Oil deals fuel Iraq tensions

18 October 2011

The Kurds’ independent oil policy poses problems for Baghdad. Finding common ground on exploiting hydrocarbon resources in Iraq will benefit both parties

As Iraq slowly begins to rebuild, the enormity of the job in hand is beginning to look more and more apparent.

Oil is obviously at the forefront of every decision Baghdad makes and the fact that almost all its hydrocarbons are located far from the capital is beginning to make the government’s position more precarious.

The semi-autonomous region of Kurdistan contains roughly 30 per cent of Iraq’s oil and coupled with the fact that Kurdish politicians are effectively kingmakers in Baghdad, this is making Irbil more powerful.

What has to be remembered however, is that Baghdad still has not recognised any of the oil contracts signed by the Kurdistan Regional Government (KRG) and that is not likely to change in the near future.

The central Oil Ministry still owns the pipelines used to transport oil in Iraq and until the KRG builds its own infrastructure, it is still indelibly linked to Baghdad. The ministry also decides who does and does not get paid for oil exports, so the KRG is still not in a position to push too hard.

Another factor is attracting the international oil companies (IOCs) to carry out detailed exploration works. Experts say Iraqi Kurdistan is one of the last few true oil frontiers where large deposits remain practically untapped.

However, while 30 per cent of Iraq’s oil is in the north, the remaining 70 per cent is in the rest of the country. IOCs still seem reluctant to align themselves to the KRG when such rich pickings remain in the south of Iraq.

A long road of negotiations lies ahead for both parties and hopefully at the end, an amicable and beneficial resolution can be found.

The KRG has made great strides in trying to rebuild itself post-Saddam Hussein.

Baghdad has an unenviable task of bringing together a country that for so long has been ripped apart by war and tyranny. Finding an effective and workable solution to selling its hydrocarbons should be its first priority.

Analysis: Irbil stands defiant

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