Officials from the Kurdistan Regional Government (KRG) in northern Iraq will consider an end to the standoff over unilateral oil exports if the central government in Baghdad guarantees the Kurds US$1 billion in monthly revenues, news agencies report.
The Iraqi Kurds have largely maintained the upper hand in this oil independence struggle since they began exporting oil on their own directly to Turkey, but since then, Baghdad has made several moves to gain more leverage.
The latest move in March saw Baghdad indefinitely halt oil exports from its National Oil Company (NOC) through the northern Kurdish pipeline, depriving the Iraqi Kurds of additional revenue from the NOC’s 150,000 bpd, in order to pressure them to give in on an oil-revenue-sharing deal.
The Iraqi Kurds, however, aren’t likely to give in without putting a high price tag on their capitulation, which for now is set at $1 billion per month, from the Iraqi federal budget. This figure is said to represent 17 percent of the budget, which was the original deal between the Kurds and Baghdad before the latter cut out the former as punishment for exporting oil unilaterally.
The Iraqi Kurds have not delivered any crude to Baghdad for over a year in retribution for the central government’s failure to give the Kurds their share of the federal budget. Related: Russia’s Oil Giants Feel The Crunch But Stay In The Black
The Kurds are not concerned about exporting their oil unilaterally; rather, they are concerned about revenues. Reuters cited Iraqi Kurd officials as saying that it was of no importance where the oil goes first on its way to the market, as long as the Kurds get the same revenues in the end.
By the latest count, the Iraqi Kurds exported over 513,000 barrels directly to Turkey in May, for revenues of just over US$390 million. It’s not enough to pay the debts it owes to its operators, fund the battle against the Islamic State (ISIS) in and around oil-rich Kirkuk and handle its budgetary requirements, while simultaneously gunning for independence.
The latest deal is one of many that have been proposed in recent months.
By James Burgess of Oilprice.com
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