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Rosneft Could Be The Key To Iraq-Kurdistan Oil Deal

Russian oil giant Rosneft could be the key in the talks between the Iraqi government and Kurdistan for the full resumption of oil exports from the semi-autonomous region, Reuters reported on Monday, citing two industry sources involved in the talks, in what is the latest sign of Russia’s growing influence over the Middle East oil scene.  

After Kurdistan’s independence referendum opposed by Baghdad, Iraqi federal forces seized in October the oil fields around Kirkuk, which had been under Kurdish control since 2014.

Last week, the central government in Baghdad and the Kurdish Regional Government (KRG) in Erbil agreed to a tentative deal to restart full oil flows from Kurdistan, but little details about the deal were announced. Iraq and Kurdistan have yet to settle their dispute over oil revenue sharing, who will pay Kurdistan’s debts, and how much money Iraq will transfer to Kurdistan from its national budget.

According to Reuters’ sources, the KRG has set two conditions for resuming full exports and transfering the oil revenue to Iraq’s central government—that some of the crude oil is not exported and kept for local refining and that Baghdad pays pumping tariffs to Rosneft.

“Erbil offered a quick-fix solution and has written to Baghdad but has yet to hear a final answer,” one of the sources told Reuters.

Related: Shale Boom Could Create A Refining Bottleneck

Just days before the Kurdistan referendum last September, Rosneft said that it would look into the opportunity to build a US$1-billion pipeline for bringing gas from Iraqi Kurdistan to Turkey. Rosneft—led by Vladimir Putin’s close ally Igor Sechin—has been intensifying links and deals with Kurdistan worth billions of U.S. dollars.

According to sources in Kurdistan who spoke to Reuters, the semi-autonomous region has lost almost US$3 billion in oil revenues since the Iraqi federal government seized the oilfields in Kirkuk.   

According to Reuters sources in both Baghdad and Erbil, it is unlikely that the two sides will reach a lasting agreement on oil before the parliamentary elections in Iraq on May 12.

By Tsvetana Paraskova for Oilprice.com

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