Dialogue on Contentious Oil Issues in Iraq

In short, if this pipeline is seen as exclusive matter for KRG and Turkey alone then Iraq might see it as a move against Iraqi national interest; a violation of its sovereignty and a breach of the Constitution. This could prompt Iraq to pursue different legal actions under international law; under the bilateral agreements with Turkey; and under the Iraqi Constitution, Budget Laws and other Iraqi Laws (including customary law). Any legal action by Iraq would create significant degree of legal uncertainty and could put the pipeline and the petroleum it carries at significant legal risk, and put the involved parties at risk of committing felony and illicit trade.

Moreover, such a pipeline will give Turkey too much leverage over KRG and thus give Turkey strong position to extract the highest share of the economic rent of petroleum. Eventually, Turkey and the IOCs operating in Kurdistan could come out as the main winners while the Kurdish people get the smaller share of the oil-cake.

The operational and export revenues management matters complicate the issue even deeper, and the proposed “escrow account” managed by Turkish bank or entity would be out of the question for Iraq to consider, let alone accept. Iraq has just been freed from Chapter 7 and DFI requirements, and Iraq will certainly reject any new attempt to have such oil export revenues become under the tutelage, patronage or mandate of Turkey or any other external entity.

On the other hand if this pipeline is considered and used as part of the Iraqi pipeline network under the INES’ crude oil evacuation infrastructure, then it would surely benefits Iraq including KRG as well as Turkey. But, as I said in answering question 2, this depends on restoring confidence and good working relationship between the Federal and KR governments, and mutual adherence to the principle of the best interests for the Iraqi people as the Constitution asserts.

4: Does Iraq need to consolidate its economic policies in all parts of the country? Or does it have to be divided between Baghdad and Erbil?

AMJ answer on Q4:

The term “economic policies” is rather wide. However, the Constitution provides some guidance in defining the prerogatives, authorities and powers of the federal, regional and provincial governments pertaining to different economic issues, matters and policies. The Constitutional provisions pertaining to various economic policies should be translated into specific laws and operating modalities to implement such laws.

That said, regretfully and as admitted by many scholarly and professional observers as well as many Iraqi politicians the Constitution was written in such a vague language that permits different interpretation and more often than not even contested interpretation. Such ambiguity, different political interests, lack of mutual trusts among influential political blocks, and political immaturity, sectarian/ Muhasasa politics among others had contributed to prevent the enactment of laws pertaining to various economic matters.

5: You are aware that Iraq does not accept the agreements of Kurdistan government, but the oil companies are heading to Kurdistan, which side, Baghdad or Erbil is right?

AMJ answer on Q5:

The Iraqi government adopted Long Term Service Contracts-LTSC while KRG signed Production Sharing Contracts-PSC (probably except one).

LTSC model is a hybrid and mostly unique in combining some features of the conventional service contracts and some of the conventional PSC. KRG’ PSC follow known form used by countries. So the issue is not the “type” or “name” of contracts, rather it is the substantive components, conditions and the provisions of the contract and their implications.

The comparative assessment of the singed LTSCs and KRG’s PSCs would lead to one conclusion: the LTSCs give more to Iraq while the KRG’PSC is more attractive to IOCs. If one applies the Constitutional principle of “best interest for the Iraqi people”, LTSCs serve, in my views, the best interest of the Iraqi people more than KRG’s PSCs do. This is even correct if one considers the LTSCs for exploration blocks concluded under bid round four held by the federal ministry of oil.

As a matter of fact the “oil companies are heading to Kurdistan”, as your question puts it, fall into four categories: