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By Shwan Zulal:
The European Union (EU) and Shahristani have announced agreement on exporting oil and gas from Iraq to Europe. The EU secured the deal with Iraq’s deputy prime minister for oil, Hussain Shahristani, opening the door for the EU to receive Iraqi oil and gas after an improved strategic energy partnership was drafted in Brussels on Thursday.
“We acknowledge that all entities party to the Southern Corridor project must observe Iraqi laws pertaining to gas production and export from Iraq,” the joint declaration read. The European Union’s Energy Commissioner, Guenther Oettinger, and Shahristani signed a declaration on an enhanced strategic energy partnership, which paves the way for oil and gas delivery to Europe via the Southern Corridor. The significance of this agreement to the Kurdistan Region and anyone connected to Kurdish oil cannot be under-estimated. The EU acknowledges the Iraqi central government’s authority over all oil and gas exports from the country. This means that the Kurdistan Region, which has its own government and parliament and has signed oil contracts with over 40 companies, must go through the Iraqi government for any exports to the EU. The precise detail of the agreement is not yet clear and both the Iraqi parliament and the Kurdish government will probably have objections to the deal. But it’s almost certain that the latest development will put the Kurdistan Region and Turkey on a collision course with the Iraqi Government and the EU.
Shahristani has been at odds with the Kurdistan Regional Government (KRG) over its oil contracts which he has refused to recognise, saying the contracts fall foul of the Iraqi constitution and need to be re-negotiated. While some payments to the companies involved in Kurdish oil exports have been approved by the Iraqi government – after refusing to pay the companies since 2009 – this agreement will make investors even more confused about the prospect of resolving the contract issues soon.
Turkish companies have invested heavily in the region and Turkey has been forging close ties with the KRG as relations have warmed up in recent years. Turkish General Energy aims to become the main player in the region and only recently announced plans to expand its operations in the Kurdistan Region. In an effort to accelerate the export of untapped oil and gas reserves from the Kurdistan Region, new pipelines have been proposed connecting Kurdistan’s oil fields to Turkey. Through this Turkey hopes to increase its leverage on the EU while negotiating its entry into the Union. Nevertheless, the EU has outmanoeuvred Turkey and gone ahead with this agreement with the Iraqi deputy PM. Although Iraq has the capacity to export nearly 2.5m bopd through Turkey, and it is set to continue to do so in future, a Sunni Turkey would not enjoy losing the concessions the KRG is prepared to give and would find it increasingly difficult dealing with a Shia-dominated Iraqi government.
The Kurdistan Region understands that the only realistic way of becoming an oil-producing nation is through good relations with Turkey. In return, the Turkish government has grand plans to become the star of the region and play a big role in the future supply of oil and gas to Europe. Allowing the Kurdistan Region to become an oil-exporting nation would benefit the Turkish economy immensely. It would also enhance Turkey’s strategic importance to Europe and its chances of securing much coveted membership of the EU.
Investors, who have injected over $10bn into the extensive exploration program in Kurdistan, feel confused and bewildered at the state of affairs in Iraq. Mixed messages are coming out of Iraq and Kurdistan continually. Meanwhile the latest deal between Shahristani and EU can be described as a tremendous blow to the KRG and oil companies operating in the region. The Kurdistan Region has ambitions to become a leading player in exporting oil and gas and only last week it asked Gulf Keystone (the British oil exploration company) to prepare to export 5000 bopd. Shahristani’s tactics have made the situation much more complicated and investors will be closely monitoring the reactions of Turkey and the KRG.
This article first appeared on Kurdish Views
