Kurdistan Oil Exports to Resume in February

Reuters reports that Iraq’s semi-autonomous Kurdish region of Iraq has agreed with Baghdad to resume oil exports from the start of February, the Kurdish prime minister Barham Salih (pictured) said, taking the two sides closer to resolving bitter disputes over oil and land.

Around 40 companies, such as Norway’s DNO, have invested in Kurdistan, but their revenues have been curtailed by being unable to sell their oil for export, because Baghdad has deemed the contracts they signed to be unconstitutional.

The news of a possible resumption in exports sent shares of DNO up as much as 6 percent on Tuesday.

The office of the Kurdish prime minister said in a statement on Tuesday that the resumption of oil exports from the region was agreed at a meeting on Monday with Iraqi Prime Minister Nuri al-Maliki.

There was no immediate confirmation from the Iraqi government, which said last May it had approved a deal with the Kurds and expected Kurdish oil exports to resume quickly. Exports remained blocked, however, while negotiations over forming a new government continued.

One of the other issues is the inclusion in Iraq’s draft budget for 2011 of a clause cutting the funds paid to the KRG if it does not export an average of 150,000 barrels per day this year. The budget has not been approved yet by parliament, and the proposed clause drove Kurdish lawmakers to walk out in protest on its first reading last month.

If oil exports resume from the Kurdish region, flows would be about 100,000 bpd and could reach 250,000 bpd by the end of the year, Kurdish officials have said.

12 Responses to Kurdistan Oil Exports to Resume in February

  1. […] to our report last week that oil exports from Iraqi Kurdistan will resume at the start of February, the Kurdistan Regional Government (KRG) […]

  2. Ahmed Mousa Jiyad January 24, 2011 at 9:10 am #

    Iraqi national interests and DNO conditional demands.

    Since the details of this agreement between the federal government and KRG have not been fully and officially disclosed it is not possible to assess properly the impacts and long-term implication of this agreement. However, the agreement represent an obligation on KRG to deliver, the 100,000 bd (down from 150,000 bd originally proposed) for 2011 budget otherwise its share in the federal budget would be reduced accordingly, and expectedly, proportionally. With smuggling of oil products from KRG to Iran almost ended (due to serious American pressure), and as information from MoO asserts this is also part of the recent agreement, KRG has now to depend more on the federal government in marketing oil produced in the region to ensure its share in the federal budget.

    Regarding payment to companies that have PSCs with KRG, information indicates that Baghdad ‘will not pay foreign companies their profits’ and further one assumes that the incurred cost of development to these companies would be paid only after checking and verification to ensure compliance with the norms acceptable for MoO. So it is not open ended, and these PSCs remain illegal, null and void in Baghdad long stated views.

    Today (http://www.upstreamonline.com/live/article242382.ece 24 Jan), the Norwegian oil company DNO International said ‘it will not start exports from its Tawke field in Kurdistan until the regional and central governments provide details about their agreement to resume exports by February.’
    Such announcement, whether initiated originally from DNO or the company was ‘instructed’ to do so by influential forces within KRG, is very problematic:
    First, DNO involves itself in a ‘sovereign’ issue that is so sensitive and politically charged, and could very well backfire on DNO.
    Second, it sets clear conditional demand on KRG, which if not met, almost 50% of the obligated oil delivery upon KRG would not be delivered, causing embarrassment and financial burden to KRG and harm to Iraq’s national interests.
    Third, when DNO request full disclosure of an agreement between federal and regional governments, then DNO should be requested to fully disclose the PSCs it had signed with KRG.
    Fourth, the statement by DNO saying ‘there was nothing else preventing DNO from opening valves in its Tawke field for pipeline exports to the west through Turkey.’ is unacceptable interference by DNO in the work of SOMO on how and where to export Iraqi oil.
    Finally, the refusal of DNO to deliver produced oil and its interference in Iraqi oil marketing matters could very well invoke the ‘termination’ clause of its PSCs with KRG.

    Ahmed Mousa Jiyad,
    Norway.
    24 Jan 2011.
    [email protected]

  3. Svempa January 29, 2011 at 1:33 pm #

    Ahmed, you write:

    “Third, when DNO request full disclosure of an agreement between federal and regional governments, then DNO should be requested to fully disclose the PSCs it had signed with KRG.”

    Please note that the PSC between KRG and DNO was fully disclosed several months ago by KRG, it is published on the KRG website.

    You also write:

    “Fourth, the statement by DNO saying ‘there was nothing else preventing DNO from opening valves in its Tawke field for pipeline exports to the west through Turkey.’ is unacceptable interference by DNO in the work of SOMO on how and where to export Iraqi oil.”

    This is a misrepresentation of the DNO standpoint, what DNO states is merely a matter of fact, not an interference in the political process.

    Finally you write:
    “Finally, the refusal of DNO to deliver produced oil and its interference in Iraqi oil marketing matters could very well invoke the ‘termination’ clause of its PSCs with KRG.”

    It is within the rights of DNO to refuse delivery of oil if DNO is not receiving compensation according to the PSC. Further, DNO has stated that it will cooperate to the fullest extent of its capabilities in order to start export of oil as soon as DNO receives permission to do so.

  4. Ahmed Mousa Jiyad February 3, 2011 at 9:17 am #

    Today 3 Feb I received from IBN email message conveying feedback from Svempa to my earlier comment. My response is as follows:
    1- I thank you Svempa for your comments, but who are you, and with whom are you working? Are you with DNO, or KRG or enlightened reader? In the sprite of openness and transparency I provided my full name, location and email address, in order to promote professional debate and exchange of thoughts.
    2- Yes, DNO agreement which you says was posted on KRG website was the one entered into force on March 2008. What about the ones of 2004 and 2005, where are they and what are their conditions? Moreover, the reasons behind posting 2008 agreement on KRG’ website could be the legal proceedings and investigations in Oslo and London, both legal proceedings and investigations involving DNO, KRG and its Minister. There are sufficient information and copies of documents on these two legal actions available online
    3- Svempa objected to/commented on my points Three and Four only and this implies that Svempa accepted my First and Second points.
    4- Svempa says, “It is within the rights of DNO to refuse delivery of oil if DNO is not receiving compensation according to the PSC.” First, I would ask Svempa to tell us which provision or article in the PSC gives such rights to DNO. Second, the original statement by DNO requested, “until the regional and central governments provide details about their agreement”, not “receiving compensation”. The two issues are totally different and Svempa seems to be mixing up. Third, the issue of “compensation according to the PSC”, which Svempa raises is linked to the legality of the PSC that has to be finally decided in accordance with the 2005 Iraqi Constitution and its interpretation by and only by the High Federal Court. Finally, by not objected to my points First and Second Svempa fall into clear contradiction.
    5- Svempa says, “This is a misrepresentation of the DNO standpoint, what DNO states is merely a matter of fact, not an interference in the political process.” I do not discuss “intentions” or endorses what Svempa describe as “what DNO states is merely a matter of fact”. When DNO statement says “exports to the west through Turkey”, the implications are obvious: EXPORT, to the WEST through Turkey, and this is clear intrusion on the sovereignty of the Iraqi state by DNO whose PSC has not even recognised yet by the federal government.

    Ahmed Mousa Jiyad,
    (Iraq Development Consultant),
    Norway.
    3 Feb 2011

  5. Svempa February 6, 2011 at 9:57 am #

    Ahmed, I appreciate your response. As to my identity I am (since 1998) a private oil and energy analyst situated in Sweden. For eight years I was on the board of Seabased AB (http://www.seabased.com), a Swedish alternative energy company, but last summer I declined reelection due to age and some health problems. I also initiated, to commemorate the death of the Swedish oil man Adolf Lundin in September 2006, the small (but growing) charity project Energiminnesfonden.se where I still am the chairperson.

    As to your point 2 the published PSC supercedes the older ones, so they are really not very interesting. And of course DNO cannot publish any contracts at all without the consent of the KRG. As to the reason for KRG publishing the 2008 PSC I am surprised at your lack of knowledge, your speculations are totally unfounded as it is well known why the KRG did this, I cite from the KRG press release of Jan 17 this year: “To demonstrate the extent of our resolve and readiness, we are publishing the contracts of the companies DNO and Genel, to facilitate discussions and to show the transparent nature of these contracts and their economic benefits for everyone in Iraq.”

    To your point 3, it should be obvious from what I wrote that I am absolutely not in agreement with points 1 and 2 in your previous comment.

    To your point 4, what I write is in accordance with common business principles – there is never an obligation to deliver if you do not get paid according to your contract. Obviously the KRG agrees with this since they did not intervene when DNO stopped producing in 2009 for this very reason (or perhaps KRG even ordered DNO to stop).
    When it comes to the legality of the PSC, it is legal since it follows the constitution of Iraq. And yesterday this was confirmed by prime minister Maliki, see http://www.kuwaittimes.net/read_news.php?newsid=MTkxODYxMDQ2 .

    To your point 5, DNO did clarify the statement you found controversial, see http://www.iraq-businessnews.com/2011/01/27/dno-clarifies-position-on-oil-exports-from-kurdistan/ . This has obviously been accepted by the authorities. So I can today see nothing that would endanger DNO:s position as an oil producing company in Kurdistan.

    If you have investors as clients I certainly hope you have not been advising them to sell DNO shares short, there is a high probability that the shares will increase in value the coming weeks, or even days :-)!

  6. Ahmed Mousa Jiyad February 7, 2011 at 7:40 pm #

    Svempa, I am willing to continue with this debate provided you adhere to minimum standard of civility, refrain from personal attacks and focus on the issues. That said, and considering your remarks “I am surprised at your lack of knowledge”, I suggest your search my full name on Google, Yahoo and Bing to see how accurate is your judgement.

    You say, “published PSC supercedes the older ones, so they are really not very interesting.”
    The Federal Government requested authentic copies of the signed PSCs since 2004, and its sovereign rights to have the authentic text of these contracts. By the way the new PSC, which superseded the previous ones was signed on 13 March 2008.

    This brings me to address the second issue.
    You write, “As to the reason for KRG publishing the 2008 PSC I am surprised at your lack of knowledge, your speculations are totally unfounded as it is well known why the KRG did this, I cite from the KRG press release of Jan 17 this year [2011]: “To demonstrate the extent of our resolve and readiness, we are publishing the contracts of the companies DNO and Genel, to facilitate discussions and to show the transparent nature of these contracts and their economic benefits for everyone in Iraq.”” (emphases italic added)
    Let us leave the issue of how much I know, only the readers will be the judge. But let me ask you: the new PCS was signed on 13 March 2008, and you confirm and cited KRG press release of Jan 17 this year, why this 22 months gap? Perfect transparency I suppose !! Finally, please read the following count of event regarding Oslo Stock Exchange case and London Arbitration case with web-links to find out my, as you put it, “speculations are totally unfounded” and pay attention to dates and years please:

    Document written by five officials from Oslo Stock Exchange Appeals Committee “BØRSKLAGENEMNDEN – SAK 4/2009”, which has 23 pages full of facts, dates, statements and texts of annual reports, letters and emails. The said document presented and published in a (.pdf) format, to avoid any text manipulation, with blue ink signatures of its five authors. It was a deliberated decision by an “appeal” body, which demonstrated it is a follow-up on a “complain” made by a plaintiff (DNO) against earlier decision imposed on it by another authority (Oslo Stock Exchange-OSE) that began the investigation as early as 21st Nov 2008; while the second is a “Statement” by “Senior Advisor” released one day after the Appeal report became public.
    Briefly, the Oslo Stock Exchange-OSE revealed information, documents and email messages which demonstrate that Mr. Hawrami, through direct contact with DNO Managing Director Helge Eide, had bought in October 2008 “43 873 960 shares at an “agreed to in principal” price of Norwegian kronor- NOK 4 per share.” The transaction was made through HSBC in London. According to the bank HSBC the order, worth 175.5 million NOK, was placed and paid by Mr. Hawrami.
    Due to the follow-up of the case by the Oslo Stock Exchange it become apparent by 6th April 2009 that the Turkish company “Genel Enerji” had acquired ownership of 4.8% of DNO shares, which it bought in the last quarter of 2008. The above percentage corresponds to the same number of shares transferred earlier to Mr. Hawrami account with HSBC.
    The Stock Exchange Appeals Board in its 23 pages verdict dated 17th September 2009 freed DNO from the charges of “inside trading” but upholds a fine on DNO of 942 228 NOK “For breach of the duty of disclosure in Exchange Act § 24 (7)”

    The case attracted wide international and Norwegian attention, and many in Norway consider this a clear corruption case and therefore asked for further action.
    Detailed information and related opinions were posted and are available on the websites of OSE, the Norwegian business newspaper (DN- Business Daily) and the US “Upstreamonline” listed below:

    http://www.oslobors.no/Oslo-Boers/Om-oss/Presserom/Pressemeldinger/Boersklagenemnden-DNO-International-ASA (In Norwegian)
    http://www.oslobors.no/content/download/33995/1157592/file/ig1.pdf (In Norwegian)
    http://www.dn.no/energi/article1744336.ece (In Norwegian)
    http://www.upstreamonline.com/live/article188967.ece?referrer=htmlemail&date=Fri%20Sep%2018%2013:38:40%20CEST%202009 (In English)
    http://www.dn.no/energi/article1744336.ece

    As for London arbitration, which started soon after Oslo Stock Exchange mentioned above. A British court has awarded between $55 million and $75 million to Peter W. Galbraith, the former United States diplomat who advised the Kurds during the negotiations on Iraq’s Constitution, and a Yemeni investor Shaher Abdulhak for their stake in a widely criticized oil deal involving Iraq’s rich northern fields, the oil company ordered to pay the award.
    The New York Times and the Norwegian newspaper Dagens Naeringsliv reported last year (2009) that during constitutional negotiations in 2005 that addressed, among other things, control of oil fields, Mr. Galbraith had been a paid adviser to the Norwegian oil company DNO, and that Mr. Galbraith had acted as mediator between DNO and the Kurdish government in talks that won the company a potentially lucrative contract to work those northern fields.
    http://www.nytimes.com/2010/10/07/world/middleeast/07galbraith.html?_r=1&ref=jamesglanz

    Incidentally, Shaher Abdulhak is the father of Farouk, who was accused of rapping and killing the Norwegian student Martine Vik Magnussen, in London 2008. Recent (Dec 2010) media reports and actions in Norway are surfaced again and gaining momentum regarding Farouk-Vik case, and thus more details could be uncovered.

    You write, “what I write is in accordance with common business principles – there is never an obligation to deliver if you do not get paid according to your contract. Obviously the KRG agrees with this since they did not intervene when DNO stopped producing in 2009 for this very reason (or perhaps KRG even ordered DNO to stop).”
    My question to you was specific related to the signed contract not “common business principles”. You are avoiding the real issue and answer the posed question. By the way there are ample statements that KRG stopped the production. I totally agree with you that a company has to get paid according to its contract, provided the contract is legal and valid. And this is the issue.

    You write, “When it comes to the legality of the PSC, it is legal since it follows the constitution of Iraq.” Who told you this? Did you read the constitution? Are you Constitutional Law recognised scholar?, etc. the two contesting parties: the Federal and Regional governments have different views on the legality issue, and under the constitution it is only the High Federal Court has the prerogatives of interpreting the constitution. However, the two contesting parties might “politically” find a way out, never the lese the legal uncertainty remains high unless all signed contracts (by the federal and regional governments) are approved by the federal parliament.

    You write, “And yesterday this was confirmed by prime minister Maliki”. Well, today this has been denied by the Deputy Prime Minister. See http://www.upstreamonline.com/live/article243818.ece

    As for DNO shares, you should know the volatility and sensitivity of the trading and the complex factors affecting them. Please look to today’s (7 Feb) trading, they disapprove your expectation.
    http://www.oslobors.no/markedsaktivitet/stockOverview?newt__ticker=DNO the sharp drop (at 14.30 onwards) was a reflection of the statement by the Deputy Prime Minister (who, unlike prime minister Maliki, speak perfect English) referred to above

    Finally, I am supportive of IOCs working in Iraq provided their contracts are approved by the Iraqi people, for the interest of the Iraqi people as enshrined in the Iraqi constitution. The only way for these contracts to be legal, valid and ensure the interest of the contracting parties they have to be approved by the federal parliament.

    Ahmed Mousa Jiyad
    7 Feb 2011

  7. Svempa February 9, 2011 at 10:05 am #

    Ahmed, thank you for your further comments. We obviously disagree on several points, but at least we are in agreeement on something. You write: “Finally, I am supportive of IOCs working in Iraq provided their contracts are approved by the Iraqi people, for the interest of the Iraqi people as enshrined in the Iraqi constitution.” and I could not agree more, possibly with the exception of the words “approved by the Iraqi people” since the contract we are discussing is between the KRG and DNO, and we cannot have a national referendum over such matters. It should be enough to state that the Iraqi people will greatly benefit from oil exports from the Kurdish provinces, and that such exports would have been impossible without IOC:s with production sharing contracts.
    You also write: “The only way for these contracts to be legal, valid and ensure the interest of the contracting parties they have to be approved by the federal parliament.” My comment is that it is not normal procedure to have business contracts approved by the parliament, this would be a very clumsy way to do business. But I do agree that there must be a certain cooperation by the federal government, since the federal government controls oil exports and collects the revenue from the oil sales, and that naturally means at least acceptance if not approval.
    This acceptance now seems to exist according to what Prime Minister Maliki has stated, and according to KRG sources the agreement was made on January 16 or 17, see http://www.indiareport.com/India-usa-uk-news/latest-news/992810/International/2/20/2 .
    However, as you note, Deputy Prime Minister Shahristani does not seem to share this opinion. Now, how important is that? Basically not important at all, the way I see it. Mr Shahristani is in many respects an admirable and competent person with great integrity, but he seems to have his own agenda and while he was Oil Minister, as you certainly know, he always denied the legality of the PSC:s that KRG had signed with now upwards of 40 different IOC:s. So it is no surprise that he still does that. And this has of course influenced the markets, who are very sensitive when risks of political turmoil seems to exist.
    This brings us to the Iraqi Constitution, naturally I have studied this document very carefully, it is not possible to have an informed opinion about oil contracts in the KRG area without doing so. Like you say, when there is doubt about any article in the Constitution only the High Federal Court can make a decision. But the Iraqi Constitution is well written and easy to understand, and very, very clear about who has jurisdiction over the oil and who can write contracts for exploration of new and existing oil fields. It even states that, in the case of new oil fields, if there is any conflict between federal law and regional law the regional law shall prevail.
    Now it is obvious that Mr Shahristani belongs to a faction that would like to see the Constitution revised, with more powers to the central government and less power to the regions. Probably his delaying tactics have been in hope of this coming true, but at present it is obvious that there is no political possibility of such a revision. And today Mr Shahristani no longer has the power to delay the acceptance of the KRG oil contracts, and I am sure he is aware of this and that his statement is for the benefit of his followers to demonstrate that he will do his utmost to prevent what in reality is inevitable, in fact it has already taken place. The only thing he has accomplished is that the Iraqi people have been denied several billion dollars in revenue during the almost two years when no oil has been exported from the KRG provinces.
    This is illustrated very well by the contents of this link: http://translate.google.se/translate?hl=sv&sl=ar&tl=en&u=http%3A%2F%2Finternational.daralhayat.com%2Finternationalarticle%2F232454 which is a Google translation of an Arabic original. I cite from the translation:
    “Bahr al-Ulum said in a statement to «life» that «the delayed export of oil from fields in the north of the country cost the state more than four billion dollars during the past two years».
    He added that «the federal government legally obliged to implement the recent agreement that was signed late last month between the governments in Baghdad and Erbil, during a visit Barham Saleh, who states that the SOMO to export oil to pay the Government Center as the Ministry of Finance of the Federal benefits foreign companies contracting with the territory».
    He called Bahr al-Ulum that «is not subject the process of running the country’s wealth to personal differences», called the Federal Oil Ministry to «resolve the dispute between the Council of Ministers, which signed an agreement with the Kurdistan Regional Government and the Vice-President of the Council (Shahristani) to take its independent according to its vision for the management of oil wealth».
    Link to original: http://international.daralhayat.com/internationalarticle/232454 .
    I see no need to comment the masses of outdated information you present about the arbitration process in London and about DNO:s dealings with the OSX, including the verdict of the Stock Exchange Appeals Board, which went in DNO:s favour except for a fine which I for one find wrong since DNO did disclose all relevant information they had in their possession to the markets. But it is of course a minor matter. And all of this is naturally well known to me, after all I have been following developments for several years now.
    Finally, I am curious as to why you write “I am willing to continue with this debate provided you adhere to minimum standard of civility, refrain from personal attacks and focus on the issues.” That is precisely what I have been doing all along, on rereading my posts I cannot find a single word that could be interpreted as being offensive in any way. If it is the words “I am surprised at your lack of knowledge” that you dislike I would like to point out that the statement applied to one single matter (the reason given by KRG for publishing the contract, which you apparently knew nothing about) and was not general, I am of course aware of your excellent credentials and distinguished career. But it seems even the sun has a few spots…

  8. Svempa February 9, 2011 at 11:51 am #

    One more comment, I detected an error in my earlier post, the date of the KRG press release where the reason for publicising the DNO PSC was given was Jan 17 2010, not this year. The link is http://hugin.info/36/R/1374229/336847.pdf .

  9. Ahmed Mousa Jiyad February 9, 2011 at 1:13 pm #

    It wouldn’t make any difference 2011 or 2010. As I wrote in my previous posting the “old” contracts are still (secret), and the question is why?, and the “new”, which superseded these old ones, was signed on March 2008, but KRG, as you said, posted it on January 2010. So the same question is why this disclosure after 22 months gap? Obviously this delayed (transparency) must have a reason, and the reason was related to the two legal cases of Oslo Stoke Exchange and London Arbitration, which DNO was involved.

    By the way DNO shares traded in OSE are down on the third day in a row!

    Ahmed Mousa Jiyad,
    Norway.
    9 Feb 2011

  10. Svempa February 9, 2011 at 3:10 pm #

    Well Ahmed, that was just an addendum. My main post is still awaiting moderation. Seems to take some time.

  11. Svempa February 10, 2011 at 9:09 am #

    My earlier post got lost somehow, let’s try again:

    Ahmed, thank you for your further comments. We obviously disagree on several points, but at least we are in agreeement on something. You write: “Finally, I am supportive of IOCs working in Iraq provided their contracts are approved by the Iraqi people, for the interest of the Iraqi people as enshrined in the Iraqi constitution.” and I could not agree more, possibly with the exception of the words “approved by the Iraqi people” since the contract we are discussing is between the KRG and DNO, and we cannot have a national referendum over such matters. It should be enough to state that the Iraqi people will greatly benefit from oil exports from the Kurdish provinces, and that such exports would have been impossible without IOC:s with production sharing contracts.
    You also write: “The only way for these contracts to be legal, valid and ensure the interest of the contracting parties they have to be approved by the federal parliament.” My comment is that it is not normal procedure to have business contracts approved by the parliament, this would be a very clumsy way to do business. But I do agree that there must be a certain cooperation by the federal government, since the federal government controls oil exports and collects the revenue from the oil sales, and that naturally means at least acceptance if not approval.
    This acceptance now seems to exist according to what Prime Minister Maliki has stated, and according to KRG sources the agreement was made on January 16 or 17, see http://www.indiareport.com/India-usa-uk-news/latest-news/992810/International/2/20/2 .
    However, as you note, Deputy Prime Minister Shahristani does not seem to share this opinion. Now, how important is that? Basically not important at all, the way I see it. Mr Shahristani is in many respects an admirable and competent person with great integrity, but he seems to have his own agenda and while he was Oil Minister, as you certainly know, he always denied the legality of the PSC:s that KRG had signed with now upwards of 40 different IOC:s. So it is no surprise that he still does that. And this has of course influenced the markets, who are very sensitive when risks of political turmoil seems to exist.
    This brings us to the Iraqi Constitution, naturally I have studied this document very carefully, it is not possible to have an informed opinion about oil contracts in the KRG area without doing so. Like you say, when there is doubt about any article in the Constitution only the High Federal Court can make a decision. But the Iraqi Constitution is well written and easy to understand, and very, very clear about who has jurisdiction over the oil and who can write contracts for exploration of new and existing oil fields. It even states that, in the case of new oil fields, if there is any conflict between federal law and regional law the regional law shall prevail.
    Now it is obvious that Mr Shahristani belongs to a faction that would like to see the Constitution revised, with more powers to the central government and less power to the regions. Probably his delaying tactics have been in hope of this coming true, but at present it is obvious that there is no political possibility of such a revision. And today Mr Shahristani no longer has the power to delay the acceptance of the KRG oil contracts, and I am sure he is aware of this and that his statement is for the benefit of his followers to demonstrate that he will do his utmost to prevent what in reality is inevitable, in fact it has already taken place. The only thing he has accomplished is that the Iraqi people have been denied several billion dollars in revenue during the almost two years when no oil has been exported from the KRG provinces.
    This is illustrated very well by the contents of this link: http://translate.google.se/translate?hl=sv&sl=ar&tl=en&u=http%3A%2F%2Finternational.daralhayat.com%2Finternationalarticle%2F232454 which is a Google translation of an Arabic original. I cite from the translation:
    “Bahr al-Ulum said in a statement to «life» that «the delayed export of oil from fields in the north of the country cost the state more than four billion dollars during the past two years».
    He added that «the federal government legally obliged to implement the recent agreement that was signed late last month between the governments in Baghdad and Erbil, during a visit Barham Saleh, who states that the SOMO to export oil to pay the Government Center as the Ministry of Finance of the Federal benefits foreign companies contracting with the territory».
    He called Bahr al-Ulum that «is not subject the process of running the country’s wealth to personal differences», called the Federal Oil Ministry to «resolve the dispute between the Council of Ministers, which signed an agreement with the Kurdistan Regional Government and the Vice-President of the Council (Shahristani) to take its independent according to its vision for the management of oil wealth».
    Link to original: http://international.daralhayat.com/internationalarticle/232454 .
    I see no need to comment the masses of outdated information you present about the arbitration process in London and about DNO:s dealings with the OSX, including the verdict of the Stock Exchange Appeals Board, which went in DNO:s favour except for a fine which I for one find wrong since DNO did disclose all relevant information they had in their possession to the markets. But it is of course a minor matter. And all of this is naturally well known to me, after all I have been following developments for several years now.
    Finally, I am curious as to why you write “I am willing to continue with this debate provided you adhere to minimum standard of civility, refrain from personal attacks and focus on the issues.” That is precisely what I have been doing all along, on rereading my posts I cannot find a single word that could be interpreted as being offensive in any way. If it is the words “I am surprised at your lack of knowledge” that you dislike I would like to point out that the statement applied to one single matter (the reason given by KRG for publishing the contract, which you apparently knew nothing about) and was not general, I am of course aware of your excellent credentials and distinguished career. But it seems even the sun has a few spots…

  12. Ahmed Mousa Jiyad February 11, 2011 at 3:56 pm #

    Svempa,
    First, probably you are the only one (except some KRG officers and their consultants) who claims the “the Iraqi Constitution is well written and easy to understand, and very, very clear about who has jurisdiction over the oil and who can write contracts for exploration of new and existing oil fields.”
    Many Iraqi and non-Iraqi legal scholars and professionals as well as Iraqi politicians (even some who had contributed to the drafting of the document) agree that the constitution was written in a very vague way to the extent that it can be interpreted differently. Selectivity of certain provisions of the constitution and the unilateral interpretation regarding, for example “jurisdiction”, “new”, “existing” and “filed” are misleading and intentional by KRG. On a personal note, in 1977 I spent two months with a drilling team of an oil-well in a field, which is now claimed by KRG!!!!!!!
    Many documents, studies, statements and positions are available on the constitutional matters, and how the constitution was written, and the influence by the American interventions, particularly Peter Galbraith (DNO again). I do not need to go further on this very complex issue, which many have written about, but to emphasise that the KRG interpretation of the constitution (which apparently you endorses) is one thing and the majority of well informed professional is another.

    Second, considering the significant of oil in the economies of the Middle East countries many such contracts of upstream petroleum development has to be enacted by Law in for example, Jordan, Syria, Iran, Kuwait and even Iraq (studies by ESCWA provide further details on this issue). This is why the majority of Iraqi legal and oil professionals (including myself), question the legality of ALL service contracts signed by the federal government (and of course by KRG). We rest our opinion on the current constitution and many laws that are still valid and enforceable.
    According to this body of legal regime upstream oil contracts have direct bearing on the sovereignty of the State over its natural resources, on one side, and petroleum is vital for development of current and future generations of the country. Hence, it is not fully accurate or even proper to treat them like any other “business contracts”, as you suggest. They are not.

    Third, for the Iraqis oil is politics and politics is oil. Politicians change their position and sometimes dramatically. Therefore, oil contracts would face great deal of legal uncertainties if they were based on political promises, especially if such promises were made by ONE MAN. What makes contracts even more vulnerable is the way they were concluded.
    ALL KRG contracts were not transparent and too much accusation of corruption and wrongdoing were raised about them even by Kurdish political parties. Moreover, since Iraq becomes an EITI member, the KRG contracts have to come clean on all and every payment made to KRG by foreign oil companies. This is now an obligation on Iraq as part of its ICI, the UN and IMF/world Bank. NOT even AlMaliki or any one else can violate such obligations, and this adds more legal uncertainty to KRG contracts. Finally, KRG has to submit details of all what it has received from oil companies to the Iraqi Supreme Auditing Council before receiving budget allocation.
    I have regular contacts with senior people including many who are cited by the international media. Some, as I said above, change their views 180 degrees depending on the political horse-trading. Through my very wide direct contacts and search on websites of MoO, CoM, and CoR, I did not find any confirmation that “the Council of Ministers, which
    signed an agreement with the Kurdistan Regional Government”, as you claim. Nothing at all was approved by the federal government or the Council of Ministers so far.

    Fourth, I referred to Shahristani because the market has reacted to his announcement as evidenced by DNO shares value. Your assessment of him is very similar to that of KRG and Hawrami in particular. He, Shahristani, might defend himself against your views, and as far as I am concerned I address issue and actions not personalities. And by the way, it is not only “Mr Shahristani belongs to a faction that would like to see the Constitution revised”, as you stated. AlMaliki and Ulum (mentioned by you), like many more others (including myself) would like to see the Constitution revised. Finally, as I wrote in a commentary for IOR, I think Shahristani could be more powerful than he was a minister.

    Fifth, the reasons I went at length regarding the DNO-involved legal cases in Oslo and London was in response to your assertion that my reference to the cases was, “speculations are totally unfounded”.

    Finally, as for my condition of civility, it was to prevent any possibility of degenerating the debate since you began by, “surprised at your lack of knowledge”. From my experience, as I regularly make commentaries in the international media and have good network of ca. 400 individuals (80% Iraqis), once such language starts it could easily develop into offensive tone and divert the debate from objectivity and professionalism.

    Ahmed Mousa Jiyad,
    Norway.
    11 Feb 2011
    [email protected]

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