As the Islamic State (IS) with the help of several Iraqi Sunni groups waltzed into Iraq seizing large swathes of territory, the goalposts in Iraq completely changed. Iraq as we know it ceased to exist.
Yet amidst the grave crisis in Iraq that Iraqi forces have failed to extinguish, Iraqi Prime Minister Nouri al-Maliki seemed more intent to turn focus away from the security nightmare and to increase the already wide gaps in the relations with the Kurds into an unsurmountable gulf.
Kurdistan Regional Government (KRG) and Baghdad have been at loggerheads for years over control of oil including revenue sharing and oil exports, however, matters took extra significance with IS breaking the status-quo.
Baghdad has threatened foreign companies dealing with KRG over oil for many years, but this has not stopped oil majors flocking to the region. Last month, Baghdad issued yet another statement threatening legal action against such foreign companies “Any company that deals with or handles the cargo, we will not deal with it…Any discharge authorities, any port authorities, any party at all dealing with the cargo coming from Kurdistan without approval from the federal government, the oil ministry will take action with them.”
Only this week, the United Kalavrvta tanker, carrying 1 million barrels of oil, was anchored in international waters off the port of Galveston, Texas, after Baghdad launched a petition to a US court to seize the oil.
The US judge could not take any action as it lacked jurisdiction. In the meantime, the KRG launched its own counter legal proceedings to the Texas court warning “There is no merit whatsoever to the allegations of the Ministry of Oil; to the contrary, it is the federal government of Iraq that has acted wrongfully and that will have to answer to the KRG’s substantial counter-claims.”
KRG Minister of Natural Resources, Ashti Hawrami, further warned “The federal government cannot win, because our crude is legally produced, shipped, exported, and sold in accordance with the rights of the Kurdistan Region as set forth in the Iraqi constitution.”
After Baghdad threatened foreign companies with legal action for dealing with Kurdish crude, a determined KRG had threatened to sue buyers of Iraqi oil on the basis that they are complicit in violating the Iraqi constitution with Baghdad failing to pay the KRG share of the budget.
Meanwhile, in light of the latest dispute, the United States has maintained the same out- dated rhetoric. U.S. State Department spokeswoman Jen Psaki stated “Our policy certainly has not changed; we believe that Iraq’s energy resources belong to the Iraqi people and certainly have long stated that it needs to go through the Iraqi government.”
Even as Iraq has unravelled before their eyes, the US has clung to an outdated belief in the unity of Iraq without judging the disputes between the KRG and Baghdad in its historic context and the changing realities on the ground.
Deputy Spokesperson for the US State Department, Marie Harf, recently stated “There is no US ban on the transfer or sale of oil originated from any part of Iraq…Our policy on this issue has been clear, Iraq’s energy resources belong to all of the Iraqi people. These questions should be resolved in a manner consistent with the Iraqi constitution.”
The US one-sided policy that favours Baghdad in the hope of preventing the collapse of Iraq, fails to acknowledge that the Iraqi Hydrocarbon law has been gathering dust on the Iraqi political shelves since 2007. Furthermore, fundamental articles in the same Iraqi constitution that US constantly refers to have been ignored or neglected since 2005.
The Iraqi constitution does not need to be negotiated, only implemented and the US should support the Kurdish view as they have not gone beyond the legal terms stated in the constitution and it is Baghdad that has been unlawfully withholding the KRG budget entitlement.
The key question remains, what resolution over oil rights can be applied between the KRG and Baghdad after years of disputes and protracted negotiations? Kurdistan cannot remain idle with no funds for months upon end waiting for sentiment to change in Baghdad.
The disputes have been hastened by IS but it often gets overlooked in international circles that the Kurdish share of the national budget, that Kurds allege now amount to $7 billion, have not been paid since January.
Tankers carrying Kurdish crude at times receive coverage like it is exported via the black market. This is the same crude that is pumped via official pipelines to the port of Ceyhan with full support of Turkey.
This is the same crude that would see Baghdad receive a lions-share (83%) under the terms of the constitution. The matter is not a lack of revenue for Baghdad but the strengthening of the Kurdish hand with their new independent oil infrastructure and economic self-sufficiency.
The buyer of Kurdish crude becomes the object of much controversy and mystery, which is especially ironic giving that Iraq, is engulfed in sectarian flames and since it was same marginsational policies that Maliki attempts on the Kurds that reignited the latest Sunni insurgency.
In a blow to the KRG, LyondellBasell, recently confirmed that it had purchased the oil off Texas but would not accept delivery of the contested cargo. Their statement fell in line with the rhetoric of Washington, “We have cancelled further purchases and will not accept delivery of any of the affected crude until the matter is appropriately resolved.”
However, ultimately as more oil tankers are prepared for shipping, the Kurds will not back down and export Kurdish crude cannot be halted. The road ahead will have its own fair share of bumps, but when the Iraqi constitution is judged on its own merits, not just on the basis of Baghdad threats and the economic embargo on Kurdistan by Baghdad is taken into account, even the US will fail to justify its actions against Kurdish oil exports.