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While tensions between Iraq’s federal government and the Kurdistan region continue to escalate, Russia’s state-controlled oil giant Rosneft said on Thursday that it had agreed with the Kurdistan Regional Government to take majority control in the operation of the oil pipeline in the Kurdish region, in an apparent push by Russia and Rosneft to achieve greater political and economic influence in the Middle East.
Rosneft’s share in the project may be as high as 60 percent, while the other project participant with a 40-percent stake will be KAR Group—the current pipeline operator, the Russian company said.
“The entry into the infrastructure project will contribute to achievement of Rosneft’s strategic objectives and will enable Rosneft to enhance the efficiency of oil transportation to the end customers including supplies to the Company’s refineries in Germany,” said Rosneft’s CEO Igor Sechin, who is a close ally of Vladimir Putin.
According to sources familiar with the deal who spoke to Reuters, Rosneft’s investment in the project would be around US$1.8 billion.
The Rosneft deal comes just days after Iraqi government forces seized control of all oil fields that Iraqi state-held North Oil Company operates in the oil-rich Kirkuk region from Kurdish forces.
Last week, Iraq’s Oil Minister Jabbar Al-Luiebi ordered state-held oil and pipeline companies to begin restoring oil flows from Kirkuk to Ceyhan via a pipeline that bypasses Kurdistan, increasing pressure on the breakaway region that voted for independence last month in a referendum strongly opposed and deemed illegal and invalid by the federal government.
On Thursday, Iraq’s Oil Ministry issued a statement saying that it “warns seriously all the countries and oil companies from contracting or dealing with any authority inside Iraq without taking the approval from the federal government and the ministry of oil.”
Oil Minister Al-Luiebi said that “the irresponsible statements from some of the officials inside & outside Iraq or the foreign companies about their intention to sign oil contracts with any authority inside the geographic borders of Iraq without telling the federal government or the ministry of oil, is considered as a Blatant interference in the internal affairs and a derogation from national sovereignty, and an outright violation of international norms.”
Related: Oil Markets Fear Iraqi Escalation
Although the statement doesn’t specifically name any foreign company, it came on the day after Rosneft signed another deal with Kurdistan--Production Sharing Agreements (PSA) for five production blocks, for a total investment of up to US$400 million.
This week’s deals between Rosneft and Kurdistan are not the first agreements between the Russian oil giant and the region that overwhelmingly voted for independence from Iraq at the end of September. Even before the referendum, Rosneft had already become the biggest source of oil funds for Kurdistan.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.