Hopes for a resolution between Iraq, Turkey and the autonomous region of Kurdistan have stalled as Baghdad threatens to punish both Ankara and Arbil for “smuggling” oil out of Iraq, say news agency Reuters.
Kurdistan has often pulled against the reins of central authority, and even raised the prospect of secession from Iraq. However it is still heavily reliant on Baghdad for a portion of the country’s $100 billion-plus budget.
Baghdad has warned it will sever that lifeline if the Kurds export oil without its consent. The Iraqi cabinet this month approved a draft budget for 2014 that would slash the region’s share of state revenues unless it exports 400,000 barrels of crude per day via State Oil Marketing Organisation (SOMO).
That is well above Kurdistan’s current export capacity of around 255,000 bpd, industry sources say.
At Turkey’s Ceyhan, three storage tanks, each with a capacity of 2.5 million barrels, have been set aside for Kurdish oil, and industry sources say around 300,000 barrels have flowed into them so far.
The KRG has already issued a tender to sell 2 million barrels by the end of January.
The Kurds insist on selling crude independently of SOMO, which Baghdad says has exclusive rights to manage all sales of Iraqi oil.
SOMO officials have traveled to Turkey along with the head of Iraq’s state-run North Oil Company to meet the deputy energy minister.
Iraqi Oil Minister Abdul Kareem Luaibi said last week Baghdad was preparing legal action against Ankara and would consider cancelling all contracts with Turkish firms if exports went ahead, putting $12 billion worth of bilateral trade a year in jeopardy.
Kurdistan used to feed crude into a Baghdad-controlled pipeline to Ceyhan, but stopped a year ago due to a row over payments.
Since then, the Kurds have been trucking smaller quantities of oil to Turkey and collecting the revenues themselves, while laying their own pipeline, which was completed late last year.
Kurdish officials remain defiant after Baghdad’s recent threats.
“If Baghdad cuts the budget as they threatened, then Kurdistan has a lot of cards to play, not allowing the flow of oil from Kirkuk to Ceyhan is one of them,” a senior official in Arbil told Reuters on condition of anonymity.
It is not clear how the Kurds would prevent pipeline oil flowing from the Kirkuk oilfields to Turkey’s Mediterranean port of Ceyhan, but a stretch of it runs through their territory.
Another less provocative option would be to twist Iraqi Prime Minister Nuri al-Maliki’s arm before a parliamentary election due on April 30, in which he will need Kurdish support to win a third term or form a government.
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