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Kurds’ EU gas deal irks Baghdad on eve of
U.S. transition
2.9.2010
By Ben Lando - Iraq Oil Report |
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September 2, 2010
ERBIL-Hewlêr,
Kurdistan region 'Iraq', — Baghdad is scrambling to
re-establish federal control over oil and gas
exports, after Iraq’s Kurdish region announced a
deal to export natural gas to Europe, the same week
America officially ends combat operations in Iraq.
In a statement with the Kurdistan Regional
Government (KRG), the German utilities company RWE
announced it would help develop northern Iraqi
natural gas for export via the Nabucco pipeline to
Europe. Taken by surprise, Iraq’s Oil Ministry
quickly released its own statement condemning the
deal.
“Iraq is exporting crude oil and gas through SOMO
(the State Oil Marketing Organization) exclusively
and there is no other side is authorized to sign
contracts with local and international companies
regarding this issue,” the ministry said, adding
“there is no value” to any agreement without its
approval. Both the speaker of the KRG and the head
of its foreign relations department issued rebuttal
statements.
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US President Barack Obama reads his speech to
photographers after delivering an address to the
nation on the end of combat operations in Iraq from
the Oval Office of the White House in Washington on
August 31, 2010. AP photo |
The RWE deal would boost
the semi-autonomous Kurdish region’s
already-advanced energy sector, and residents would
gain access to cooking and heating gas supplies via
pipelines.
But the deal also throws fuel onto the fire of
Iraq’s key, unresolved issue: the competing claims
by the central and local governments to make
contracting and strategy decisions about their
massive oil and gas reserves. The KRG, on the other
hand, has defied Baghdad by independently signing
more than two dozen contracts with foreign companies
to explore for and produce oil and gas, without
federal approval. The KRG claims it has the legal
rights to control hydrocarbon development in its
region as long as it sends all revenue to the
central government.
It’s not clear whether the American diplomatic
mission, which as of Sept. 1 will have the lead role
in shepherding Iraq to full sovereignty, is keyed in
enough to these core issues to play a productive
mediator role. The outgoing ambassador to Iraq said
in a parting press conference the Arab-Kurdish feud
is over, and officials here scrambled after
smuggling allegations began to make headlines.
Iraq, however, is suffering from a crisis of
electricity and fuel shortages, and Baghdad has
vowed to export natural gas only after domestic
demand is met. So, although Baghdad is developing
its natural gas reserves – most notably by capturing
associated gas flared from oilfields in Basra and by
offering three dry gas fields to foreign investors
in an Oct. 1 auction – it has only committed them to
Nabucco verbally. The Nabucco pipeline consortium
represents an attempt to feed Asian and eastern
European natural gas to western Europe without any
Russian involvement. On August 23, Nabucco’s
constituent companies announced two main feeder
lines to come from Iraq and Georgia.
American heads in the sand
In short, the issue of who controls Iraq’s oil
sector is a wedge in Iraq’s major fault line.
This dispute lies at the heart of a grand Iraqi
federalist debate, and over the past six years it
has stalled key pieces of legislation that would
have governed the oil sector and oil-revenue
redistribution, resolved territorial claims, and
clarified the management of the national army. The
federalist question is also a flashpoint in the
ongoing post-election attempts for form a governing
coalition.
Yet Washington’s delegation to Iraq has apparently
not taken great notice – despite a season of
political earthquakes in which the RWE deal is only
the latest tremor.
“I think oil is no longer an impediment in
reconciliation,” Christopher Hill told a State
Department press conference Aug. 17, days after
ending a 16-month stint as U.S. ambassador to Iraq.
“They have reached an agreement where the contracts
that were assigned with the KRG, the Kurdish
Regional Government, have been accepted in Baghdad.”
In late June, the New York Times broke a story that
has been an open secret in Iraq for some time: that
the KRG has been complicit in exporting oil and fuel
to Iran, in contravention of the central
government’s monopoly on such exports and in
defiance of U.S. sanctions, which forbid substantial
support to the Iranian energy sector. The smuggling
allegations took Americans in Iraq by surprise and
opened a new front in the verbal wars between the
central and regional governments over oil policy.
Talking to reporters two days after Hill’s press
conference, responding to criticism from Baghdad
over the Iranian export controversy, KRG natural
resources minister Ashti Hawrami said, “We will not
listen to lectures delivered by losers.”
“The minister in the federal government can speak
whatever he wants; we are working according to the
constitution,” Hawrami added. “The policy of the
federal government in terms of energy and
electricity in particular has failed.”
Soon after the Iran smuggling story broke, an
American delegation met with Kurdish leaders to
discuss the issue. (The KRG’s foreign affairs chief,
Faleh Mustafa Bakir, confirmed that Lt. Gen. Kenneth
Hunseker, then the deputy commanding general in
Iraq,www.ekurd.netand
the new assistant chief of mission in the embassy,
Peter Bodde, raised the issue of Iranian exports
with KRG officials, including the ministers of
natural resources and interior.) It was one of an
increasing number of meetings between American and
Kurdish officials in the wake of the Times story.
“We have met with different officials so they can
tell us what is going on and compare the input of
various sources we have,” said Larry Milam, the
senior economics adviser with the U.S. Embassy’s
Regional Reconstruction Team in Erbil, the KRG’s
capital.
The U.S. military refused numerous interview
requests to discuss allegations of smuggling across
the border it helps Iraq protect and monitor, and
how that trade of energy products – illicit or
otherwise – squares with U.S. sanctions against
supporting Iran’s energy sector.
The Kurdish export controversies have strained
relationships not only between Kurds and Arabs and
between Iraq and the U.S., but also within Kurdistan
itself.
The Kurdish opposition party Goran has pushed the
issue as an example of the regional government’s
corruption. The party of KRG president Massoud
Barzani filed a $1 billion lawsuit against Goran’s
newspaper Rojname after a story alleging the
president benefited from hundreds of millions of
smuggling profits; Goran’s TV station KNN airs
regular footage of the tankers at the border and
gave prime coverage to video it took that showed a
U.S. military delegation at one border crossing with
Iran.
The U.S. military said the visit to the border
captured by KNN cameras is routine, and directed all
other queries to the U.S. Embassy. The Embassy also
ultimately refused any interviews. Those that were
scheduled were not allowed to be conducted on the
record, and were ultimately canceled on the day they
were to take place. Sources within the State
Department said officials at the embassy were
unprepared to address such a politically delicate
issue.
A time of transition
The sluggish American response to the rising
Kurd-Arab conflict is the result of an embassy
that’s both in transition and disconnected from the
ground-level reality of Iraq’s streets, according to
U.S. officials speaking on background. The military,
meanwhile, has been working with security officials
from both sides in joint border operations.
The recent reduction of U.S. troops to below 50,000,
in advance of the August 31 deadline, marks a shift
in American goals, away from war-fighting and toward
training, Primary responsibility for the American
presence in Iraq will shift from the U.S. military
to the State Department, which is expanding its
presence via consulates throughout the country. The
U.S. embassy in the capital is its biggest in the
world – proof of the strategic relationship
Washington envisions it will maintain with Baghdad,
even after the final bases close in 2011.
Yet American diplomats have complained to Iraq Oil
Report, on the condition of anonymity, that their
security restrictions are setting them up to fail.
Such a mission, they say, requires personal
interactions between foreign service officers and
local citizens. Yet the embassy will rely heavily,
for transportation and protection, on private
security contractors who are infamous around Iraq;
soon, their armored convoys will be painted a
bright, alien silver to avoid confusion with the
military’s tan vehicles.
Copyright, respective
author or news agency, iraqoilreport com
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