Baghdad’s Revenue-Sharing Deal: Avoiding a Kurdish Split

By Ruth Lux, Managing Director of political risk consultancy Strategic Analysis.

The security situation in Iraq has significantly declined over the last week. Mosul and Tikrit fell to the Islamic State of Iraq and the Levant (ISIS), an al-Qaeda off-shoot, and Tal Afar, in the Nineveh province, was seized on Monday.

Additionally, Baquba, only 37 miles from Baghdad, was briefly over-run by the militants. ISIS have engaged the Iraqi army in Diyala and Salahuddin provinces and reportedly now control up to 75% of the Baiji oil refinery, the largest in Iraq. This oil refinery is 210 km north of Baghdad and should the militants follow-through on their threat to cut off domestic oil supplies, an already fragile domestic situation will be exacerbated.

The Kurds have benefitted from this security vacuum and the Iraqi army’s inability to secure the country. They have moved their peshmerga forces into areas claimed to historically be part of Iraqi Kurdistan and are unlikely to withdraw. The presence of the peshmerga is undoubtedly securing oil-rich Kirkuk and the Mosul dam, which provides Baghdad with its water supply, however, some critics identify this move as opportunistic.

The deteriorating security environment in Iraq has also bolstered the Kurdish region’s position with regards to its’ revenue-sharing agreement with Baghdad. The Kurdish region has been eager to identify export routes for its crude oil and on 5th June Turkey and Kurdistan signed a 50 year oil export deal.  With Baghdad facing more pressing security concerns, the Kurdish region is unlikely to face the usual backlash entailed in acting without the authorisation of the federal government.

The Kurdistan Regional Government (KRG) has actively sought export routes for its crude oil and its latest oil export deal with Turkey meets this objective. Kurdistan has proven oil reserves of 45 billion barrels, with production capacity quickly rising and expected to reach 1 million barrels per day (bpd) in 2015, compared to the current level of 400,000 bpd.

5 Responses to Baghdad’s Revenue-Sharing Deal: Avoiding a Kurdish Split

  1. Ali 19th June 2014 at 10:19 #

    You believe it or not some Iraqi people believe that PM Al Maliki engineered the events in north Iraq. He ruled Iraq eight dark years. What did he achieve? In my own opinion absolutely nothing. Perhaps he hunted the old regime leaderships and excuted them after laughtable court trials. Did he solved the problem with the shortage of Electricity and Water. The answer is absolutely not. PM Al Maliki used to blame USA because USA did not sent him the military equipements which he bought it from USA. Could you tell me what PM Malikia will be going to say when all his military equipents fell in the hand of Walibi invaders!

  2. shackiraq 19th June 2014 at 13:18 #

    Ma. Luz has written an interesting article but, overlooked several important facts.

    "The presence of the peshmerga is undoubtedly securing oil-rich Kirkuk and the Mosul dam, which provides Baghdad with its water supply, however, some critics identify this move as opportunistic."

    Who are the critics? And why shouldn't the KRG send the Peshmerga to secure areas stolen from them through Saddam's Arabization program?

    Ms. Lux conveniently overlooks the fact that Maliki asked the KRG to rescue the Ninewa Governor which they did. Even though Maliki owes the KRG $6B in withheld oil revenue over the last six months.

    Who would Ms. Lux like to have in control of Mosul dam and Kirkuk? Isis or the KRG? Isis would likely blow a hole in the dam to flood Baghdad.

    Kurds, the KRG and Kurdistan are 15 to 20 years ahead of the rest of Iraq in their planning, organization, judicial system, governance, business development, economic growth, religious tolerance, and perhaps most of all in my view, Nationalism.

    Kurds have a great sense of Nationalism that the rest of Iraq does not have or enjoy.

    Old injustices to the Kurdish people are now being corrected. Has the KRG rejected Arabs who fled Mosul? No.

    The KRG, in my view, is duty bound to take every step required to first protect its people and lands. Second, the KRG should take every step needed to consolidate its power and influence under the Iraq Constitution approved by a vote of all of Iraq.

    The critics of the KRG are bemoaning the success of Kurdistan because the Arabs have failed to be inclusive. Those critics would have the KRG set silent while Kurdistan was overtaken by Isis and other terrorist. Complete and utter nonsense.

    Go Kurdistan!