The Kurdish administration in Iraq must cease its unilateral moves to develop the region’s oil fields or face sanctions from the federal government, the director general of Iraq’s state company for oil projects (SCOP) has warned.
The authorities in the Kurdish north of the country must provide the federal government with “significant proceeds” or face “bad consequences,” Falah al-Khawaja told Emerging Markets on the sidelines of a conference in London.
The Kurdistan regional government (KRG) has inflamed Baghdad by frustrating efforts to sign a national oil law, which would govern the distribution of oil revenues to federal and local governments. The KRG instead passed its own regional oil law, and has also signed contracts with international companies, including Texas-based Hunt Oil in September this year. The regional authority aims to produce 1 million barrels of oil per day within five years in the Erbil, Sulaimania and Duhok provinces.
Kurdish officials blame the main Sunni and Shia factions in parliament for the failure to agree on a national accord, and argue that their unilateral drive to up the region’s oil output is vital for economic growth.
“We are not stealing the oil, it’s our oil, it’s Iraqi oil, we’re entitled to it,” KRG’s natural resources minister Ashti Hawrami has said.
But Khawaja argued that a national law is critical for national reconciliation, and such unilateral moves by the KRG were thus tantamount to a secession attempt. He also blamed the semi-autonomous region for creating “almost irreconcilable differences” between Iraq’s three main groups – Kurds, Shias and Sunnis – as well as hardening the political resolve of warring factions in the country’s parliament.
“The KRG is making places like Basra think ‘if the Kurds are going their own way, why don’t we pursue our own oil interests?’,” Khawaja said. He argued that Iraq’s main source of wealth must be “fairly balanced throughout the country” in order to heal ethnic and sectarian divisions - although he did not suggest a precise revenue-sharing formula.
He warned that foreign oil companies “could not have confidence” in their investments in the Kurdish north, since only a national oil law could set the terms for international investment. Regional governments such as the KRG “would not have the right to enter contracts with oil companies,” he added.
Frustrated by the political in-fighting, Khawaja said he is in talks to sign “virtual construction contracts” with international oil companies who would otherwise be repelled by the alarming security situation.
These deals would involve receiving technical assistance from foreign companies via video conferencing and remote computer modelling, but with Iraqis on the ground in charge of the construction efforts. He would not divulge information about the specifics, but suggested such a strategy would be used to develop a pumping station.