The Exxon Mobil Bombshell

The following article was published on Monday by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

So far, conspiracy theorists alleging that American appetite for oil was the real factor behind the Iraq War – perhaps even in a plot intended to partition the country for the benefit of US oil interests – haven’t quite been able to fit their theory to the empirical realities. Until now, American companies have not been particularly prominent in terms of their involvement on the ground in “the new Iraq”. Also, generally speaking, most of the contracts of the IOCs signed with Baghdad come across as modest in terms of profit rates for the Western companies compared to what goes to Iraq.

Enter Exxon Mobil and its recent Kurdistan dealings. The story began in the shape of rumours last week but has now been confirmed by a sufficient number of sources that it can be treated as facts: Exxon has cut separate exploration deals with the Kurds, circumventing Baghdad and thereby potentially jeopardising its existing service contract with Baghdad for the supergiant West Qurna field near Basra. The move could also signify the entrance of “big oil” into Kurdistan after a period of “small oil” dominance (including, most recently, former BP chief Tony Hayward in his new role in Genel).

The bid comes at the most critical juncture imaginable. For the first time in the history of Iraq, the central government is threatened by federalism movements in both Sunni and Shiite areas, alongside the existing challenge from the established Kurdish region. Today saw further unprecedented moves in this direction in parliament where Usama al-Nujayfi, the speaker of the national assembly, organised an impromptu conference on federalism and decentralisation issues. The conference – attended by representatives of five Sunni-majority provinces and reportedly boycotted by the ten Shiite-majority ones – concluded with a statement that highlighted such broad issues as the constitutional right to form regions, the need to reform the provincial powers law of 2008 and even the question of the impartiality of the Iraqi judiciary.

Whether Prime Minister Nuri al-Maliki in this critical situation will bend to the pressure from Exxon Mobil and give up his policy of blacklisting companies that do separate deals with Kurdistan remains to be seen.

A consistent response would involve kicking Exxon out of its Qurna contract which is shared with Shell (which in turn has not concluded any deals with the Kurds). Maliki has so far been able to resist federalism initiatives from fellow Shiites in Basra and Wasit, and has recently indicated a possible judicial approach that could create delays for the latest Salahaddin autonomy bid. Maliki does not really enjoy the parliamentary backing required to act so boldly, but as long as his enemies are unable to sack him due to their own disunity there is plenty of room for manoeuvre for the prime minister regardless of the parliamentary situation.

If on the other hand Maliki does feel threatened by the growing number of unhappy oppositionists he will likely turn to deal-making with the Kurds in order to ensure his own survival. In that respect, bargains over oil may perhaps be an easier route than a sell-out on Kirkuk (which is certain to meet with opposition even in Shiite Islamist circles that are normally friendly to the Kurds). Taking a pragmatic approach to the latest Exxon deals in Kurdistan might be one aspect of such an approach.

The international dimensions of these developments are particularly hard to grasp. It seems remarkable that a company of Exxon’s stature should run such an incredible risk with West Qurna had there not been some kind of deal-making and assurances under the table. Could the move have been clarified with the Obama administration? Right now, it seems Washington cannot quite make up its mind as to whether to slap Maliki in the face or try to put a gloss on the whole situation. It is noteworthy that according to Kurdish sources, the deals with Exxon were signed on 18 October 2011 whereas 21 October was the date of Obama’s “total withdrawal” speech on Iraq. Would Washington really want to put all its eggs in basket of central-northern Iraqi energy when even the most optimistic scenarios for the Kurdish areas (including the projected Nabucco pipeline) dwindle by comparison with the south? The geopolitical risk of those fields falling under ever firmer Iranian control is certainly considerable.

The net effect of the Exxon Mobil dealings are easier to evaluate: They make Iraq look more fragmented, vulnerable and susceptible to foreign influences than for a long time.

One Response to The Exxon Mobil Bombshell

  1. Gaylan King 5th January 2012 at 18:36 #

    I worked as a businessman in Iraq from 2003-2007; I love the country and the people and look forward to peace and prosperity for both.
    I'm also a Geologist by degree and this whole piece strikes me as curious ( read- overly political) and I'm trying to figure out which faction it most serves.
    I pray factional politics play a less important role in such future decisions.
    Gaylan King