Claiming a share: Iraqi Kurdistan’s struggle for oil fields

When the Iraqi Armed Forces overran the Peshmerga’s positions in October 2017, the Kurds of Iraq awoke from a dream shattered by reality.

The independence, long aspired by so many had now become pie in the sky. Many of the oilfields once under their control had been retaken by Baghdad; a fact that plunged the already economically stricken Kurdistan Region into further decline. Falling oil prices and lost oilfields triggered an economic crisis that has brought many to the streets venting their anger and demanding an improvement of conditions.

These events might give outside observers the impression that Baghdad is the winner, yielding power over all bargaining chips. A miscalculation. The Kurdistan Regional Government (KRG) remains in control of many key points and reminding Baghdad that they are still a force to be reckoned with. The result is muscle flexing from both sides.

Since the recapture of Kirkuk and most of its oilfields by the Iraqi Armed Forces, oil production has resumed, and drilling rights have been granted to numerous foreign oil and gas companies, among them BP. Despite this seemingly positive outcome for Baghdad, they have little reason for content. The oilfield of Khurmala remains under the control of the KRG, which has rejected any claim to it raised by Baghdad.

Kirkuk’s probably most important oilfield, Bay Hassan, although under Baghdad’s control, is of no use for its only way to export leads directly through territory controlled by the KRG that has shut down all access to it.

In return, Baghdad’s countermeasures against what they consider lack of cooperation have not failed to emerge. Kar Group, a Kurdish oil company, has been denied all production rights in Kirkuk, a move that many consider a punitive measure.

 Surrounded by all sides

With these obstacles at hand and foreign pressure to achieve a settlement with the KRG, Iraq’s Prime Minister al-Abadi has no choice but to resolve the ongoing crisis by political means. As a result, he has met with the KRG’s Prime Minister Nechirvan Barzani on several occasions trying to reach an agreement, a move that has hitherto remained unsuccessful.

Also, he faces another challenge that leaves him caught in the middle of events: that of the country’s budget for 2018. After it had been rejected by almost all political factions in the country, al-Abadi eventually came to an agreement with Shia factions represented in the Council of Representatives. However, Sunni and Kurdish factions remain unconciliatory, with the latter enraged particularly about alleged cuts in budget appropriations in favour of Kurdish provinces. They thus insist upon a raise, a move that if applied could leave other parties disgruntled.

To overcome this hardly solvable predicament al-Abadi will be compelled to find a solution that satisfies all. He faces a mammoth task. His concern over his lack of progress is expected to be shared by foreign oil companies that will hesitate to invest in a region where ownership and authority remain unclear and sometimes even leave oilfields inoperative.

By David Kampmann

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