Baghdad, Kurdistan Clash Over Kirkuk Oil Field

Last Updated: 18, January 2013

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The Kurdistan Regional Government (KRG) in Northern Iraq has accused the nation’s central government for creating “division and strife”, reported Bloomberg on Friday, after Baghdad announced plans this week to develop the Kirkuk oil fields alongside BP plc, despite an ongoing dispute over the area’s sovereignty.

In a statement on its website, the KRG said that the proposed agreement between Baghdad and BP was “illegal and unconstitutional”, further criticising Iraqi oil minister Abdul Kareem al-Luaibi for inciting conflict through “insulting references” and a “series of ill-judged remarks” on the KRG’s own oil activities.

“Iraq’s citizens are simply tired of this sort of language of threat and intimidation, which in the cynical pursuit of narrow political agendas serves only to create division and strife,” wrote the KRG.

[quote]“Such remarks (by Baghdad) reflect a lack of respect for the Constitution of Iraq and also for the people of Kurdistan. They represent a degree of panic and desperation. It would appear the overriding philosophy is that if your own policies have failed, lash out and blame others,” the statement added.[/quote]

At the heart of the argument is the large Kirkuk oil fields, which was discovered in 1927, but has seen production decline to just 260,000 barrels a day – from 900,000 barrels a day in the early 2000s – after years of mismanagement. The fields run along the border between the semi-autonomous northern region, controlled by the KRG, and the rest of Iraq; and has seen small fire-fights occur since last year due to the ongoing conflict.

“Had it not been for the federal government’s obstructionist policies, the Kurdistan Region could now be exporting 500,000 barrels per day or some $18 billion per year,” the KRG said. “This is in addition to the wasteful, costly and environmentally damaging oil ministry policy of gas flaring which has cost Iraqis an estimated $10 billion in lost revenue every year since 2003.”

[quote]“One would think that federal authorities would applaud the KRGs plans to create a northern energy corridor for Iraq, whereby up to 3 million barrels a day could soon be flowing through the north of Iraq to Turkey and international markets beyond, and the revenues are shared by all Iraqis,” they added.[/quote]

Abdul Mahdy al-Ameedi, head of the Iraqi oil ministry’s petroleum contracts and licensing directorate, on the other hand told the Wall Street Journal that a request had already been sent out to the cabinet to approve contract negotiations with BP.

BP spokesman Toby Odone confirmed to the Associated Press that the company had intentions to start work in Kirkuk, but declined to give details on the potential scale of the investment.

“It’s very early … in terms of anything significant,” he said. “It would be pretty small. It’s just a short-term program. … Whether it develops into something more is another matter.”

Baghdad and Kurdistan have clashed several times over oil in the northern region. While the Kurds consider oil in their territory to come under their own legislation, Baghdad wants the central government to control all of Iraq’s oil policy.

According to Toby Dodge, author of a soon-to-be-published book called Iraq: From War to a New Authoritarianism, the dispute over Kurdistan’s oil is one of the largest threats to Iraq’s political and economic stability since the 2003 U.S. occupation.

[quote]“The oil issue is an existential threat to (Iraq’s Prime Minister) Nouri al-Maliki,” said Dodge to the Financial Times. “And the Kurdistan Regional Government and Maliki know it.”[/quote]

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