Baghdad-Kurdish Oil Export Deal Collapses

No sooner had Baghdad’s offer of allowing the Kurds to export oil for the first time in return for concessions on passing the national oil law been reported here than today’s edition, December 3, of the Iraqi paper Azzaman ran a story that the deal had collapsed. Problems between the two sides were first reported on December 2 when Oil Minister Hussain al-Shahristani demanded that the Kurdish Regional Government (KRG) void its oil contracts that it signed under its own oil law in return for a deal to export oil. The KRG refused as they have always stood by their right to negotiate their own oil contracts. The Kurds also wanted to have control over a portion of the revenue garnered from the petroleum exports. Oil Minister Shahristani believes that all oil agreements and profits should be under the sole control of the central government. KRG President Massoud Barzani attacked Shahristani for his stance, and said that the Kurds are determined to export crude. Without a new national oil law however this is impossible. Kurdistan is also landlocked, and the surrounding countries of Iran, Syria, and Turkey have all said they would not allow Kurdish oil to flow through their countries without authorization from Baghdad.

This is a major setback for Iraq’s energy policy. Without a rapprochement between the Kurdish Regional Government and Baghdad the hydrocarbon law that would regulate the development and exploitation of oil and natural gas will continue to be deadlocked in parliament. The collapse of this agreement points to the opposing views of the two sides that have held up the legislation. The Kurds want their autonomy and freedom to offer oil deals on their own, while Baghdad demands central control. The Oil Minister’s proposal to allow the Kurds to export petroleum in return for movement on the oil law was a major concession, but it was apparently not enough to overcome these deep-seated divisions.

SOURCES

AFX News Limited, “Kurdish Authorities Stand by Foreign Oil Contracts,” 12/2/08

Al-Laithi, Nidhal, “Agreement to export oil from Kurdish fields collapses,” Azzaman, 12/3/08

International Crisis Group, “Oil For Soil: Toward A Grand Bargain On Iraq And The Kurds,” 10/28/08