The Slippery Business of Oil: A Decade after the US Invasion That Toppled Saddam Hussein, Iraq Is in the Grip of a New Conflict, This Time between Power-Hungry Prime Minister Nouri Al Maliki and the Rebellious Kurds over Their New-Found Energy Riches
Blanche, Ed, The Middle East
EVERY DAY, A CONVOY OF TANKER TRUCKS loaded with crude oil head north from Iraqi Kurdistan through the border crossing at Harbur into Turkey. The oil comes from new fields the semi-autonomous Kurdistan Regional Government (KRG) are opening up with the help of some of the biggest oil companies in the world.
Hussain Balu, undersecretary at the KRG's Ministry of Oil and Natural Gas, estimated in January that some 15,000 barrels per day (b/d) of oil and natural gas condensate goes to Turkey for refining or export.
But Ankara wants to build pipelines from Kurdistan to Turkey's Mediterranean oil terminal at Ceyhan that could initially carry 1mb/d, possibly as early as 2014, and bypass the Baghdad-controlled export network.
Land-locked Kurdistan has no access to the sea, so if it wants to export independently of Baghdad it must use pipelines, which as the Americans found during their eight-year occupation, are highly vulnerable to sabotage. The central government in Baghdad bitterly opposes the Kurdish enterprise, viewing it as an act of treason against the post-war Iraqi state. Be that as it may, Kurdistan is sitting on at least 45bn barrels of crude, as well as substantial natural gas reserves.
That's roughly one third of Iraq's declared oil reserves total 143.1bn barrels, so the loss of such resources threatens Baghdad's entire reconstruction programme which hinges on the quadrupling of oil production, a mammoth task that many in the global energy industry believe is unattainable. So Baghdad can be expected to fight tooth and nail to ensure that Kurdish oil and gas will be under its control.
Prime Minister Nouri Al Maliki, a Shiite with one foot in Tehran, insists that his coalition government, increasingly shaky though it may be as Iraq continues to be plagued by insurgency and sectarian violence, has the sole right to conclude drilling contracts with foreign companies and that the oil the Kurds are shipping north rightfully belongs to the Iraqi state.
"Exporting oil from the Kurdistan region to Turkey is illegal and illegitimate," government spokesman Ali Al Dabbagh declared.
"The oil and gas are the property of all Iraqis and those exports and revenues must be managed by the federal government which represents all Iraqis."
He accused Ankara of "participating in the smuggling of Iraqi oil ... and this issue will affect the relations between the two countries, especially the economic ones."
The Kurds have cut off all exports to Iraq, claiming Baghdad owes the KRG and the oil companies working with it some $2bn in fees.
The hostility between Maliki and the KRG under its president, Massoud Barzani, son of the late Mullah Mustafa Barzani, revered champion of Kurdish nationalism, has been escalating for years. But it accelerated when US forces, with whom the Kurds had a particularly friendly relationship, completed their withdrawal from Iraq in December 2011, leaving the power-hungry Maliki in control.
This has heightened speculation that the Kurds could be moving towards a declaration of independence, a dream they have cherished for generations and for which they have spilled much blood, particularly under the legendary Mullah Barzani.
"The hypothesis of an armed conflict between the central Iraqi government and the autonomous Kurdish region cannot be excluded," French analyst and author Christophe Ayad wrote in Le Monde Diplomatique recently.
The KRG has been defying Baghdad on the oil issue for years and has signed exploration contracts with some 40 foreign companies, mostly trail-blazing independents known in the industry as "wildcatters", or small companies such as DNO of Norway and Gulf Keystone Petroleum of the UK.
That was a mild irritant to Baghdad. But the game-changer came in October 2011 when the KRG signed up ExxonMobil of the United States, the world's biggest oil company, to explore six blocks, two of them in ethnically mixed disputed territory. …