The Long-Term Implications of Iraqi Kurdish Oil Exports

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kirkuk.oil.pipe.jpg
(Photo Credit: jamesdale10’s photostream)
More than six years after the United States invaded Iraq, Iraqi Kurds finally exported oil to Turkey for the first time yesterday.
The oil exports indicate two important developments.
First, Ankara has made a strategic decision to engage the Kurdish Regional Government (KRG) in Erbil, Iraq. It appears that at least for now the commercial opportunities for trade, investment, and energy supplies outweigh Ankara’s concerns that an independent KRG might encourage Turkey’s own restive Kurdish population to seek greater autonomy. (For more on relations between Ankara and Erbil, the Kurdish Globe published a very informative interview with Atlantic Council Senior Fellow David Phillips earlier this week.)
Second, the precipitous drop in the price of oil over the past year has forced Baghdad’s hand. Baghdad did not want to allow the exports, but needs the revenue to prevent further budget cuts. Baghdad will receive 88% of the revenues, with 12% going to foreign investors. Baghdad will then send 17% back to the KRG.
If Baghdad is going to enjoy most of the revenues, why does the decision to allow the exports represent a concession?
The answer is that the KRG is slowly building a case for increased autonomy and perhaps eventual independence. The exports increase the KRG’s value to Turkey, a country with large and growing energy needs. Furthermore, Iraqi Kurdish oil could potentially flow beyond Turkey into Europe, building a constituency for the KRG further to the west.
The other piece of this is that the act of owning, managing, and selling natural resources is a core state function according to international law.
The International Crisis Group, in its excellent 2008 report, Oil For Soil: Toward A Grand Bargain on Iraq and the Kurds, quotes an energy expert who explains that

The Kurds care about owning and managing the oil
industry more than about revenue sharing because
they want to establish sovereignty and build up a
record over time of examples in which the KRG
has exercised effective sovereignty and use this as
a basis for a claim of independence under international
law.

It will also be interesting to follow whether Iraqi natural gas flowing through the proposed Nabucco pipeline could eventually offer Europe an alternative to Russian gas.
More on that later.
— Ben Katcher

Comments

16 comments on “The Long-Term Implications of Iraqi Kurdish Oil Exports

  1. UGG Paisley Boots says:

    Kurdish regional government is slowly increased autonomy established in the case, and perhaps eventual independence. Increase exports to the value of the Turkish Kurdish region, a large and growing national demand for energy

    Reply

  2. Edward says:

    it surely can’t be compared to gas problems of Russia and Ukraine (interested in this I downloaded great articles by http://www.picktorrent.com search engine), but is rather unpleasant. still, everything is only about indepenence and power.

    Reply

  3. Target coupon codes says:

    I think as long as Kurdish independence is limited to the Iraqi side of the border, the Turks will probably get used to the idea, especially if they get to cash in on the transport of all those precious Kurdish energy resources.

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  4. Mr.Murder says:

    “17% to foreigners,” is that Chalabi’s nom de guerre is at this time?

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  5. ACWorld says:

    The Kurds – especially in Turkey – are going to play a dominant role in the near future as they control a great deal of the “prime” Iraqi real-estate. Asia Chronicle (www.asiachroniclenews.com) has been covering this for a while – good to see other people jumping on the bandwagon.

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  6. Ian Kaplan says:

    There was a news article a while back (http://www.washingtonpost.com/wp-dyn/content/article/2008/11/22/AR2008112202297.html) about the Kurds taking delivery of several C-130 loads of arms from Bulgaria. A steady flow of cash may mean that the Kurds will be purchasing more arms. Whether or not Iraq falls into civil war after the US leaves (assuming that the US is actually going to leave), the Kurds have a long bitter history with the rest of Iraq. The only way to protect themselves against a reoccurrence is to have a military that will protect them.

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  7. Ben Katcher says:

    Vulkan,
    This Jamestown article sources the KRG website and Al Arabiya for the 12% figure.
    Thanks for commenting.
    Ben
    http://www.jamestown.org/programs/edm/single/?tx_ttnews%5Btt_news%5D=35072&tx_ttnews%5BbackPid%5D=27&cHash=2f143dec0d

    Reply

  8. WigWag says:

    So let me get this straight. Alex_No (Jun 03 2009, 1:12AM)thinks a civil war in Iraq was more likely in 2006 when 130 thousand American troops were in the country (not to mention the British and a few other scattered members of the coalition of the willing)than it will be after the Americans leave. Given the recent uptick in violence, Maliki’s treatment of the Sunni Awakenings Movement, the trouble in Mosul, etc., this thesis seems bizarre.
    Overestimating the capabilities of the Iraqi army is a big mistake. It was only about a year ago that the Iraqi army(with all that great American training) thought it could take on Shia insurgents in the southern part of the country. The Iraqi army was thrashed by the insurgents and had to be rescued by coalition forces (along with Iranian pleas for the insurgents to exercise restraint). It was a humiliating defeat for Malaki and forshadowed events still to come in Iraq. And remember, the Shia in Iraq are still bitterly divided amongst themselves, the Sunni are largely leaderless while the two major Kurdish political parties have formed a sturdy and long lasting coalition.
    The idea that its only a “dream” of the Kurds that a civil war in Iraq is coming is incorrect. Alex_No may want to read what Peter Galbraith has had to say on the subject. Or even better he should read Tom Ricks (author of “Fiasco” and “The Gamble”). Ricks (who has a truly great blog over at Foreign Affairs) thinks things are falling apart in Iraq and thinks a civil war may very well be on the way. By the way, obviously neither Galbraith or Ricks are Kurds (neither am I).
    Both the Shia and the Sunni want to rule Iraq, the Kurds just want to exit stage left. My guess is that the Iraqi Kurds will get the last laugh. Not only would I not be surprised if they ended up with Kirkuk, I think its possible that they will even end up with Mosul.
    As long as the Kurds in Iraq don’t agitate for independence for their brethren in Turkey (who to be fair are terribly treated by the Turks)there’s no reason an independent Kurdistan and Turkey can’t have good relations. The Turks and the Kurds are both mostly Muslims but neither of them are Arab. Both the Kurds and the Turks practice a relaxed form of Sunni Islam and both the Turks and the Kurds have strong secular elements in their societies (although the Turks are not quite as secular as they used to be). Tied together by the possibility of become prosperous from the energy trade, there’s no reason this can’t be the start of a beautiful friendship.

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  9. Dave says:

    Hopefully Iraq oil will add some value to the development of the country and the people therin.

    Reply

  10. vulkan says:

    Ben,
    How do you know that 12% is going to foreign investors? What is your source for this information?

    Reply

  11. alex_no says:

    I think WigWag is a Kurd. At least he’s spouting KRG propaganda. That Iraq will fall into civil war (and then break up, one supposes) is the dream of the Kurds. If such a civil war was going to happen, it was in 2006. The danger is past now.
    I suspect Maliki may have taken the risk, because he estimates the danger from the Kurds has declined. They have not managed to get through much of their agenda recently.
    Not too much of a risk either. If the Kurds get uppity, all he has to do is to send in some false-flag saboteurs, and blow the pipeline up again.

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  12. PissedOffAmerican says:

    “Once the Americans leave Iraq all evidence points to the inevitability of civil war”
    Gosh, haven’t you heard about “the success of the surge”? Come on, Wiggie, get with the program. Everything is peachy keen in Iraq, man.

    Reply

  13. Ben Katcher says:

    Wigwag,
    That’s a good point. Thanks for commenting.
    Cheers,
    Ben

    Reply

  14. WigWag says:

    Ben Katcher says,
    “First, Ankara has made a strategic decision to engage the Kurdish Regional Government (KRG) in Erbil, Iraq. It appears that at least for now the commercial opportunities for trade, investment, and energy supplies outweigh Ankara’s concerns that an independent KRG might encourage Turkey’s own restive Kurdish population to seek greater autonomy.”
    This is probably right as far as it goes, but there may be another reason the Turks have acquiesced to Kurdish oil exports; they realize independence for Kurdish Iraqis is inevitable (whether they like it or not.)
    Once the Americans leave Iraq all evidence points to the inevitability of civil war. The protagonists will primarily be the Sunni and Shiite Iraqis who actually aspire to rule Iraq. Neither party to this civil war will be in a position to antagonize the Kurds whose support could tip the balance towards one side or the other. What the Kurds will want for their support is simple; they want out of Iraq. Their army, the Peshmerga, will be more than capable of protecting Kurdish interests against Sunni or Shia fighting forces depleted from fighting each other.
    When the Americans leave the current dispute between the Peshmerga and Iraqi army in Northern Iraq will dissipate as will the animosity between Sunni irregular forces and Kurds in Kirkuk. Instead the Sunni and Shia will turn their vitriol on each other and the Kurds will watch it all take place with glee.
    The Turks probably understand that if Kurdish independence in Iraq is inevitable they might as well get on board now and cash in on the gravy train that Kurdish oil and gas represents.
    Besides, the preliminary evidence suggests that the Iraqi Kurds (at least the Iraqi Kurdish government) has offered little or no support to the PKK and it wouldn’t be surprising if the Iraqi Kurds had provided actionable intelligence to help the Turks with there cross border attacks on the PKK.
    As long as Kurdish independence is limited to the Iraqi side of the border, the Turks will probably get used to the idea, especially if they get to cash in on the transport of all those precious Kurdish energy resources.

    Reply

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