Oil is the constant

| | in Oped
Oil is the constant

For long, the US has been accused of meddling in West Asia to keep its oil supplies running. Now, Iraqis and Kurds are fighting over the same commodity 

The significance of oil and energy resources as drivers of economic activity and growth can be seen throughout history. One of the most fought over natural resources, oil continues to influence economic growth patterns, regional stability and international security. With an exacerbated population growth in the developing and under-developed world, more and more countries are now aggressively trying to secure the precious resource. This has resulted in increased unrest in regions that possess vast proportions of the world's oil resources.

An abundance of oil in Iraq has ensured a somewhat steady economic growth of the country; so much so that the current economy is heavily dependent on oil exports. With that said, increasing unrest between the Kurdish Regional Government (KRG) and the Iraq Central Government over oil production and shared revenues threatens to cast a shadow over the country's oil operations and as a result, put a damper on its economic growth. The establishment of the KRG in 1992 in the aftermath of the Gulf War has had two direct implications in post-2003 Iraq’s relations with the Kurds within the State; the struggle between Baghdad and Erbil in Kirkuk over oil and its territory and the struggle’s direct impact on the subsequent quest for Kurdish Independence for which a referendum took place in September 2017.

The largest minority in Iraq, the Kurds have been aiming to establish a separate autonomous state for long.They have historically been the target of suppression by various Iraqi Governments, particularly by Saddam Hussein’s Government. The most prominent example of the brutal suppression of Kurds under Hussein's regime is perhaps that of the chemical attack on Halabja in 1988 wherein 3,200 to 5,000 civilians were killed. The brutality experienced by the Kurds under Saddam’s regime resulted in the creation of a common sense of identity amongst the people.

It was only in 1991 when the United States and its allies defeated Iraq following Iraq’s invasion of Kuwait that a de-facto Kurdish state could emerge in Iraq. For the first time in modern history, the Kurds established their own Government and revolted against the Ba’athist regime. The establishment of a ‘no-fly’ zone in Northern Iraq by the United States and its allies allowed the Kurdish National Front to form an elected regional Government whose elections were held in 1992. The establishment of the KRG, albeit with a coalition between the two major parties,Patriotic Union of Kurdistan (PUK), led by Jalal Talabani and Kurdistan Democratic Party (KDP), led by Masud Barzani, strengthened the Kurdish quest for Independence.

Because oil has always been central in the fight between the Central Government and the KRG, its extraction has traditionally been looked upon by the Kurdish leadership as a symbol of the region’s sovereignty. Even before the formation of the KRG in 1992, Mullah Mustafa Barzani, the leader of the Kurdish nationalist movement in 1972 committed to “give oil to America” in case he managed to get control over the Kirkuk oil fields. One of the first moves by the KRG after its immediate formation was to form the national oil company, KurdOil. And even though the company never became operational, it signifies the beginning of disputes between the two Governments over oil extraction and shared revenues.

The scope of developing energy in the region remained limited until Hussein was overthrown due to a sluggish economic growth because of embargoes imposed on the KRG by the international community and by the Central Government. The invasion of Iraq by the US in 2003 allowed Kurds the rare opportunity to influence the politics of the country. Both, the United States policy of changing Saddam's regime as well as the invasion were supported by the Kurds. And with the end of Hussein's regime, the Kurds were able to participate in the formation of a new Iraqi state and the creation of the Coalition Provisional Authority (CPA).

Up until 2005 when the Iraqi Constitution was ratified to give Kurds more regional autonomy and pave way for investments by oil companies, the Kurds relied heavily on smuggling oil through Turkey. Following this ratification, the Tawke field was discovered in 2006 and foreign companies such as UAE’s Dana Gas and Crescent Petroleum and Canada's Western Oil Sands began to establish themselves in the region. The establishment of these companies in the region created friction between the KRG, which, to this day, maintains its right to develop minefields and the Central Government, which argues that natural resources and in particular, oil and gas are owned by all Iraqis, irrespective of the region.

By the start of 2007, representatives from Baghdad and Erbil began negotiations to approve a National Hydrocarbon Framework Law. By July of that same year, representatives of KRG withdrew their support from the bill citing reasons that it would allow centralised control over oil development and would not benefit the region. Following the failure of the negotiations, the Kurdish Parliament in 2007 passed a regional petroleum law which allowed the KRG to sign contracts independently of the Central Government with the help of Public Sharing Agreements (PSA). Here it should be noted that no major oil companies signed PSA’s with the KRG for fear of alienating Baghdad. Retrospectively, despite the fact that the contracts signed were illegal, the Central Government at the time did not make an issue out of it.

The main contention between the two Governments regarding oil began in October 2011 when the KRG signed a PSA with Exxon Mobil. As the oil fields signed under the PSA were located in Kirkuk, a contested area that Kurds claim historically as their own and that contains up to 40 per cent of Iraq’s oil reserves, the PSA did not go down well with the Central Government. In response to this deal, the Central Government began blacklisting companies with investments in the regional oil field. This led to a chain of reactions where for a short period of time in March the Central Government halted the allocation of revenues to Kurdistan and in response to this, the KRG stopped oil supply from within Kurdistan.

Finally, in March 2014, the KRG and the Central Government renegotiated the agreement wherein the Kurds would deliver 175,000 barrels per day to the Central Government in return for 50% of the oil export revenues to the KRG. The agreement was however once again compromised in light of IS’s rising power in the region and its control over major oil fields throughout Iraq. Before IS’s takeover of Kirkuk in 2014, oil exports from the region were controlled by the Central Government. As the Iraqi forces fled the region, the Kurdish forces moved in and after expelling IS from the region, they seized oil fields that were legally still under the control of the Central Government.

On 25th September 2017, the Kurds held a referendum for gaining formal Independence from Iraq and included territories of Iraqi Kurdistan as well as disputed territories such as Kirkuk, claimed by both the Governments. As the inclusion of Kirkuk within its territory will ensure that Kurdistan remains an economically viable country after Independence, the Kurds have time and again claimed that the region belongs to them. The referendum however backfired as the move was opposed not only by the Central Government but also the international community and in particular, by the US and Turkey.

It also increased the hostility between both the Governments which ultimately led to Iraqi central forces taking control of oil fields in the dis-puted territory. The Iraqi forces have so far taken back a large number of cities and oil fields located in northern Iraq. They have also taken back borders that up until now had been controlled by the Kurds.

The core issue with KRG’s bid for Independence lies in the fact that Iraqi Kurdistan cannot sustain itself economically without including Kirkuk within its boundary and Bagdad will never let Kurdistan secede with Kirkuk as it is home to about 40 per cent of the oil resources within Iraq.

The recent dispute regarding the KRG supposedly supplying oil to the United States through the tanker Neverland has once again led to a fierce disagreement between the two. Despite the issue having been contested in the Iraqi Supreme Court for over a year now, there seems to be no end to the conflict due to the KRG’s insistence on an autonomous oil sector.

In the current context, the Kurdish leadership must reconsider its decisions to ensure that the Kurds can better negotiate regarding issues such as the budget allocated to the region as well as revenue allocation from oil exports. In the absence of an agreement between Baghdad and Erbil about the ‘disputed territories’ and oil revenues, it remains likely that neither Baghdad nor Erbil will benefit from Kirkuk’s natural resources.

(The writer is a student at Sciences Po, Paris and LSE)


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