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