and export capabilities increase the viability of independence as an option for the region, which is in a months-long standoff with Baghdad.

The dispute has seen Kurdistan president Massud Barzani launch a series of attacks against Prime Minister Nuri al-Maliki, while the region cut off oil exports to Iraq in a payment dispute and also refused to hand over a fugitive Iraqi vice president who is wanted for allegedly running a death squad.

The autonomous region in northern Iraq has not made any overt moves towards independence, although Barzani has said he could resort to a referendum on its future if the crisis with Baghdad drags on.

Kurdistan has its own government, security forces, borders and flag, but it is economically dependent on the Iraqi government, which is required to pay 17 percent of the national budget to Kurdistan.

The region has signed dozens of contracts with foreign oil firms aimed at boosting its oil sector in recent years, and said it intends to build pipelines that would give it an independent export capability — moves that could give it financial independence.

The Iraqi government, which says all oil contracts must go through Baghdad and regards any that do not as illegal, has strenuously opposed such deals.

“It is becoming increasingly clear that the Kurds see expansion of (Kurdistan’s) oil sector as the key to future independence,” said Reidar Visser, an Iraq analyst and editor of the www.historiae.org website.

“By signing those deals, the Kurds are looking at the long term, when it would be in their favour to split from Iraq proper by being financially independent,” said Ruba Husari, the editor of www.iraqoilforum.com.

Iraqi Kurdistan does not currently have the ability to independently export oil, but the region has said that two pipelines, one for oil and another for gas, are planned.

A statement posted on the Kurdistan government website in May said that natural resources minister Ashti Hawrami had spoken about “plans for a new gas pipeline to supply Turkey’s BOTAS gas grid… and in the next 12 months, a million-barrel oil pipeline to connect to the Ceyhan pipeline” that feeds an export terminal on Turkey’s Mediterranean coast.

“A pipeline from Kurdistan to Turkey would allow the Kurds to export crude independently of Baghdad and cash the proceeds directly,” Husari said.

“The Kurds are acting independently in everything but the name,” said Visser.

But he noted that the position of Turkey, with which Kurdistan has important economic ties, is key, saying: “It is conceivable that Turkey may prefer to maintain the nominal unity of Iraq.”

Baghdad has pushed back against Kurdistan’s oil deals, especially an exploration contract the region signed with US oil giant ExxonMobil last October.

“Maliki views these deals as representing a very dangerous initiative that may lead to the outbreak of wars” and “breaking up the unity of Iraq,” the premier’s spokesman Ali Mussawi said.

The premier “sent a message to American President Barack Obama … urging him to intervene to prevent ExxonMobil from going in this direction,” Mussawi said.

And Iraq’s deputy premier for energy affairs issued a warning to French companies that any contracts with Baghdad would be scrapped if they signed deals with local or regional governments in Iraq.

Baghdad “has been blacklisting companies from doing projects in Iraq proper,” if they sign deals with Kurdistan, Husari said.

“There is little it can do with past contracts, but all future contracts will have a clause saying that federal government approval is required for any project in the oil sector,” she said.

But production-sharing contracts that are offered by Kurdistan are a major draw for companies, as they are more lucrative than the service contracts the federal government has awarded, which offer a fixed fee per barrel of oil.

The region’s prime minister, Nechirvan Barzani, told AFP in Arbil that Kurdistan is committed to the Iraqi constitution, but also said that the Kurdish people have a right to self-determination.

“It’s a question about people. Of course, as a nation, yes, we have that right, but now we are dealing with reality,” Barzani said.