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By Shwan Zulal:
Tension between Baghdad and the Kurdistan region has reached its peak since the Iraqi PM, Nuri Al-Maliki, ordered the removal of Kurdish flags from government buildings in Khanaqin in Diyala province, which is in the disputed territories defined under Article 140 of the Iraqi constitution.
Since the directive was issued by the Iraqi PM, many protests in Diyala province and elsewhere in the Kurdistan region have taken place. The demonstrations were highly charged with nationalistic slogans and one protester is even reported to have set himself alight. The head of Diyala province also refused to comply with the order from the PM to remove the Kurdish flag from government buildings.
The focal point of the incident was in Khanaqin, in an area which has been the subject of ethnic cleansing and Arabization for decades by the former regime. The Iraqi PM’s latest decision to remove Kurdish flags has evoked painful memories from the past, and brought the simmering ethnic disputes and mistrust to the surface.
Maliki’s directive is seen as a symbolic move by Baghdad to assert control over the areas, which is still disputed and successive Iraqi governments after 2003 failed to deal with this. Kurds does not see areas like Khanaqin as a disputed territory but as part of the Kurdistan region, waiting to be annexed back to the region if and when the long-awaited article 140 of the Iraqi constitution is implemented.
It is needless to say that areas like Khanaqin and Kirkuk, which fall under the “disputed territories”, are strategically very important for whoever controls them, because of their abundant hydrocarbon reserves, and Kirkuk has one of the largest oil fields in Iraq.
Resentments and tit-for-tat politics are on the increase between the central government and the KRG (Kurdistan Regional Government). Oil output from the Kurdistan region is decreasing as payment issues are still not being resolved.
Companies like DNO International ASA and others operating in the region have been pumping oil to the northern Iraqi pipelines and they have been increasing their output in the last year after an agreement was reached for them to be paid the cost by the Iraqi government. However, after a couple of payments, the central government reneged on its undertaking: no further payments have been made since September and oil exports from Kurdistan through Iraq have slowly but surely fallen.
It has been reported that the fall in production is due to technical glitches but it is odd that, as soon as payments stopped from the central government, the production has withered away. Moreover, DNO announced on Monday that it has reached a deal to supply the domestic market to the tune of 675,000 barrels of oil at the rate of 10.000 bopd at $50, and DNO made it clear that it will receive payments in advance.
Although DNO has said that it has had a go-ahead from the authorities, it is not clear if this has been cleared with the central government. Furthermore, it remains to be seen if the revenue generated by this deal would be taken into account when Baghdad allocates the KRG budget.
It is a known fact that Iraq and Kurdistan have a deficit in refining capacity and that Turkmenistan’s surplus refining capacity, along with that of Turkey and other neighbouring nations, has been used to supply the domestic market.
Many oil companies in Kurdistan region are reaching the final stages of their initial exploration programs and they are in a position to start selling oil to create a revenue stream in order to continue their programs and balance their books. However, limited access to much-need funds and obstruction by Baghdad will not make it easy for them and could compel them to find other ways to sell their oil.
DNO has been one of the early entrants to the region and it has made an early move to switch to the local market, which means trucking the oil rather than sending it through the central government’s pipelines.
What is happening in the Kurdistan oil market feels as if the region is under a sanction imposed by Baghdad, leaving the KRG no choice but to improvise and sell the oil to alternative markets.
The indiscretion by the Iraqi government towards the Kurdistan region is alienating the Kurds further. The battle over the control of the oil and revenue-sharing is one which will determine the shape of Iraq and the level of Kurdish independence from central government, but the tactics deployed by Al-Maliki’s government are pushing the parties further apart.
Unless the Iraqi government changes its stance and wakes up to the fact that the Kurdistan region is not willing submit to the central government’s authority like before, the KRG will find other ways to sell the oil and generate a revenue stream. Meanwhile, the KRG will continue demanding its 17 per cent of the overall Iraqi budget, which it is entitled to under the Iraqi constitution. Iraq depends on oil for 95 per cent of its income and, as the disputes escalates and the KRG redirects its oil supplies, the rest of Iraq will be the net loser as a direct consequences of Al-Maliki’s government.
This article first appeared on Kurdish Views
