Kurds Might Have Scored Small Victory In Oil Dispute With Baghdad

The Chinese are claiming that Iraq’s Oil Ministry has okayed a deal for the state-run Sinopec company to buy Switzerland’s Addax, which is now exporting oil from the Taq Taq field near the city of Irbil in Kurdistan. For the past several years the Kurdish authorities and Baghdad have argued over who has the right to sign oil deals, and conduct exploration and exports. The Oil Ministry claims all contracts must go through them, while the Kurds claim they have the constitutional right to follow their own independent petroleum policy. In May 2009 there seemed to be a small break through when Kurdistan announced that it was to begin exporting oil from the Taq Taq and Tawke fields for the first time with the okay of the central government. While the Kurds held this up as a victory, Baghdad may have come out with the upper hand because the profits from the oil exports are going into their coffers, but the Oil Ministry has refused to pay the companies. The Kurdistan Regional Government (KRG) has not paid them either. This may derail the entire process, as many experts do not think the Kurds can afford to pay the exporting companies for a long time out of their own budget.

If Sinopec is allowed to buy Addax it may be another small boost for the KRG’s plans however. Its new strategy is to try to get big oil companies to buy up the small independent ones now doing exploration and exporting in Kurdistan. Baghdad could not say no to this because many of those same major petroleum corporations are bidding on Iraq’s large fields. If they said their deals were illegal in Kurdistan, they may not invest in the rest of Iraq. At the same time, if Sinopec takes over work at Taq Taq, they would still not be paid for their work, furthering the deadlock between Kurdistan and Baghdad. This conflict could drag on for years because no one is really mediating between the two sides.

SOURCES

Agence France Presse, “Iraq approves controversial Sinopec oil rights deal,” 8/26/09

Ciszuk, Samuel, “No clarity on Iraq-KRG oil export flap,” Iraq Oil Report, 5/13/09

International Crisis Group, “Iraq and the Kurds: Trouble Along the Trigger Line,” 7/8/09

Reuters, “Iraq Kurds to start Tawke crude exports June 1,” 5/8/09

Webb, Tim, “Oil giants find scramble for Iraq is a game with complex rules,” Observer, 10/19/08