menu
spacer
 
| Ander Nieuws week 52 / Midden-Oosten 2010 |
 
 
 
Kurdish oil demands to Maliki revealed

 
Iraq Oil Report
December 15, 2010
Ben Lando
 
In exchange for the decisive support they gave to Prime Minister Nouri al-Maliki's bid for a second term, the political bloc representing the Kurdistan region demanded measures that would give it significant autonomy within Iraq's oil sector.
 
In a previously undisclosed communiqué to Maliki, Kurdistan Regional Government (KRG) President Massoud Barzani called for the passage of a specific revenue sharing law sometime "in the 2011 financial year" and an oil law "at the beginning of next year, 2011."
 
The Kurdistan Alliance, which has 57 seats in the 325-member Parliament, also wants the KRG's laws to trump federal laws in any dispute over the legality of the 37 oil deals signed by the KRG with foreign oil companies, in defiance of Baghdad.
 
The demands were issued on August 21, 2010, and remained in force as the Kurds pursued a coalition-building dialogue with Maliki in October and November, according to a source familiar with the Kurdish side of the negotiations. Those talks culminated in second terms for Maliki and President Jalal Talabani, a Kurd.
 
For the past four years, the KRG's leaders in Erbil have been at odds with Baghdad over key issues, including the proper boundaries of Kurdish territory and the region's level of control over its oil sector. Maliki's administration has condemned the KRG's contracts with foreign oil companies as illegal – a dispute which has effectively locked in a prospective 150,000 barrels per day (bpd) of potential oil exports. The KRG Ministry of Natural Resources Minister Ashti Hawrami said fields in the region could export one million bpd in a few years.
 
According to officials involved in the government formation negotiations, a final agreement that would sanction the KRG contracts will not be reached until the government is fully formed and the Parliament revisits legislation to govern the oil sector, which has been stalled since 2008.
 
"It's a demand (for) recognition of the KRG oil deals and pay the companies," said independent Kurdistan Alliance Parliamentarian Mahmoud Othman. "All the problems will be solved when there is a hydrocarbons law." The draft law calls for a federal oil and gas council, "and that council will decide on the (legality) of the contracts," Othman said. "It will take time."
 
Maliki has until Dec. 26 to finalize the formation his government, which includes a tense allocation of key positions to winning parties, including leadership of the ministries of Oil and Finance.
 
As that deadline looms, nearly all of Iraq's elected officials are refusing to disclose details of the political jockeying. Maliki ally Abbas al-Bayati ended an interview when questions turned to Kurdish-Arab relations, including Barzani's recent public statements asserting Kurdistan's rights to oil-rich and disputed Kirkuk. (KRG officials have said the comments were taken out of context and misunderstood.)
 
"We will look to the (KRG oil) contracts in a way that will dismiss all the differences," Bayati said. He wouldn't get into specifics but alluded to a general agreement that key oil-related laws would provide the path to reconciliation.
 
Despite pre-government-formation gestures that trend toward political harmony, the underlying disputes that stalled these laws in 2008 have not been resolved.
 
Iraq's 2005 Constitution leaves unanswered several key oil-related questions, and calls for a suite of definitive legislation to structure the oil sector. Those laws were pushed hard by the U.S. government and various Iraqi officials beginning in 2006, but faltered first in the cabinet and then in Parliament over two key issues: the federal Oil Ministry's exclusive right to sign contracts, and the extent to which foreign companies will be allowed into the country's oil sector.
 
That stalled legislation seems likely to serve as the starting point for future negotiations. The package comprises four laws: the hydrocarbon law, which would provide a framework for managing the oil sector in Iraq; the revenue sharing law, which determines a mechanism for redistribution of funds; a law reorganizing the Oil Ministry into a purely regulatory body; and a law re-establishing the Iraqi National Oil Company.
 
Barzani's communiqué is titled "Kurdistan Region's negotiation conditions regarding resources and the oil and gas sector," and it insists on the passage of particular versions of the hydrocarbon framework law and the revenue sharing law.
 
It calls for "passing the agreed upon draft (revenue sharing) law dated 20/06/2007... This law should be enacted in the 2011 financial year."
 
As for the framework law – also known as the hydrocarbons law or the federal oil and gas law – Barzani called for "legislating this law according to the draft dated 15/02/2007... so that this law is to be enacted at the beginning of next year, 2011."
 
The communiqué mentions specific amendments to both laws, but the content of those amendments has never been made public. An April 2007 annex to the oil law by Oil Minister Hussain al-Shahristani that divided Iraq's oil fields into four development and control categories caused the KRG to withdraw support back then.
 
Barzani also demanded one change to the draft oil law. All KRG oil deals should be considered valid "assuming that they comply with the Iraqi Constitution," according to Barzani's recommended language. His provision continues: "Should there be a case where there is a discrepancy with the constitution, then this should be resolved by the relevant authorities in the Kurdistan Region."
 
Such language opposes the existing policy of Maliki's government, which has fought hard to centralize authority over Iraq's oil sector.
 
The tug of war between Baghdad and Erbil was particularly strained last year over exports from the Tawke field, which has been developed by Norway's DNO, and Taq Taq, developed by a joint venture between Turkey's Genel Enerji and China's Sinopec. Those fields briefly exported around 50,000 bpd for four months, but that arrangement imploded. The KRG wanted the federal government to pay the companies, while the Oil Ministry contended that the signator of the contract – that is, the KRG – was required to pay from its own budget.
 
Since then, numerous meetings have taken place, and a nominal deal was even reached by which the Ministry of Finance would assess the KRG's deals and contractors' expenditures in order to certify compensation. This didn't happen for political reasons, and because the Finance Ministry has lacked the capacity to perform such an assessment.
 
There also remains a possible showdown over the 2011 budget, which in its draft form requires the KRG to send 150,000 bpd through the export pipeline or risk paying that lost revenue through a reduction of its 17 percent cut of the federal budget. The budget legislation also mentions an audit of 2004-2010 revenues that the KRG should but might not have sent to the central government.
 
The nearly $79 billion budget, which includes a nearly $12 billion deficit, is funded almost entirely by oil exports, as well as loans from the International Monetary Fund, World Bank and Central Bank of Iraq. It remains to be seen whether the budget will force the sides to compromise or drive a wedge deeper in the dispute.
 
© Strategic News International LLC 2009
 
Original link
 

 
 
| Ander Nieuws week 52 / Midden-Oosten 2010 |