29 September 2006
Officials in Baghdad and the northern Kurdish government locked horns this week over the Kurds’ claimed right to award production sharing contracts to foreign oil companies. The spat prompted a Kurdish threat to break away from Iraq, in a development that bodes ill for the country’s future unity.
The quarrel centered on whether the Iraqi oil ministry in Baghdad should have a say in how — and by whom — oil and gas fields are developed in the semiautonomous Kurdish provinces in northern Iraq.
Iraqi Oil Minister Hussein al-Shahristani said this week that Baghdad would not recognize any of the recent deals signed by the Kurdistan Regional Government (KRG) with foreign firms to develop oil fields in the region and that these would require the ministry’s review.
In a strongly worded response, the premier of the Kurdish region said he “resented” al-Shahristani’s remarks and accused him of trying to “sabotage” foreign investment in Kurdish oil.
“The people of Kurdistan chose to be in a voluntary union with Iraq on the basis of the constitution,” Kurdish Prime Minister Nechirvan Barzani said in a statement published on his official website. “If Baghdad ministers refuse to abide by that constitution, the people of Kurdistan reserve the right to reconsider our choice.”
Although al-Shahristani’s statement reiterated a position he took when assuming the oil portfolio in May, it was enough to send the share price of Norway’s DNO — the first foreign oil firm to start exploration drilling in Iraqi Kurdistan — tumbling as much as 11% on Monday.
DNO responded by quoting from correspondence with Kurdish Energy Minister Ashti Hawrami, who said, “The ministry in Baghdad has no authority to make statements like this, and the same ministry does not have to be committed to such contracts under the new constitution of Iraq.”
Hawrami last week spelled out ambitious targets for development of the Kurdish area’s oil resources, including a production goal of 1 million barrels per day.
Some legal experts contest the Kurdish interpretation of the constitution, which they used to draw up a draft hydrocarbon law for the Kurdish region. This states that “petroleum in Kurdistan” is owned by “the people of Kurdistan,” while the Iraqi constitution declares that oil and gas are owned by “all the people of Iraq in all regions and governorates”.
The Iraqi constitution is ambiguous on issues concerning the different powers of the regions and the federal government, especially regarding resource management, as a result of a compromise between different factions and groups.
A bitter political dispute is raging in Baghdad on this issue. Iraq’s parliament this week agreed to pass by Oct. 22 a Shiite-sponsored draft bill setting a mechanism for the establishment of federal regions, as stipulated by the constitution — but the law will only take effect after 18 months.
The Iraqi government is also drafting legislation to clarify how oil investment and revenues should be shared between the regions and to determine who exactly has the authority to negotiate and sign oil and gas deals with foreign firms. Iraqi sources say the committee in charge of drafting this legislation is divided over the latter issue, with no sign yet of compromise.
The publication of a new Kurdish constitution — which the Kurdish parliament started debating on Sunday ahead of a vote planned for Dec. 1 — also drew the ire of Arabs elsewhere in Iraq and provoked arguments in the National Assembly. The contentious document sets out claims to territory beyond the current provinces of Dohuk, Erbil and Sulaimaniyah, including Kirkuk province — heart of the northern oil industry — and parts of Diyalah, Nineveh and Wasit provinces.
The constitution establishes conditions for the Kurds to remain part of the country, stating that they have “chosen a liberal federation with Iraq as long as it respects the federal constitution, its federal, democratic and multiparty parliament.” The Kurds reserve the right to review this choice should the federal constitution be violated, particularly its democratic and human rights aspects, or if a federal constitutional article allowing a referendum on the future of Kirkuk is not respected.
Iraqi observers say the two sides are on a collision course, as the KRG edges toward the establishment of a de facto mini state, despite objections by the US and regional powers, including Turkey and Iran.
Iraqi President Jalal Talabani, a Kurd, recently drew anger at home and abroad by declaring that the US should maintain permanent military bases in Iraq to defend it against other states. The Kurdish regional president, Massoud Barzani, also provoked a storm when he banned the Iraqi flag from flying over public buildings in the Kurdish area. He also threatened secession from Iraq in response to criticism by the national Shiite Prime Minister Nuri al-Maliki.
By Ruba Husari, Dubai
(Published in International Oil Daily Sept. 29, 2006)