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

Middle East analyst, James Gavin, comments:

In its long-running stand-off with Baghdad, Kurdistan urgently needs to secure a viable export channel for its crude. Turkey's willingness to load shipments of KRG-origin oil -- the second shipment dispatched from Ceyhan port on 9th June -- provides that outlet. The recent events in Iraq, with ISIS making sweeping gains, have left the Kurds in an even stronger position to dictate terms to prime minister Maliki.

"Yet the legality of the sales is still questioned, and a buyer has still not been found for the first tanker shipment. As yet, the Kurds have not found a long-term solution to their oil marketing problem -- even if in the crude calculus of Erbil-Baghdad relations, the Kurds are much better placed after Maliki's humiliation in Mosul”.

Pipeline exports to Turkey are being operated by Anglo-Turkish company Genel Energy and British Gulf Keystone Petroleum. Relations between the KRG and Ankara have steadily increased and the volume of trade between the two is approximately 8 billion USD, whilst three quarters of all Kurdish consumer goods come from Turkey.

The strengthening of business relations with Kurdistan has directly improved Turkey’s relationship with its own Kurdish population and assisted Turkey in its goal to reduce its reliance on energy imports from Iran and Russia. As the security situation worsens in Iraq, Ankara will undoubtedly become increasingly nervous as it considers how Turkey should support its ally.

James Gavin comments on Turkey's energy needs:

“Diversifying its energy imports is an important issue for Ankara, and it has long seen the KRG as a strategic source of energy supply to Turkey. But the sanctioning of the dispatch of Kurdish crude in storage at Ceyhan does not necessarily play into this agenda; it is, though, a means for the Turkish government to apply pressure on Baghdad, and to give its Kurdish allies material support”.

The security situation in Iraq is extremely grave. Coupled with the humanitarian crisis now facing Kurdistan as over 300,000 refugees have fled there from Mosul, an emboldened Kurdistan is now in a position to negotiate improved terms with Baghdad on the revenue-sharing agreement of its oil exports. Given the important role its peshmerga troops are playing in securing crucial strongholds in Iraq together with the relative security Iraq’s citizens can hope for within its borders, the possibility of Kurdistan acting increasingly unilaterally regarding its crude oil exports is highly likely.

Whether this independence lays the ground-work for Kurdistan to pursue its ambition of becoming a sovereign state in the coming months remains to be seen.

Strategic Analysis’s researcher Plamena Solakova contributed to this article.

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!