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Oil for soil: toward a grand bargain on Iraq and the Kurds


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B.Oil in Kirkuk and Other
Disputed Territories


Inflaming the debates over oil and the disputed territories is the issue of oil in those disputed territories, especially Kirkuk. “If Kirkuk had no oil, no one would fight over it”, said Qader Aziz, KRG President Masoud Barzani’s Article 140 envoy.116 Kirkuk has been fought over since Royal Dutch Shell found oil there in the early 1920s, coincident with the rise of the Kurdish national movement from the Ottoman Empire’s ashes.117 The Kurdish struggle for freedom from alien rule went hand in hand with a quest to make that freedom economically sustainable. While the Kurdistan region’s oil reserves might be sufficient to provide it with a great deal of economic self-sufficiency, the size of Kirkuk’s reserves would undoubtedly do so, increasing the stakes for everyone. Speaking of Iran’s and Turkey’s red line over Kirkuk’s incorporation into the Kurdistan region, a KRG official contended: “They see Kirkuk as a base for Kurdish independence. And we as Kurds also know that without Kirkuk we will not have a good future”.118

The Kirkuk “super-giant” oil field contains as much as 13 per cent of Iraq’s proven reserves (fifteen billion out of 115 billion barrels),119 though estimates vary.120 Like many of Iraq’s oil fields, however, Kirkuk’s has been poorly maintained (even mistreated), relies on outdated technology for extraction (vertical versus horizontal drilling), has been damaged by the re-injection of “dead” crude and saline water incursions and is rapidly depleting. Over time, in other words, its value and that of Kirkuk as an oil-bearing region will diminish.

Opinions are divided over the timeframe. Some claim that Kirkuk, like many current oil fields, will run out within twenty to 50 years.121 This has given Kurdish leaders ammunition for their argument that its oil is irrelevant to their quest for either Kirkuk or independence. In their view, the matter is moot, since they agree that under the constitution the KRG would be obligated to jointly manage the Kirkuk field with the federal government, if and when Kirkuk is incorporated into the Kurdistan region, and share revenues with all Iraqis. For example, Karim Sinjari, the KRG’s minister of state for the interior, contended: “Kirkuk is very important to us. It has nothing to do with oil. The oil question has been solved in the constitution. The oil fields would stay under the federal government regardless of whether Kirkuk joins the Kurdistan region….[Moreover], we have sufficient oil in the Kurdistan region for now to survive for years. Erbil is sitting on a sea of oil”.122

Others argue that the Kirkuk field is “unlikely to run out soon” and is “potentially one of the largest producing fields in the world”.123 Just as importantly, this perception, correct or not, is shared by Turkey which sees Kirkuk’s oil as a worrisome stepping stone toward an independent Kurdistan on its borders. Moreover, the notion that its oil will run out within the next few decades could be one reason why the KRG is in a hurry to incorporate Kirkuk (another being to capitalise on the KRG’s relative political strength in Iraq today), ie, before there is nothing left on which to build an independent state.

The Kirkuk field, which for now remains under federal government control, is proving its worth, after many post-2003 setbacks. Although it is still producing below capacity, this is mostly because of problems in protecting the 79-km pipeline from Kirkuk to Baiji (north of Baghdad), where it links up with the main line to Ceyhan.124 In early 2008, Kirkuk was producing an average of 600,000 b/d, about two thirds of its pre-war capacity, the majority (400,000-450,000 b/d) of which was exported via Ceyhan according to demand.125 The remainder was sent to Iraq’s largest refinery complex, in Baiji, for domestic market processing.126

A specific dispute has arisen over one part of the Kir­kuk oil field, Khurmula dome, which juts into Erbil governorate.127 In November 2007, the KRG awarded a service contract to build a refinery for oil derived from Khurmala dome to the newly established, KRG-owned Kurdistan National Oil Company (KNOC).128 Later that month and again in June 2008, the KRG’s guard troops reportedly blocked federal government workers from upgrading the field.129 The stakes are high, as the field could be producing as much as 70,000 b/d for local consumption. This could partly address the Kurdistan region’s pressing fuel needs once the refinery comes on-stream.130

The KRG has argued that because the field extends into Erbil governorate, it is inside the Kurdistan region rather than in disputed territory, so the Kurds have full rights to it.131 Moreover, the KRG says, the Khurmala dome has never produced and so is a new field over which the KRG should have full management rights under the constitution. Lastly, it argues, it should not matter whether the KRG or the federal government pumps the oil (and either exports it or, once a refinery is built, refines it and sells it on the local market); either way it would benefit the Iraqi people: “We are not stealing the oil”, Ashti Hawrami proclaimed. “It’s our oil; it’s Iraqi oil; we’re entitled to it. If Baghdad can do better, be my guest….Come work with us – no problem at all. But they cannot be coming here to stop us from doing it. That is not the spirit of the constitution or cooperation”.132

Iraqi officials dispute these claims. They argue that Khurmala dome is an integral part of the Kirkuk field, which is recognised to be part of the disputed territories and remains under the federal government at least until a settlement is reached. Moreover, they say, it is not a new but an actively producing field that has been pumping 35,000 b/d since August 2004; as such, it does not fall under the KRG’s exclusive jurisdiction per Article 112 of the constitution.133

The conflict arises out of the incendiary intersection of oil, territory and facts on the ground. As stated earlier, the definition of disputed territories is ambiguous and their location itself disputed. Could parts of the three Kurdish governorates be considered disputed? The KRG appears to argue not. “You show me the green line in the constitution”, said Ashti Hawrami, referring to the line of control at the time of the U.S.-led invasion in April 2003 that separated the Kurdistan region from the rest of Iraq, including the disputed territories. “You show me a green line that officially anybody signed on to. There are many green lines. But what counts really is what is currently under the KRG authority”.134

Yet, in other circumstances, the KRG has acknowledged that districts that were attached to Kurdish governorates as a result of Arabisation but previously belonged to Kirkuk governorate, such as Chamchamal (attached to Suleimaniya), should be restored to Kir­kuk,135 thereby contradicting the principle that land inside Kurdistan cannot be disputed. There are a number of fields, both producing and prospective, that either straddle or skirt the green line.136 This suggests that as long as the green line remains undemarcated, conflicts such as that over Khurmala dome will continue to arise.137

Indeed, another already has. It involves part of a concession given to Hunt Oil of the U.S. in an area of Dohuk governorate.138 Although the exact area of the awarded blocks remains unclear, the contract provoked controversy, because some said that one (K7, “Ayn Sifna”) protrudes from the KRG’s jurisdiction into disputed territories in Ninewa governorate.139 Hawrami has justified the contract by arguing that regardless of the structure’s precise location, revenues will accrue to the federal government and be shared fairly through its annual budget; the KRG’s actions would, therefore, not harm the federal government’s interests.140 Moreover, contracts issued today can be cancelled tomorrow (though presumably not without a cost to the government).

In the Ayn Sifna case, however, if the block does in fact extend into disputed territory, the KRG would be disregarding its own August 2007 oil and gas law, which prevents the KRG from issuing contracts in disputed territories without the federal government’s consent. Instead, it appears to be relying on an unapproved August 2006 draft, which entitles the KRG to manage oil fields in all areas claimed by the Kurds that are likely to join the Kurdistan region pursuant to Article 140.141

While the KRG may provide economic justifications for developing fields in the disputed territories and rationalise its unilateral policy by stating it would not adversely affect the federal government’s financial interests, its overriding motive appears to be to stake a claim to these areas, thereby prejudging their ultimate disposition. As such, the policy inevitably raises tensions. Matching the KRG’s unilateralism in kind, the federal oil ministry announced in early October 2008 that it was putting up for tender fields in disputed areas of Diyala governorate.142 Obviously, the federal government can make the same economic arguments (that it is not harming the KRG’s financial interest) and is further supported by the fact it has sovereignty in these areas at least until their status is resolved.

As the August 2008 Khanaqin events showed, territorial conflict can arise anywhere in the disputed areas, with oil playing an important factor, particularly as prospective field boundaries and their reserves become better understood. The oil potential of areas other than Kirkuk is unknown; very little new exploration, let alone development, has occurred there or in the rest of the country. Iraq never had the incentive to prospect for new fields when it had three giant ones producing the maximum allowed for export under its OPEC quota at the time. Nor has the potential been mapped. Oil is said to be present in at least Khanaqin,143 Makhmour144 and contested areas of Ninewa.145 Without progress in negotiations over the status of disputed territories, these areas will be flashpoints for future conflict between the KRG and the federal government.


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