Highlights
• Unilaterally negotiated KRG oil deals deemed illegal by Iraqi central government raise concerns
• Fear rises that Kurdistan is seeking enhanced sovereignty over its oil resources
• Turkey and Iran grow weary of increased Kurdish autonomy
The Government of Iraq’s efforts to secure its oil pipelines and infrastructure has paid off in recent months. According to Iraqi officials, the Bayji oil pipeline, originating in Iraq’s central Bayji refinery, was targeted 30 times in the opening three months of 2007. In the six months that followed, however, that number declined to a total of less than 10 attacks. The decline in oil pipeline attacks is linked to the successful implementation of a US military training program, through which 3,000 Iraqi soldiers’ national loyalties were scrutinized before undergoing training to guard Iraq’s oil infrastructure.
News of enhanced oil transport security in Iraq was greeted with great anticipation among international oil companies and investors. Increased optimism that the time is ripe to begin development of Iraq’s 200 billion barrels of proven oil reserves was at loggerheads with the central government’s inability to pass National Hydrocarbon legislation (Previous Report).
As a result, the Kurdish Regional Government (KRG) in northern Iraq chose to side step the central government by passing its own regional oil-and-gas law and signing five new oil contracts with international companies. The approved contracts include four exploration and production contracts and two new refinery projects, totaling $800 million in Foreign Direct Investment (FDI).
Domestic Political Implications
The Iraqi central government is outraged by what it considers an effort to exert complete sovereignty over an Iraqi national resource by the KRG, as well as the selling off of Iraq’s most valuable asset. Following the KRG’s signing of its first regional oil deal with Hunt Oil in mid-September 2007, Iraqi Oil Minister Hussain al-Shahristani reacted to the Kurdistan oil contracts saying, “any oil deal has no standing as far as the government of Iraq is concerned.”
The issue of regional sovereignty over the management of oil resources is a hotly debated issue among Iraq’s parliamentarians. The fact that the KRG signed four new oil deals following the central governments’ condemnation of the Hunt Oil contract is evidence that the KRG’s frustration with the central government’s inability to operate effectively is intensifying calls for regional autonomy.
The Iraqi government, however, created a new oil ministry designed to manage and oversee the issuance of international oil contracts, and is, therefore, angered by the KRG’s blatant disregard for the legitimacy of its legal institutions. Thus, Prime Minister Nuri al-Maliki and other ministers of parliament (MP) called the oil contract illegal, but Kurdish MPs persist in their assertions that the oil deals will benefit all of Iraq.
Regional Ramification
Both Iran and Turkey are concerned that expanded regional autonomy in Kurdistan could lead to increased calls for an independent Kurdish state encompassing parts of Turkish, Iranian, and Syrian territories. Ongoing attacks by the Kurdish Workers’ Party (PKK) and the Kurdistan Free Life Party (Pjak) into Turkish and Iranian territory were unanswered by the KRG and led to a buildup of Turkish and Iranian troops along their northern Iraqi borders earlier this summer.
Turkey, who recently signed a contract for the construction of a new, larger capacity oil pipeline between Iraq and Turkey with the central government, negotiated a security agreement with the Iraqi government in which the two sides swore to defeat hostile militias operating in Kurdistan. Likewise, Iran and the Iraqi governments contracted the construction of a new oil pipeline connecting Iran’s oil fields to Iraq’s Bayji refinery, and are negotiating future security agreements. Any change in the autonomy of Iraq’s northern territory, therefore, is considered cause for great concern.
Though the Iraqi governments’ oil pipeline agreements with Turkey and Iran will boost economic interdependence and, by extension, regional stability, increased Kurdish autonomy and control over Iraq’s oil resources will be viewed with uncertainty. Turkey and Iran both are deeply invested in Kurdistan but Turkey will nonetheless be concerned with the impact of enhanced Kurdish autonomy on its domestic politics and Iran by the accompanying increase in US regional influence.
A Way Forward
The KRG’s actions intensified Iraqi domestic debate concerning the passage of its national hydrocarbon law, making it even more difficult to negotiate a compromise. In the absence of set legal guidelines, the KRG will move forward with the passage of two additional international contracts now under negotiation. The responding anger by the Iraqi central government will likely be met with Kurdish assurances that their actions are best for Iraq as a whole. These assurances will likely be inaudible above shouts from Iraqi MPs that Kurdistan is selling Iraqi national oil rights to international corporations.
The KRG will sign the remaining oil contracts under negotiation and there will be a corresponding rumbling in Baghdad. Threats of instability may lead to intensified Turkish and Iranian military bombardments of PKK and Pjak positions in northern Iraq, but large-scale conflict will be averted.
The growing interdependence between the three countries, as well as Kurdistan’s need for the international legitimacy provided by operating under Iraq’s political umbrella, will overshadow immediate political concerns and a compromise will be reached—at least for the near term.
