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

The Kurdistan Regional Government has…

Iraqi Oil Showdown and the Syria End-Game

Iraqi Oil Showdown and the Syria End-Game

As the Iraqi central government struggles to subdue the implications of the unilateral oil deals northern Iraq’s Kurdish government is making with Western oil majors, an end-game scenario for Syria comes into play in a complicated geopolitics-big oil cocktail.

Chevron, the second oil major to have struck a deal with the Kurdish Regional Government (KRG) in northern Iraq, by passing Baghdad, has been banned from any oil dealings with the Iraqi Oil Ministry.

On 19 July, Chevron announced it had signed a deal with the KRG for oil exploration rights in northern Iraq, taking over exploration from India’s Reliance Exploration and Production in the Rovi and Sarta blocks. This gives Chevron 80% of the contract and Austria’s OMV AG 20%. Last October, ExxonMobil signed a similar deal for six exploration blocks with the KRG, inviting the ire of Baghdad, which is losing control of the country’s northern oil capacity.

The KRG has signed a number of similar deals in the past, but always with smaller companies. ExxonMobil changed the game, as the first Western oil major to step on Baghdad’s toes, with some hefty geopolitical blessings.

Earlier this year, Baghdad held a failed auction of some of its exploration blocks and failed to attract any oil-major bids. Among the concerns during the auction was a clause that banned anyone bidding on exploration blocks to do business separately with the KRG. Chevron held out for the KRG instead. Now, the Iraqi central government is banning Chevron from cutting any oil deals with the Iraqi national oil ministry. But Chevron was prepared for this move in advance, and its usefulness as a deterrent is weak.

Turkey has also inked a number of deals with the KRG, despite warnings from Baghdad. In early July, Ankara and Irbil launched their first oil trade operation via the private sector. Turkish engineering and construction firm Siyah Kalem is going to a KRG contract to transport natural gas from Kurdistan to Turkey.

For now, although Baghdad’s feathers have been seriously ruffled, Ankara’s dealing with the KRG has not kept Turkey and Iraq from making deals of their own.

While Chevron and ExxonMobil are banned from any oil deals with the authorities in Baghdad, Turkey is not. On 16 July, Baghdad signed an initial deal with a Turkey-Kuwait consortium to drill for oil and natural gas. Plans have also been revealed for the shipment of oil from Basra, in southern Iraq, to Turkey via pipeline.

We’ve talked about how Turkey is setting its sights on an unconventional alliance with the KRG, and how Washington is pushing that relationship, which could result in the making of Kurdistan.

Adding the Syria element to this equation sheds more light on the KRG-Washington-Ankara nexus and the wider end game. In this respect, the actions of KRG leader Massoud Barzani are very interesting to follow.

Barzani is a key figure in Washington’s overall Syria plans, but he is walking a thin line at home, though so far he has not tipped the balance critically. The Barzani-Washington relationship can be traced back to ExxonMobil’s deal with the KRG last October. Since then, Washington has been following Barzani around closely and keeping him on a tight leash.

Here it would be fortuitous to take a look at Syria as a convenient transit country for Kurdish oil and gas to Turkey (and beyond, to Europe).  From this standpoint, Washington and Ankara have similar interests in Syria. But in order to make these interests viable, the Kurds have to be brought into the game.

Barzani is the key to this, as well as Turkish leader Erdogan, though the latter’s situation is decidedly more complicated at home. It is important to remember that there are various Kurdish groups of Turkish, Iraqi and Syrian origin.

Barzani is working to bring these three Kurdish factions together, with financial help from Turkey. The first goal will be to get the Syrian Kurdish faction to side with the opposition in Syria to help force a regime change.

The reward for the Kurds will be a Kurdistan empowered by oil and gas exports outside the central government’s fold, and supported by Washington and Ankara. And they key to convincing the Kurds to come on board will be convincing them that they can trust Turkey, their long-time foe.

This brings us to a recent explosion and ensuing fire that disabled a pipeline carrying oil from the northern Iraqi city of Kirkuk to the Turkish city of Ceyhan. The explosion hit a portion of the pipeline in Turkey’s southeast, near Midyat. Turkish officials are calling it “sabotage”. Typically, they would immediately blame Kurdish rebels, who have bombed the pipeline before.

If the Kurds, then it signals that Barzani is having some problems in his efforts to unite Kurds around the newest Washington-Ankara policy and that he is treading on dangerous ground. It could also be Baghdad, through Kurds who may not be inclined to understand Barzani’s movements, sending a message that it can go beyond conventional means to suppress the increasing boldness of the KRG with Iraqi oil.

By. Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.

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