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Baghdad Rejects Oil Revenues Mechanism Proposed by Turkey

Iraqi commandos survey Fauqa Oilfield in Maysan province. Photo: AFP
Iraqi commandos survey Fauqa Oilfield in Maysan province. Photo: AFP

By Samia Zuber

ERBIL, Kurdistan Region – Iraqi Prime Minister Nuri al-Maliki’s State of Law Coalition has rejected a Turkish proposal for an escrow account to monitor Iraqi oil revenues and resolve a pending payment issue between Baghdad and Erbil.

“Iraq is a sovereign country and it does not seek counseling from foreign countries for distribution of its revenues,” said Khalid Saadi, an MP from the State of Law Coalition. “Iraq has laws to settle these issues,” he added.

Last Saturday, Turkish Energy Minister Taner Yildiz proposed a mechanism to end the long-standing dispute between Iraq and its autonomous Kurdistan Regional Government (KRG) over the sharing of oil revenues. Yildiz said that he discussed the issue with Iraq’s Deputy Prime Minister for Energy Affairs Hussein Shahristani, but has not yet heard back from him.

“The distribution of the revenues would be carried out by Iraq, we would only hold these deposits at a Turkish state bank," said the Turkish energy minister.

Saadi said that Yildiz’s proposal would only lead to further deterioration of relations between Baghdad and Ankara.

After two years of strained relations over Syria, Sunni populations in Iraq and Kurdistan energy deals with Ankara, Iraq and Turkey mended relations earlier this month through exchange visits by their respective foreign ministers.

The Iraqi parliament has failed to pass the Hydrocarbon Law, which has been languishing since 2007 over disagreements between Kurds, Sunnis and Shiites.

Meanwhile, Farhad Atrushi, a member of the Iraqi parliament’s Oil and Gas Committee, expressed doubt that Baghdad would ever agree to Turkey's proposal. “Article 112 of the Iraqi constitution allows the KRG to run its oil affairs,” he argued.

That article of the Iraqi constitution allows the federal government, in cooperation with the producing regional government and governorates, to manage oil and gas extraction. It also allows the right to distribute revenues “in a fair manner in proportion to the population.”

Atrushi concurred with Saadi that the distribution of Iraqi revenues is an Iraqi internal matter, but believed that other stakeholders should be taken into consideration. “Undoubtedly, this is a domestic matter, but Turkey is still a party in this issue because Kurdistan’s oil pipelines go through Turkey. In addition, the biggest Turkish oil company has investments in Kurdistan’s oil sector,” he said.

Atrushi maintained that the Kurdistan Region should not be treated like another province. “The region has been governing itself for years,” he noted.

The KRG demands that Baghdad pay the fees for international oil companies operating in Kurdistan, which it says amount to $5 billion.

Over such disputes, the KRG has halted exporting some 100,000 barrels per day since December 2012 through Iraqi-Turkish pipeline that are managed by the central government.


Bill Lees | 20/11/2013
Why should Maliki care about obtaining more revenue for all Iraqis? His son has billions of dollars in real estate throughout the Saudi peninsula,and some relly nice Maseratis to drive around London and pick up the girls!They are living large in the Green Zone at times.
Wild Boar | 21/11/2013
This disagreement over oil revenue cannot go on for ever. I think the best course of action is to set up an independent commission with equal members of from Iraq and Kurdistan region to hammer out a proposal which then should be debated by both Iraqi parliament and Kurdistan parliament. If both parliaments agree on the draft or the amended version then it should be made to law.
FAUthman | 21/11/2013
Crrently there may be close to forty oil companies working in Kurdistan under PSC contracts with the KRG. Each will present individual production costs and profit figures for which they require payment. These figures need to be verified and accepted by the KRG alone, or jointly with Baghdad, before payments are made. Working jointly with Baghdad has been tried by Arbil but it has not worked, for Baghdad has continuously disagreed, legitimately or not, with Arbil`s figures. So far $5 billion in bills have accumulated but have not been paid. This is an accounting issue and will continue being a problem but with increasing complexity as more companies demand payment, as long as both Arbil and Baghdad have to agree on the payment figures in the absence of an independent auditor. That is where the U.S. needs to step in and help set up a payments mechanism that is equitable and efficient. The export logistics of oil and gas from Kurdistan and the accounting and disbursement mechanisms have to respond to the unique requirements of the individual PSC contracts made with the KRG.
Russel Check | 22/11/2013
@Wild Boar pointless, everything has been tried with Baghdad, they haven't' honored ONE single agreement, not even the constitution, that means that they will never honor any agreement in the future, it's the same mentality of Saddams era, they think they can dictate everything. I don't think KRG leadership are under any illusions any more, they know who they're dealing with. KRG next move should be to unite ALL anti Malaki factions and kick both him and his lapdog Sharistani from their thrones.
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