Saturday, January 2, 2010

What Do The New Oil Deals Mean for The Kurds?

In mid-December 2009 the Iraqi Oil Ministry carried out its second round of bidding on oil fields by international companies. Winning offers were made on seven of the ten fields up for auction. Afterward Oil Minister Hussain Shahristani said Iraq could reach eleven million barrels a day in capacity in six years, which could make it one of the largest producers in the world. This may turn out to be a major setback for the Kurdistan Regional Government (KRG), and its own petroleum policy.

Since 2003 the KRG has been hoping that its oil reserves would give it greater autonomy, and perhaps eventually independence. They signed their first oil deal with a Turkish company in January 2003, and then finalized over twenty others in the following years. None of these went through the Oil Ministry. Most of these deals were for exploration, but with Iraq’s oil production at below pre-invasion levels, Kurdistan believed that Baghdad would eventually have to accept their oil policy and allow them to export. The KRG also attempted to foster closer ties with Turkey and Europe, offering to export oil directly to the former, and trying to get involved with the proposed Nabucco natural gas pipeline to the latter. If these deals succeeded than Kurdistan would be connected to the international energy trade, could put more pressure on Baghdad to accept its energy policy, and gain greater autonomy from the central government. Some believed that this would give the Kurds the self-sustainability and influence they would need to declare independence sometime in the future.

All of these goals are now in jeopardy because of the Oil Ministry’s second bidding round. With international companies finally agreeing to Baghdad’s terms, and Iraq’s hopes of becoming one of the largest oil exporters in the world, there is no reason for the central government to give into the Kurds’ demands. The Oil Ministry has always vigorously protested the Kurds’ actions, and blacklisted any petroleum corporations that do business with them, leaving only small businesses investing there. They and the KRG still hope that Baghdad will eventually allow them to export because no government will turn down money, but that’s becoming less and less likely now. In fact, the Kurds may be the biggest losers if Iraq’s oil potential is finally tapped.

SOURCES

AK News, “Iraq’s oil and gas assets are shared: Barzani,” 11/11/09

International Crisis Group, “Iraq and the Kurds: Trouble Along the Trigger Line,” 7/8/09
- “Oil For Soil: Toward A Grand Bargain On Iraq And The Kurds,” 10/28/08

Lando, Ben, “In the theater of oil, the politics of Iraq,” Iraq Oil Report, 12/17/09

Yackley, Ayla Jean, “Iraq’s new oil deals seen weakening Kurds’ hand,” Reuters, 12/17/09
- “UPDATE 2-Kurds say Iraqi oilfield auction is being rushed,” Reuters, 12/10/09

7 comments:

Anonymous said...

But the deals Baghdad has signed are all illegal aren't they? There is no oil law in Baghdad.

Joel Wing said...

There's no NEW oil law, but there is older legislation and even contracts that the Oil Ministry uses.

Joel Wing said...

I should add that the head of the oil committee in parliament from the Fadhila party and some other law makers hav said the new oil deals are illegal because they have not been approved by parliament, not because there's no new oil law.

Anonymous said...

There's a problem with using Iraq's old laws - they've all been outlawed by the constitution...

Joel Wing said...

Anonymous wrote:
"There's a problem with using Iraq's old laws - they've all been outlawed by the constitution..."

That's actually not true.

Article 126 of the constitution says that all existing laws will remain in force unless annulled or amended in the 2005 constitution and there's nothing ending old oil legislation.

2nd, if signing new oil deals is illegal than no one, not even the Kurds have said so. The only legal objection as I said comes from some in parliament who say that any new oil deals need to be approved by parliament. Some also say the parliament and provinces need to be included in negotiations, which actually has some standing in the constitution.

In fact, all of the major political parties, even the Kurds said they will respect the new oil deals after a new government is installed after the 2010 elections.

3rd here's the relevant parts of the constitution on oil.

Article 25: The state will ensure investments in its resources

Article 26: The state will encourage investment in the economy

Article 110: the federal government has the authority to formulate foreign economic policy

Article 112: The federal government along with the provinces and regional governments will manage oil and distribute revenues according to population and formulate policies to develop oil

Anonymous said...

Thanks.

"In fact, all of the major political parties, even the Kurds said they will respect the new oil deals after a new government is installed after the 2010 elections. "

Where's your source for this? Haven't the kurds protested that they must be involved in the negotiations and because they havent they are illegal?

And what's baghdad's legal/constitutional justification for doing so without Kurdish consent?

Joel Wing said...

The Kurds say they should be included in any oil negotiations involving disputed areas such as Kirkuk. They have said nothing about oil deals in southern Iraq.

The article that quoted politicians from the major parties saying they would honor the new oil deals was:

Al-Salhy, Suadad and Rasheed, Ahmed, “SCENARIOS-Will Iraq honour deals with oil majors after polls?” Reuters, 12/10/09

"The Supreme Islamic Iraqi Council (ISCI), which heads the Iraqi National Alliance, a coalition likely to be Maliki's main challenger at the ballot box, will also stand by the contracts, said Jalal al-Din al-Sagheer, a senior ISCI member"

"Salim al-Jubouri, a senior member of the Iraqi Islamic Party, an important Sunni Muslim political group and frequent critic of Maliki's Shi'ite-led government, agrees"

"'These contracts will hold because they are legal, and they have no connection with political differences between the government and parliament,' said Feriyad Rawanduzi, spokesman for parliament's Kurdish bloc."

As for who gets to deal with oil contracts, the dispute is over federalism vs centralism. The Oil Ministry claims they can sign deals without including anyone because the represent the central government, and the Kurds say they can do the same because they are an autonomous region. Neither is actually correct according to the Constitution, but Iraq doesn't quite have rule of law right now.

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