Should we stay or should we go?

Evin Cheikosman

By  Evin Cheikosman:

Oil. The resource curse that a nation either benefits or suffers from. The resource that attracts many friends, a lot more foes, opens up opportunities to grow, and irritates relations with the envious. Iraq, a country known not only for its growing sectarian and civil rivalries, but also for its oil, has indeed seen a large increase in oil output since the fall of Saddam Hussein; however, according to the Wall Street Journal, Iraqi production has fallen since March by some 340,000 barrels per day (bpd), a decline of more than 9% from the February high, according to the International Energy Agency. An attack on an oil-export pipeline in northern Iraq was to blame. In addition, due to decades of sanctions, corruption, war, and a huge lack of funding in modernizing the infrastructure to move the petroleum from wells to tankers and keep up with routine pump maintenance, investors like Exxon Mobil and Royal Dutch Shell, for example, are steadily looking elsewhere.

Even Turkey, a long time partner in oil imports from Iraq, has deemed an oil pipeline carrying crude from Iraq’s Kirkuk oil fields to Turkey’s Mediterranean port of Ceyhan as unusable because of persistent militant attacks. Turkey has also stated that this is a huge lose for Iraq; referring to the Baghdad-controlled pipeline, which has been pumping way below its 1.5 million bpd capacity.

For these and other reasons, Turkey and other American companies have turned to Iraq’s northern region, the autonomous Iraqi Kurdistan. Sources state that Exxon Mobil Corp. and Chevron Corp. are now the top two investors on the list of the largest foreign companies operating in Northern Iraq independently of Baghdad. In addition, there are at least 40 other US companies operating in the region controlled by the Kurdistan Regional Government (KRG). Kurdistan controls a large chunk of Iraq and also a majority of the country’s oil and the Kurds have, from the beginning of this year, discovered a way to export the oil while bypassing the rest of the country. This has angered the Iraqi government which has even threatened to sue those countries and companies who export oil from Kurdistan. In addition to penalizing interested Kurdish oil seekers, the Iraqi government has frozen the KRG’s share of the national budget.  The President of Iraqi Kurdistan, Massoud Barzani, says that Baghdad has still not sent the KRG budget payments for March and April. “They have only sent the budget for January and February’s salaries, which wasn’t enough, despite having dispensed the share of all other Iraqi provinces,” he said. This has affected civil servants in northern Iraq who are receiving little to no salary.

Now, the KRG and Baghdad are at a standoff, both unable to reach a compromise on how to divide the oil revenues and responsibilities of exporting oil out of Iraqi Kurdistan. Recently it was publicized that both parties had reached a conditional agreement, but the KRG argues otherwise. The problem lies mainly with the fact that the Kurds have built this oil pipeline within their own territory and, with the “okay” of Turkey, found their way to the petrol market. The trucking of crude oil from Iraqi Kurdistan’s Taq Taq oil field began on 8th January with relatively modest volumes. The field is operated by Genel Energy, an Anglo-Turkish company headed by former BP CEO Tony Hayward. On 9th January Hayward told reporters that the volume was expected to rise to between 10,000 and 20,000 bpd in the following few weeks.

The Iraqi government of course doesn’t like this because they want control over the petrol in the country, and access to the revenues that they so desperately need given problems with their own oil pipelines. Thus allowing Iraqi Kurdistan to take full control of the oil in that region would shift the balance of power in the Kurds’ favor, leaving Iraq high and dry. Basically, there is a lot at stake for Iraq and it has been a struggle trying to negotiate a solution with the KRG. Thus, patience is wearing thin for the Kurds and Turkey.

Turkey is waiting for Baghdad and Erbil to come to an agreement so that the oil can then be sold to buyers in Turkey and internationally via the Mediterranean port of Ceyhan. However, for technical reasons, Turkey can wait no longer. According to sources from the Turkish Ministry of Energy, about 1.5 million barrels of Kurdish crude oil have been received to date and Ceyhan port has a storage capacity of around 2.5 million barrels. Regarding this issue, Turkey’s Energy Minister Taner Yıldız said, “Whenever we reach this storage limit, we have to decide about the next steps.” In addition, the Iraqi Kurdistan’s economy is being strained by Iraq’s unrelenting attitude towards making budget payments to the KRG.

For these reasons, many argue that this conflict is making the case that independent crude exports would decrease dependence on Baghdad for paying the bills and make Iraqi Kurdistan a growing oil hub. Baghdad’s politically motivated delays and uncompromising efforts are driving the KRG towards cutting ties with the Iraqi government. Hence Barzani’s latest statement: “If the situation continues like this with Baghdad, we will declare confederation or independence. We have studied that confederation will resolve our issues”. (Rudaw)

The reason the KRG has been patient with Baghdad, is because it genuinely wants to reach a compromise, but the issue of oil, and their support for opposing sides in the Syrian war, is souring relations between the two. Many argue that breaking off from the Iraqi government and declaring independence now is in the KRG’s best interest. However doing so could cause many problems in a fragile region where every small shock could cause massive waves.

However, one cannot help but imagine what independence from Baghdad would mean for Iraqi Kurdistan, especially in terms of oil. According to sources, petrol industry estimates indicate that the KRG is sitting on 30 percent of Iraq’s proven oil reserves of 143 billion barrels, and has up to 6 trillion cubic meters in natural gas reserves. If Kurdistan were independent, it would be among the 10 richest countries in the world, experts say. This is huge for the Kurds and likely to tempt Kurds in Turkey and Iran to do the same. But Turkey as usual is against this, as is the USA, Iraq, and many of the MENA (Middle East and North Africa) countries who are not at all ready for another power player in an already long, grueling game of territory claims, human rights abuses, poverty, and relentless Islamic groups and leaders. So what’s the solution? The Kurds are in a very different position today and play a more present and strategic role in this atmosphere of power politics so ignoring the inevitability of their success is of no benefit to anyone.  At this point, it may indeed be argued that it is up to the KRG as to whether independence from Baghdad will be declared and whether the start of a new mark in history is ready to be made.

Evin Cheikosman is a Kurd living in Los Angeles, CA, A recent graduate in International Politics from the University of California, Santa Barbara, she has studied abroad in Berlin, Germany and will soon be traveling to Zhuhai, China on a teaching assignment. Thereafter she will be pursuing a masters degree in foreign affairs. During her free time, Evin posts facts and opinions concerning Kurdish politics on her blog: Minority Politico

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