As Kurds gain power, Baghdad may be ready for oil deal

As the Iraqi Kurds boost their bargaining power with their first unilateral sale of crude oil on the international market, and new unilateral pipelines coming online soon, Kurdish officials and Baghdad have reached a tentative agreement to restore relations.

Last week, the Iraqi central government and authorities of the semi-autonomous Kurdistan Regional Government (KRG) put together a seven-point deal that could see the Kurds resume oil exports to Iraq in return for a revision of the Iraqi 2013 budget, which cut two-thirds out of the Kurd’s share.

On 1 May, KRG Prime Minister Nechirvan Barzani announced that the two sides had made headway in discussions on the issue following over a month of boycotts of the Iraqi parliament by Kurdish deputies over the budget discrepancy.

In January, the KRG halted exports of crude through Iraqi-government-controlled pipelines over non-payment of fees by Baghdad (to wit: $4.5 billion). Baghdad has refused to pay arrears for foreign oil companies operating on KRG territory, which the Iraqi central government says is a violation of the country’s sovereignty. (Related article: OPEC Falling Apart at the Seams) 

Baghdad attempted to hit back at the Kurds by stiffing them in the central budget. The new 2013 budget, passed on 7 March, gave the Kurds only $646 million of the $3.5 billion they requested. 

The provisional agreement between the Kurds and the Iraqi central government also attempts to resolve the question of the disputed territories, which lie between the two—most notably, Kirkuk, which is home to over 40% of Iraq’s total oil reserves.

The seven-point agreement promises to redraw the map of this territory, based in part on demographic changes and a census.

It comes as the Kurds deploy troops ostensibly to fill in a security vacuum in the disputed territories as sectarian violence flares as a result of the spillover of the conflict in Syria. In reality, the Kurdish peshmerga forces are guarding Kirkuk’s oil fields and wells.

What’s really happening here is that Erbil (the power center of the KRG) sees an opening, as Baghdad is being consumed by the chaos of sectarian violence that is threatening to turn into an all-out Sunni revolt and become a second front in the Syria conflict. Baghdad’s position is weakened, while the Kurds are only being strengthened. (Related article: Kurds Seize Oil Initiative in Iraq)

Unlike anywhere else in Iraq, Erbil is a center of stability, however corrupt. It is flourishing, and the talk is not of the rising unrest in Iraq, but of the peace deal between KRG benefactor Turkey and the Kurdistan Workers’ Party (PKK). What this heralds—at least for KRG President Massoud Barzani and his Kurdistan Democratic Party (KDP)—is an even stronger relation with Turkey. All of this is moving the KRG towards feasible economic independence.

What is often left out of this story on a mainstream media level is the clear division between Kurdistan’s two key political parties—the KDP and the Patriotic Union of Kurdistan (PUK), led by the Talabani family. While the PUK largely controls disputed Kirkuk and the eastern part of Kurdistan, Barzani’s KDP controls the west, and the lucrative border crossing with Turkey.

The KDP sees a chance for independence that is economically viable—and growing more so by the day. The PUK’s economic interests lie more in keeping Iraq together. So when we talk about Kurdish independence, this is a highly polarized notion, both politically and geographically. And talks with Baghdad falter on this point.

Original article: http://oilprice.com/Geopolitics/Middle-East/As-Kurds-Gain-Power-Baghdad-May-be-Ready-to-Deal.html