Strategic Implications for Northern Iraq’s Kurdish Oil Industry

Publication: Terrorism Monitor Volume: 5 Issue: 22

Iraqi President Jalal Talabani

Article 3, paragraph 3 of the Oil and Gas Law of the Kurdistan Region seems straightforward enough: “The Regional Government shall, together with the Federal Government, jointly manage Petroleum Operations … according to the provisions of the Federal Constitution” [1]. The law seems clear until one discovers that no comparable federal (meaning national) oil law has been passed and that the provisions within the federal constitution are still hotly contested by many quarters within the Iraqi government. The confusion has not only stalled oil exploration and production efforts, it carries a palpable security threat as well.

Despite opposition from the national government in Baghdad and its neighbors, the Kurdistan Regional Government (KRG) has refused to be held back by the indecision and infighting that characterizes the central government. They have charged ahead, passing their own Oil and Gas Law and forming four regional oil-related companies—the Kurdistan Exploration and Production Company (KEPCO), Kurdistan National Oil Company (KNOC), Kurdistan Oil Marketing Organization (KOMO) and Kurdistan Organization for Downstream Operations (KODO)—and signed seven new exploration deals with both Kurdish and international petroleum firms (Reuters, November 7). Kurdish officials claim they are well within their legal right to go forward with the exploration deals and that fears of the KRG monopolizing subsequent oil revenues are unfounded.

Iraqi President and Kurdish leader Jalal Talabani explained, “Regarding the Kurdistan region’s contracts, they do not deal with oil production and exploitation, but with the initial stage of oil exploration. When we reach the stage of production and exploitation, we need to go back to Baghdad in accordance with Article 12 of the Iraqi Constitution. Hence the Kurdish position is misrepresented… The Kurds have not made any demand to monopolize the oil and its revenues. We implement the relevant constitutional provisions and believe that oil and its revenues should be shared and distributed equally and fairly to all Iraqi regions without exception” (Asharq al Awsat, October 27).

Using Oil to Ensure Autonomy

Despite Kurdish protestations and assurances, the oil contracts are an obvious attempt to raise the KRG’s strategic and international profile, as well as a means of consolidating their current level of autonomy and relative prosperity. The Kurds have clearly stated that they will not allow indecision in Baghdad to hinder their hard won progress nor slow down any momentum towards economic development and regional autonomy.

But what Kurdish officials often fail to mention is that there are a host of other issues that impact Iraqi and regional opinion of the Kurdish oil contracts. Turkey, Iran and Iraq’s Sunni Arabs all cast a wary eye over the slightest movements towards Kurdish autonomy, however legal or justified they may appear. Given this ultra sensitive environment, the new oil contracts are as much of a security risk to the KRG as they are a potential boon to its economy and strategic profile. The central Iraqi government has already called the exploration contracts illegal and threatened to impose sanctions on any of the foreign companies involved in the deal, preventing them from any future work with the Iraqi state (Hayat, November 13).

Not only that, Iraqi Oil Minister Hussein Shahristani recently declared that any oil contracts signed with KRG officials are null and void. “The Iraqi government had warned these companies of the consequences of entering into these contracts, and the consequence is that Iraq will not allow these companies to extract the oil” (AFP, November 24).

It is not entirely clear how the central government plans to enforce this, short of stationing Iraqi military forces in Kurdistan, since KRG officials remain defiant and refuse to bow to Baghdad pressure. In a sharply worded official rebuttal, the KRG pledged to move forward with the oil exploration projects. “We are not deterred by Dr. Shahristani’s views. Experience shows that most international oil companies (IOCs) now ignore his unhelpful interventions. We know that the KRG is doing the right thing by encouraging the IOCs to invest in Kurdistan… We would like to remind Dr. Shahristani that we neither expect nor accept threats, sanctions and punishments from partners in our coalition government in Baghdad. The Kurdistan Alliance List [a parliamentary alliance of the PUK and KDP] is a partner in Iraq, not a rogue region to be threatened or punished… Empty threats and talk of blackmail will not last. We are sure that eventually common sense will prevail in dealing with these matters” (www.krg.org, November 20).

Accusing Shahristani of relying on Baathist and Saddamist frameworks, Kurdish leaders blasted Shahristani’s record and reminded Iraqis that oil found in northern Iraq will benefit all Iraqis because of the obligations drafted under the Revenue Sharing Law. The response of foreign companies involved in the oil exploration deals will likely resolve the rhetorical battle, but the disagreement between the national government and the KRG has greater consequences for regional security.

More pressing for the Iraqi Kurds, the oil deals threaten to exacerbate their fragile and historically hostile relationship with Turkey. Turkey has stationed thousands of troops along the border it shares with the KRG and has conducted limited incursions to flush out Kurdistan Workers’ Party (PKK) fighters hiding out in the Kurdish mountains. Turkey claims that PKK units operating out of Iraqi Kurdish territory have perpetrated attacks inside Turkey and accuse KRG officials of neglect or even collusion.

While the PKK presence in Iraqi Kurdistan is a pressing security concern, the long-term regional, particularly Turkish, worry is the growing autonomy of the KRG and the prospect of eventual Kurdish secession from Iraqi territory. In the current environment, the two issues are easily conflated.

Dispute Over Kirkuk

The recent oil exploration contracts also bring to mind Kurdish strategy in Kirkuk. In the minds of many within the region, and inside Iraq, the key to Kurdish independence lies with Kirkuk, where most of the oil in northern Iraq is located. Kirkuk is not under KRG administration yet, but the Kurdish leadership is doing everything within its power to ensure that it will be. The Kurds and the Turkomen both have historic claims to Kirkuk and want to rectify the injustice of the Arabization policy imposed on the oil-rich province by Saddam Hussein. No one denies, however, that Kirkuk’s oil resources are the main prize. The current territory under Kurdish regional administration contains only about 0.5 percent of Iraq’s proven oil reserves, while Kirkuk has 11 billion barrels of proven reserves (UPI, November 7). Iraq has a total of 115 billion barrels of proven oil reserves, though much of the country remains unexplored.

Therefore any Kurdish moves on Kirkuk are viewed with extreme suspicion. The referendum to decide whether Kirkuk should be administered under the KRG, scheduled to take place this month, has been postponed. If Kirkuk does eventually decide to ally itself with the KRG administration, Turkey will surely not sit idly by and let this happen. The Turks and Iraqi Arabs are already compiling evidence of aggressive Kurdish action in Kirkuk, such as Kurdish party officials paying Arab families to leave ahead of decisions by the Property Claims Commission and the re-settling of supporters of Talabani’s Patriotic Union of Kurdistan (PUK) and Massoud Barzani’s Kurdistan Democratic Party (KDP) in Kirkuk in advance of the referendum.

If Kurdish officials are demonstrating their defiance now in pursuing the oil exploration contracts despite Iraqi and regional opposition, Turkey, Iran and their Iraqi brothers will not be inclined to give the Kurdish leadership the benefit of the doubt when they claim they harbor no intentions to secede by claiming Kirkuk. But Turkey and other regional powers are not the only security threats to the KRG. Iraqi insurgents have also set their sights on Kirkuk.

In the latest attack, a suicide bomber targeted a top Kirkuki security official, killing five and wounding 20. As al-Qaeda and their supporters have been flushed out of Iraq’s al-Anbar province and many parts of Baghdad, they are traveling out, upwards and along the borders. Their presence is being increasingly felt at points north. The November 15 suicide attack in Kirkuk was just one of dozens, if not hundreds, of attacks on Kirkuk this year (Asharq al Awsat, November 16). The new exploration fields are a promising target to incoming insurgents and an increasingly violent indigenous Kurdish opposition to the PUK-KDP power monopoly in the KRG. A recent explosion at one exploration field, though it was deemed an engineering failure, was immediately thought to be the work of saboteurs (Hawal, October 27).

Conclusion

Though the Kurds insist the law is on their side with regard to the recent oil exploration deals, most of their neighbors and fellow Iraqis disagree. Kurds have achieved much since 1991—a certain degree of autonomy, influence within the Baghdad government, strong economic ties with Turkey and the support of the United States. But the continuation and progress of these achievements should not be taken for granted. They threaten to unravel if Turkish suspicion morphs into Turkish aggression or if future conflicts over oil devolve into civil conflict, erasing security gains in the KRG. But the achievements in Kurdistan did not come about without the Kurdish leadership taking risky decisions. Going forward with the oil exploration deals is a gamble they are apparently willing to take, but one not without dangers.

Notes

1. The Oil and Gas Law of the Kurdistan Region is accessible at: http://www.krg.org/uploads/documents/Kurdistan%20Oil%20and%20Gas%20Law%20English__2007_09_06_h14m0s42.pdf.