Iraq’s new oil deals seen weakening Kurds’ hand
Thu Dec 17, 2009 9:44pm IST
* Deals may give Iraq enough revenue to block Kurd exports
* Row over Kurdish oil contracts part of wider dispute

By Ayla Jean Yackley
BAGHDAD, Dec 17 (Reuters) – Oil firms are betting that an eventual agreement between Kurds and Arabs will allow exports from northern Iraq, but the wager became more risky last week after Baghdad secured a host of major deals of its own.
The Iraqi Oil Ministry awarded leading global energy firms contracts to operate seven fields in the Dec. 11-12 auction, its second tender since the 2003 U.S. invasion.
The two bid rounds have yielded deals that may quadruple Iraq’s output, putting Iraq close to world oil leader Saudi Arabia and possibly giving the Arab-led government in Baghdad enough revenue to ignore exports from Kurdistan, held up by a row over who should pay the foreign oil companies working there.

Small firms including DNO (DNO.OL: Quote, Profile, Research), Genel Enerji and London-based Heritage (HOIL.L: Quote, Profile, Research) have struck production-sharing agreements in the largely autonomous northern Kurdish region.

While the Iraqi government brands deals signed unilaterally by Kurdistan illegal, it had earlier this year permitted Kurdish exports via its national pipeline in what was hailed as a step forward in Kurd-Arab relations and a sign of Iraq’s desperation to plug gaping budget holes on a steep decline in oil prices.

The agreement fell apart, though, when Baghdad refused to pay the foreign firms for their work, insisting instead that all oil revenues enter national coffers, from where Kurds could pay them from their regular 17 percent cut of the national budget.
Now Baghdad, flush with confidence after the auctions, will be even less inclined to make concessions, analysts said.

“The Kurdish position is looking weaker now, given the sheer magnitude of the production boost in the south that is underway,” said Reidar Visser, editor of http://www.historiae.org.

Oil Minister Hussain al-Shahristani, a critic of the Kurdish deals, said on Saturday contracts from the two auctions will earn Iraq an extra $200 billion annually in six years.

Oil now accounts for over 90 percent of government revenue, and more than two-thirds of Iraqi production is concentrated in the country’s south near the oil hub of Basra.

“Kurds have the ability to export 250,000 barrels per day. That is money for the federal government to count on, so there is no reason why export payments should be declined,” Ashti Hawrami, Kurdistan’s natural-resources minister, said recently.
But Shahristani doesn’t seem inclined toward flexibility. He has banned oil companies that do business in Kurdistan from participating in the government’s tenders.

LARGER DISPUTE
The row over oil contracts is part of a larger conflict between Arabs and Kurds about land and oil rights, including control over the oil-rich area of Kirkuk, which poses a major threat to Iraq’s stability as U.S. troops prepare to withdraw by the end of 2011.
The odds of rapprochement are likely to be even lower until after Iraq’s March 7 general election.

“I think a new political climate will develop after the election, and I am hopeful that these matters will be dealt with soon after the election,” Hawrami said in an interview.
Norway’s DNO, a trailblazer in Kurdistan, said last week it was no longer drilling there after exports were halted. Last month, Heritage, which made large finds in the north earlier this year, scrapped a planned merger with Turkey’s Genel Enerji.

Still, Kurdistan remains attractive to small companies unable to compete with oil majors for large reservoirs in the rest of Iraq, an official at a company that has signed an exploration deal in the north said on condition of anonymity.

“We don’t see this as a long-term problem, because in the end, if Iraq seeks revenue to improve the country’s welfare, it will sell its oil,” he said. “Until now there hasn’t been a country that says, ‘I have enough oil, I won’t produce more.’”
(Editing by Keiron Henderson)

http://in.reuters.com/article/oilRpt/idINGEE5B30FW20091217?pageNumber=1&virtualBrandChannel=0

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7 August 2009 – The Security Council today extended the mandate of the United Nations Assistance Mission for Iraq (UNAMI) for another year, and decided that it should continue to pursue its expanded role in the country. The Council unanimously adopted resolution 1883, “reiterating its support to the people and the Government of Iraq in their efforts to build a secure, stable, federal, united and democratic nation, based on the rule of law and respect for human rights.”

As set out in resolutions 1770 (2007) and 1830 (2008), UNAMI is tasked with assisting the Government in the areas of elections, reconciliation, the resolution of disputed boundaries, human rights and humanitarian concerns, as well as reconstruction and development.

In today’s resolution, the 15-member Council also called on the Iraqi Government and other Member States to continue providing security and logistical support to UNAMI, recognizing that the security of UN personnel is essential for the Mission to carry out its work.

Secretary-General Ban Ki-moon, in his recent report on UNAMI, said that Iraq is entering a crucial transition period, highlighted by its increased responsibility for its security and the national elections planned for next January.

It is also “potentially a time of opportunity” regarding the Iraq’s recovery and development, he added, citing momentum across the Government to tackle some of the country’s most entrenched socio-economic issues – unemployment, dilapidated infrastructure, corruption and poverty.

Briefing the Council earlier this week, Mr. Ban’s new top envoy to Iraq voiced cautious optimism as the country regains its sovereignty, while warning of potential dangers ahead.

“Although statistics tell the story of a downward trend in the overall level of violence, reality is still tainted by an unacceptably high level of indiscriminate attacks on civilians,” Ad Melkert stated, following his first visit to Iraq as the Secretary-General’s Special Representative and head of UNAMI.

Mr. Melkert cited preparations for national elections in 2010 and the issue of ethnically disputed areas, including oil-rich Kirkuk, as two of the most critical priorities currently facing the UNAMI in promoting long-term stability in Iraq.