Slick

Iraq could simply make peace with the Kurds but opts instead to cut off all their money

January 16, 2014
January 16, 2014

The Iraqi government has raised the stakes yet again in its brinksmanship with Kurdistan—unable so far to halt the Kurds’s headlong push as an independent oil exporter, Baghdad has prepared a 2014 budget that entirely cuts off the northern region.

Baghdad’s move on Jan. 15 is a response to Kurdish plans to sell their first piped oil at the end of this month at Turkey’s Mediterranean port of Ceyhan, the first stage in an apparent strategy for wholesale economic independence from Iraq proper. With it, Iraqi prime minister Nouri al-Maliki raises the temperature not only on the Kurds, but also the foreign oil companies on which Kurdistan is relying—ExxonMobil, Chevron, France’s Total, Gazprom and a group of wildcatters.

Maliki said there will be no restoration of the Kurds’s $12 billion-a-year budget allocation until they produce 400,000 barrels of oil a day—worth about $14.6 billion a year at today’s prices. But the oil companies’ current plans do not yield that scale of production until well into next year. So to stave off economic mayhem this year, the Kurds will be lobbying both Maliki to see reason and the oil companies to up their game.

Baghdad’s escalation also places additional onus on Turkey, which has cut its own oil deals with Kurdistan and encouraged the construction of the independent export pipelines to the Mediterranean Sea. Turkish prime minister Recep Tayyip Erdogan has vacillated between fully supporting Baghdad’s suzerainty over all oil exports from Iraq, and allowing the Kurds to ship their oil with or without Baghdad’s permission.

We may not see a climbdown by either side until after Iraq’s April elections. Maliki is attempting to ensure Shia votes by displaying strength against the Kurds, the al Qaeda uprising in Anbar province and daily bombings in Baghdad itself (attack Jan. 15 pictured above). But he will eventually moderate his position since he needs the Kurds after the election in order to maintain the coalition government.

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