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Kurdistan Ready To Hand Over Oil For 17% Of Iraqi Budget

The Kurdistan Regional Government has…

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Kurdistan Proposes Immediate Ceasefire With Iraq

The Kurdistan Regional Government has…

John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Could War Flare Again Between Iraq and Kuwait?

Could War Flare Again Between Iraq and Kuwait?

According to Iraqi Council of Representatives Oil and Energy Committee member Furat al-Sharei, the 10 oil fields that spread across the Iraqi-Kuwaiti frontier are still waiting to have a line drawn through them to delineate the border, more than eight years after a coalition led by U.S. forces toppled the regime of Iraqi President Saddam Hussein.
 
According to al-Sharei, the two countries must first collaborate in developing legislation for equitably sharing the fields before oil extraction can begin, noting, "The problem of the common fields can be resolved by developing legal mechanisms."
 
While Iraq and Kuwait are now at peace, many of the border issues that led to conflict two decades ago remain, which no amount of diplomatic bonhomie can completely paper over.
 
In 1993 the United Nations Security Council Resolution 833 precisely delineated the previous borders between Iraq and Kuwait following Saddam Hussein’s invasion of his neighbor in August 1990. Iraqi forces were summarily expelled by a 34-nation coalition led by the United States during Operation Desert Storm, which began in February 1991. That conflict left Iraq with a $22 billion reparations bill to Kuwait that it is still struggling to pay off, tithing 5 percent of its oil revenue to its tiny plutocratic southern neighbor.
 
What were some of Saddam Hussein’s grievances against Kuwait? By the time Iraq signed the ceasefire in its punishing eight year war with Iran in August 1988, Iraq was virtually bankrupt, owing $80 billion in debt to Saudi Arabia and Kuwait, which now pressured Baghdad for repayment with interest. Iraq pressured both nations to forgive the debts, but they refused. Iraq also accused Kuwait of exceeding its OPEC quotas and driving down the price of oil, thus further hurting the Iraqi economy, as collapsing oil prices further decimated the Iraqi economy.
 
Baghdad also repeatedly protested to no avail about what it claimed was economic warfare waged by Kuwait’s slant-drilling into disputed border regions, which reached as far as Iraq's Rumaila oil field
 
Despite the overthrow of Saddam Hussein’s regime in March 2003, two years later Kuwait began the construction of a 125-mile metal barrier along its land borders with Iraq in early 2005. But with a new administration in Baghdad, on 23 November 2006 Kuwait's Foreign Ministry Undersecretary Khaled al-Jarallah told reporters following talks with Iraq's Foreign Ministry Undersecretary Mohammad al-Haj, “We have signed a deal ... after which Kuwait will be able to complete the construction of the security fence,” noting that as the arrangement calls for the payment of "compensation to Iraqi farmers" on the border, the requisite amount "had been deposited with the United Nations." Al-Haj added, "We have completed the practical requirements for the demarcation of borders," based on UN Security Council Resolution 833.
 
Five years later, little has moved since "the practical requirements for the demarcation of borders." The reestablishment of bilateral Iraqi-Kuwaiti diplomatic relations has been even more glacial. Kuwait reopened its embassy in Iraq in 2008 after nearly 19 years of broken diplomatic relations, while the Consulate of Iraq was again opened in Kuwait only last year.
 
Local Iraqis based in Basra have a very different view of UN Security Council Resolution 833, stating that it led to the transfer of a significant amount of Iraqi land, hosting both oil wells and agriculture such as tomato farms to Kuwait, as well as the establishment of a wide zone of neutrality between the two countries which again favored the emirate. A high-ranking Iraqi government official in the Safwan border region, who had had some of his own land confiscated when the new border was marked out, commented that the locals describe “the unjust demarcation of borders as well as their government’s reluctance to put an end to this injustice.”
 
Once again, local Iraqis two decades later are complaining that Kuwaitis are “stealing” Iraqi oil in border areas by using directional drilling techniques. Local Basra government officials say that they have proof of the Kuwaiti theft and have forwarded it to Baghdad, offering as proof the fact that pressure in some oil reservoirs near the border has dropped significantly, which local Iraqi government officials believe has been caused by Kuwaiti drilling to tap the same reservoirs. Ratcheting up the tension, Kuwait's ambassador to Baghdad, Ali al-Mu'men recently denied Iraqi allegations and instead, accused Iraqi companies of extracting oil from Kuwaiti oil reserves.

For Farid Khalid, head of the energy committee of the Basra provincial council, the issue is simple - “No oil work was done on the Iraqi-Kuwaiti-Iranian borders by the Iraqi government for years which is why the oil reserves were open for looting.”
 
So, as in the immediate aftermath of Operation Desert Storm, Kuwait has the cash and the backing of the U.S. government – hardly a recipe for regional stability. Further weighting the scales in Kuwait’s favor, as some of the U.S. forces leaving Iraq by year’s end are due to redeploy there, with the Pentagon discussing shifting a combat brigade team of about 3,500 troops and possibly other units to Kuwait to join the roughly 20,000 U.S. forces already there.

For those seeking to read the tea leaves about Iraq’s oil future, Iraq also has ten common oilfields on its eastern border with Iran that are waiting for the demarcation process to be completed before extraction can begin, but that’s another story for another time.

By. John C.K. Daly of Oilprice.com




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