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

Until this year, oil exports from Kurdistan to Turkey occurred through road truck deliveries at a rate of 50,000 bpd. Construction was completed in late 2013 for a new pipeline linking the Kurdish Taq Taq field with Ceyhan port in Turkey. In November 2013 Turkey and Kurdistan solidified their relationship with an agreement which would allow the export of oil via this pipeline to Ceyhan port, commencing on 2 January. Baghdad and Erbil failed to reach a revenue-sharing agreement on this and on 23 May 2014 over 1.5 million barrels of oil was exported via tanker from Ceyhan port. This was followed by a second tanker on 10th June.

The agreement between Kurdistan and Turkey has been met with condemnation by the Iraqi government, which claims that all export deals must receive federal approval. The constitutional agreement between the federal government and the KRG details an 83:17 sharing of resources and national budget, however, articles 112 and 115 of the constitution state that the KRG has exclusive authority over oil and gas extracted in the region from fields that came into production after 2005.

The KRG claims that all of its current exports come from such fields. Nonetheless, on 23 May the Iraqi government requested an arbitration by the International Chamber of Commerce in Paris and seeks 250 million USD in financial damages. Recent tensions between Iraq and the KRG date back a number of months as Iraq has consistently paid approximately 10% instead of 17% of owed funds to the KRG.

Although the US, Israel, Germany, France and the Netherlands have all previously imported Kurdish oil, the internal dispute between Bagdad and Erbil has signified that neither of these tankers has been unloaded due to potential legal consequences. The dominant area of disagreement between Baghdad and Erbil rests in Kurdistan’s preference for Profit Sharing contracts with foreign oil companies, which allows them up to 20% of the profits versus Iraq’s preference for Service contracts, which only allow foreign companies 1% of the profits.

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!