2013-06-18T03:13:47-04:00 Shwan Zulal http://www.huffingtonpost.co.uk/author/index.php?author=shwan-zulal Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Shwan Zulal Good old fashioned elbow grease. tag:www.huffingtonpost.com,2013:/theblog//3.3287740 2013-05-16T14:54:39-04:00 2013-05-17T10:12:34-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
And it seems as though not a day goes by when oil in the semi-autonomous state of Iraqi Kurdistan doesn't make headlines, as huge discoveries of new oil fields are announced on a regular basis. And local drivers will often complain that, despite the apparent sea of oil under the ground in this region, they still have to queue for hours to fill their cars' tanks at petrol stations where government-sponsored petrol is sold.



Recently those queues have been getting longer and fuel prices have been rising. And as they have, the call for authorities in Iraqi Kurdistan to start subsidising fuel has grown. Local media picked up on the issue and two weeks ago, a petition was launched that called on government to bring fuel prices down somehow. Although the petition did not ask directly for subsidies, it did demand that the government of Iraqi Kurdistan intervene in the free market to bring prices down.

In the past, fuel has been a big problem for Iraqi Kurdistan as there were no refineries in the region. Most fuel came from outside Iraqi Kurdistan at a high price. But in recent years refining capacity has increased.

Iraqi Kurdistan has the capacity to refine about 100,000 barrels of oil a day and this amount is set to rise in coming years. Interestingly, while most of what is known as the upstream sector in the oil industry - that is, oil exploration and extraction - is dominated by international companies, the downstream sector - that is, the refining industry - is dominated by local companies in Iraqi Kurdistan. Partly this is due to local government policies and partly it's due to lack of necessary foreign investment in this sector.

And although the quality of refined fuels is often not of the best standard, locals involved in this business have managed to keep up with local demand, using a combination of their own products and imported product. There are no accurate figures as to how much oil Iraqi Kurdistan is currently refining - but the region is close to self sufficient.

Iraqi Kurdistan also gets an allocation of fuel from Iraq and because this is partially subsidised by the government in Baghdad, this is usually sold using coupons. At private petrol stations locals can just drive in, pay and fill up as they please without queuing but at gas stations where fuel from Iraq is being sold, they must queue with their coupons.
Additionally because of all the disputes between Iraq's central government and the authorities in the semi-autonomous state of Iraqi Kurdistan on, amongst other topics, how the oil industry is managed, the central government has been playing politics with its fuel coupons. Shortages have become chronic and large queues are the norm at petrol stations subsidised by the coupon system. Higher petrol prices in recent months have also put more pressure on the coupon system as more drivers have been inclined to use it.

The result of all of the above: public dissatisfaction and calls for fuel subsidies.

In actual fact, in some ways the Iraqi Kurdish government already subsidise fuel, selling it at less-than-market-value prices in order to keep the upstream sector activity going and create an environment conducive to investment in the refining sector. The Iraqi Kurdish move to sell crude at a lower prices is an attempt to keep cash flow for oil production and exploration flowing and to counter the effect of halted exports via Iraqi pipelines (halted due to disagreements between the federal government and Iraqi Kurdistan. However the benefits of this are barely passed onto the average citizen, which frustrates many.
Still, whether by design or not, the Iraqi Kurdish government's long term policy on fuel subsidies has been the right one. And this should not change.

So far the Iraqi Kurdish government has resisted the temptation to change current policy because they understand that fuel subsidies would be a drain on their resources and wouldn't solve the main issues the region is facing anyway. The Iraqi Kurdish region is far from fully developed; it still has a way to go in building its infrastructure and services before it can think about the idea of subsidies.

The way the region operates now could make a good case for the subsidising of heating oil. But subsidising gas-guzzling luxury cars is hardly a good reason. Take a country like Venezuela for example. In 2011, it spent US$27 billion on fuel subsidies, around 9 percent of its GDP. The subsidies mostly benefitted the well-off as they were the biggest consumers of fuel, with bigger cars and more opportunities to travel. Meanwhile only around 3 percent of GDP was spent on health in Venezuela and a slightly higher percentage was spent on education. A fuel subsidy like this has an unequal impact and may not provide the best solution for those calling for subsidies anyway.

It is also worth considering that the money the Iraqi Kurdish would spend on fuel subsidies could doubtless be better spent on more essential sectors for development, like health and education. And the fact that many don't understand that every barrel of oil coming out of Iraqi Kurdish ground can be sold for around $100 USD; a barrel subsidised is lost revenue for the region.

Additionally large fuel subsidies are usually a bad political sign, an indication that the government is trying to buy its electorate's satisfaction because it cannot provide that through democratic institutions or responsible governance. This has certainly been the case elsewhere. The idea of cheap fuel still appeals to everyone and for obvious reasons. It is clearly also the kind of decision that will win votes. However once subsidies are in place, it is almost impossible to wean the public off them. Other countries - like Venezuela and Saudi Arabia - that have done this are struggling to control their subsidies and change the situation

It seems as though this debate on fuel subsidies in Iraqi Kurdistan will become louder and all sides need to make sure they deal with this sensitive issue responsibly.
So what to do? Instead of subsidies, the government could take a bigger role in facilitating large, downstream projects like refineries. Local institutions and local government could also take a better, bigger role in explaining to the public how, and where, their oil revenues go as well as making sure the public understands that universal subsidies are a drain on public finances. The government could do better in making sure that the people who most need fuel subsidised were able to access it. And the opposition must resist the temptation to play political football with this issue.

First published on Niqash]]> tag:www.huffingtonpost.com,2013:/theblog//3.3279721 2013-05-15T13:46:23-04:00 2013-05-16T08:04:00-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
At the airport moment before boarding the plane bound to the US, the Turkish Prime Minister, Recep Tayyip Erdoğan, announced that Turkey has agreed a deal with the Kurdish regional Government (KRG) and Exxonmobil for oil and gas exploration in Kurdistan region of Iraq. The PM only made a brief statement but confirmed months' long speculations about the game changing deal.

The deal could involve more than half a dozen blocks which will be deifying Baghdad and against the wishes of the White House The Obama administration has so far sided with the central Iraqi government and expressed their concerns about a Kurdish -Turkish oil deal. The White House have also warned American oil companies about the dangers of doing business in Kurdistan, which has fallen on deaf ears and the two of largest US oil companies -Exxon and Chevron- have entered into contracts with the KRG.

It is clear that the short statement by Erdoğan was intended to make the Turkish position clear before heading to the US. Turkey has insisted and made it clear on numerous occasions that dealing with Kurdistan region and entering into oil deals are a matter of Turkish national interest.

Among all the other issues which will be discussed in the meeting with Obama, Syria being the main topic, the oil deal with Exxon in Kurdistan will be on top of the list.

While the White House has made its position clear on Iraq and Kurdish oil deals, American oil companies have ignored the warnings. Despite the uncertainty over the export and political wrangling, IOCs have opted to go to Kurdistan region and in the case of Exxon, risking a significant play in the south of the country. It is ironic that a Turkish PM will be briefing the US president about a deal with one of the largest US oil companies in the world and known to be very close to US state department.

The deal has an immense economic and political implication for all the regional players involved and it does even overlaps on the Syrian issue, given Kurds in Syria are going the same way the KRG has and have borders with Turkey as well as having and controlling oil fields in their areas.

The economic benefits for Turkey are very clear as Turkey is largely dependant on energy imports and seeks energy security and diversifications. However the political impact is more subtitle and long lasting.

What the deal means for the Kurdistan region energy industry and the region as a political entity is even more profound. The idea of a Turkish PM going to Washington and vouch for oil deals in Kurdistan region is in itself a big statement. Moreover, when the details are confirmed, it means that Kurdistan region can move from exploration phase into production and export.

The oil companies in Kurdistan have been anxious about the prospect of export while the dispute between Baghdad and Erbil has escalated. Export has been halted and even when they resume, payments were not made by Baghdad.

The lasts deal with Turkey will give KRG the green light to start making plans for export via Turkey to the international markets. Although such export will be vehemently opposed by Baghdad, there is very little Baghdad can do to stop it once agreed with Turkey. The payment mechanism and logistics of export will be challenging but the determination of Erdoğan to go ahead with the deal mean those issues will be ironed out quickly down the line.]]> tag:www.huffingtonpost.com,2013:/theblog//3.3118312 2013-04-19T15:50:55-04:00 2013-04-21T05:46:28-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
The candidates running for president have not put their names forward yet, apart from one independent. On the parliamentary front, it is almost confirmed that both incumbent parties, PUK (Patriotic Union of Kurdistan) and KDP (Kurdistan Democratic Party) will not be running on one List as they done in the past but run independently. The separate Lists may not be very significant as there seem to be an understanding that they will form a government after the election, very similar to the current arrangement, if they win.

Various reports suggest that the more left leaning PUK is keener on running separately as it feels that it is losing the vote from the younger generation if aligned to the conservative KDP. After months of negotiations between the two parties, they decided to go forward separately but keep the strategic agreement which they both signed after years of division and conflict. The survival of the agreement is a welcomed news and possibly essential at this stage for Kurdistan Region stability.

The main beneficiary will be PUK as it also hopes to attracted disgruntled PUK voter whom voted for Gorran (Change Movement) - a splinter group from PUK lead by former PUK deputy leader and now largest opposition party- in the last elections. KDP on the other hand is less happy with the arrangement because it would like to remain the number one party in Kurdistan and an increased PUK vote will dent its influence. PUK members are trying to distance themselves form, KDP, the opposite members are making sure the electorate knows that both parties will be in coalition after next elections.

Although the parliamentary elections appear to have been agreed on, the local elections are well overdue and there are two major issues rumbling in the background; presidential candidacy and the various constitutional concerns.

Gorran which is by far the largest opposition party wants the constitution changed and in favour of a parliamentary system in Kurdistan Region, curtailing the president's powers. PUK appears to support that position and their leader, Iraqi president, Jalal Talabani reportedly agreed with Gorran leader, Nawshirwan Mustafa to support the constructional changes but since Talabni fell ill, the proposals have not been discussed further.

The constitutional changes may take a back seat for now but the other constitution matter will be discussed. According to current Kurdistan Region presidential Law, the President is limited to two terms. Although at this stage it is not clear if Barzani will be seeking a third term, but given the rhetoric, it is likely. The argument by Barzani supporters seems to focus on the fact that the law was enacted while serving his first term, hence the first term does not count as a full term. This is fiercely disputed by the opposition parties and so far not clear what PUK's position is on the matter.

KDP's preferred candidate is the current president, Massud Barzani, but what is not clear is how the presidential candidacy will work given PUK and KDP are running separately in the parliamentary elections. The other electable option for KDP will be Current KRG PM, Nechirvan Barzani, although unlikely at this stage given the Barzani family dynamics.

The opposition are in the process of choosing their own presidential candidate and if they agree on an electable candidate, they could have a real chance; however, so far no credible candidate has emerged and sign of agreement.

The arrangement since 2003 has been that KDP will have a candidate for Kurdistan president and PUK will have Iraqi presidency. Currently all indications are that KDP will put a candidate forward, unless there is a change where KDP get the Iraqi presidency post given the uncertainty around Talibani's heath.

PUK are in disarray since Talabani fell ill as he was the glue binding the party together and if they have to choose a candidate, the only electable candidate will be the previous KRG PM, Barham Salih. Given the dynamics within PUK and internal disputes, PUK may choose to stay as it is, waiting for its leader to recover before making any major decisions.

The next few weeks and months will be a significant period in Kurdistan Region politics and the biggest test of Kurdish democracy. What happens in the next election and how it is handled by Kurdish politicians from all sides is crucial. Getting it right and following the spirit of the law not only the letter, will establish a strong foundation for Kurdish democracy, otherwise, if mishandled, it will uproot the fragile foundation.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2477492 2013-01-15T05:18:31-05:00 2013-03-17T05:12:01-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
After the recent ill-health and suffering from a stroke, Iraqi President and the PUK leader, Jalal Talabani has been out of the political scene and very much missed. This has prompted jockeying for position and lobbying by potential successors for both posts of Iraqi president and the leader of PUK.

According to medical sources the Iraqi president may not return to the political seen anytime soon as he is recovering in Germany. Given Talabani's history and his stature in the political arena in both Iraq and Kurdistan, all politicians have been careful when talking about succession. Although the best scenario would be for the president to get better and do what he is best at, the debate about who will replace him after he gives up his potion is an important one for Kurdistan and the future of PUK.

PUK was known as the modernising force in the Kurdish politics since its inception and Talabani gathered support from liberal Kurds since 1964 when broke away from the Kurdish movement and Mustafa Barzani, the then leader of KDP now been succeeded by his son Massud Barzani. His departure from KDP was because of ideological differences and his opposition to tribal structures within the political party, and his supporters largely followed him because of his new pluralistic ideas.

The absence of Talabani is the biggest test to PUK yet, even tougher than the separation of Gorran (Change Movement) lead by PUK co-founder and deputy leader, Nawshirwan Mustafa. Gorran took a large chunk of PUK supporters on the Left and now in opposition, enjoying large support in PUK strongholds.

PUK Has suffered from polarisation and infighting throughout its history but Talabani has been the glue binding the party together. The party's struggle in the past was between those on the left and right. Gorran changed that dynamic when the left splintered joining the new movement however the polarisation did not end there but shifted to a struggle between Centrist and the right, which has been dormant until now.

In the days after Talabani fell ill, speculation were rife about successors and many names were put forward. However it has emerged that only two candidates remain and they represent two different forces within the party. On the right, there is the Iraqi first lady, Hero Ibrahim and in the centre there is KRG's Ex-Prime Minister and PUK's deputy leader, Barham Salih.

The contrast in the choices could not be starker and they both have completely different style of leadership and represent different ideology within the party. Hero spent many years of struggle in the mountains fighting guerrilla warfare alongside of her husband's (Talabani) and she is known to be shrewd, politically savvy but a publicity-shy operator. She is the architect of the PUK public relation machine and very much controls PUK finances, with it the military wing.

On the opposing side, there is Barham Salih, who Joined PUK underground movement in late 1970's but left to the UK after imprisonment. He is an Anglophile who proved to be a very astute politician when serving as a deputy Iraqi PM and KRG PM. He is liked by the public both in Iraq and Kurdistan, especially among the younger generation. He is a pragmatic Centrist, and his business friendly policies have enabled Kurdistan region attract more investment-especially in the oil sector- during his premiership.

Hero Ibrahim appears to be in pole position at this stage as she has always been one of the driving forces behind Talabani and many commentators consider Salih the underdog, largely because he is seen or portrayed as an outsider by those on the Right of the party.

PUK is at a critical juncture because neither side can work without the other. The Right controls the military wing of the party and the centre controls the soft apparatus of the party which can win it votes.
Not getting bogged down in the details of who is with whom and what if, the contrast in the choice is very clear. Go for the old PUK and have the veteran of the struggle against Saddam Hussein run the party with more of the same or have the new face of politics and a leader who can deliver change and try give PUK its old identity back, making it electable.

It is natural for the competing parties and opposition like Gorran, to support the old guard as a first choice to lead PUK because it will be easier for them to tell the narrative of change and reforms to the electorates and portray PUK as the tired old party. Moreover, although KDP has a Strategic Agreement with PUK, they would be very happy with a weaker PUK and would naturally support the conservatives.

Hero Ibrahim's advantage is her current position of being in control. She contrles the PR machine and well respected within party leadership. She enjoys the support of many on the right of the party but not so much on the left or centre. Rightly or wrongly, she had bad press for many years and that has made her a very divisive figure. She will have a difficult job filling Talabani's shoes and become the unifying figure PUK needs.

Barham Salih has the advantage of being the only candidate which is palatable to almost everyone apart from his rival and the party knows that but some are holding their cards tight to their chest. He is also a popular figure who can take supporters away from Gorran, by appealing to the younger generation. When leading the KRG, Salih proved that he is capable of institutionalising government and PUK is very much in need of such reforms to ensure its survival.

Steering PUK towards KDP format will not be sustainable in the long run as the parties have different support bases. Furthermore; it will lead to more polarisations and the real possibility of Salih or others breaking away from PUK forming a new political party or joining an existing one taking much needed supports away from PUK. Furthermore; the leadership must have an eye on the next election when considering the future direction.

The pattern which is becoming clear is that neither candidate has the luxury of going it alone and they both need to work with one another to preserve PUK, if they think it is worth saving. Barham Salih does not have the full backing of the leadership but has the intellectual capacity and what it takes to face the new challenges PUK facing and the region as a whole. Hero Ibrahim is not as popular and will find it difficult to succeed Talabani because of accusation of nepotism and she is best at operating behind the scenes, but has the advantage of controlling the hardware of the party and the good will of being who she is, as well as been known as a doer. Therefore unless a compromise is found between these two different candidates, the future of PUK will remain uncertain.

Jalal Talabni is needed as ever and hope he will be back in action soon, but as he acknowledged himself, age has its limitations, therefore those making the important decisions about the future of the party he built, must remember what he stood for.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1918319 2012-09-27T04:22:42-04:00 2012-11-26T05:12:02-05:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/

The Future of Iraqi Kurdistan: Between Survival & Independence
Moderator
İhsan Dağı, Editor in Chief, Insight Turkey
Speakers
"Turkey, the US and the KRG: Moving Parts and the Geopolitical Realities"
William Park, (Kings College, London)
"Democracy or Partition: Future Scenarios for the Kurds of Iraq"
Burak Bilgehan Özpek, (TOBB ETU University,Ankara)
"Survival Strategies and Diplomatic Tools: The Kurdistan Region's Foreign Policy Outlook"
Shwan Zulal, (Politicial Analyst & Energy Consultant, London)

Economic development
The KRG has been to trying to create an environment conducive to investment in order to attract foreign investment and create strong bilateral relations leading to strengthening multilateral partnerships with allies and neighbours that has been hostile to the Idea of Kurdistan.
By adopting investor-friendly policies, the KRG has managed to attract multinationals and oil Majors leading to a rapid economic development. The policy of looking outward has made the Kurdistan region an attractive place for investment which earned it many friends around the world.

Turkey has been and is the leading trading partner and investor as Turkish companies are thought to make up 55 percent of all the foreign companies operating in the Kurdistan region and annual trade is reported to be more than US$4 billion.

As more oil is discovered, Kurdistan region now has the potential to become an important and reliable source of energy for Turkey in particular and to the global energy market.

The KRG has been utilizing oil to its advantage when conducting diplomacy. Through oil, they have managed to form alliances and lobby politicians abroad. Oil and gas will and has been playing a leading role in the KRG's foreign policies. For example, oil has already been used to form alliances with Turkey.

Iraq's main revenue comes from oil, therefore it not surprising that there is a standoff between Baghdad and Erbil over oil policy and revenue sharing. Baghdad wants to centralise power and have full control over the hydrocarbon resources. Meanwhile the KRG sees oil as a tool to enhance its autonomy and use it as a tool to strengthen its influence in the region.

Kurdistan region oil policy has been successful. Attracting oil majors has been pivotal in putting Kurdistan region on the world energy map. Kurdistan region President likened the presence of ExxonMobil to having 10 US military divisions, meaning an oil giant like ExxonMobil, which represents US interest, will act as a security buffer for the region.

Although the KRG has been rather successful and oil policy has contributed to a successful foreign policy, this has come at a cost of domestic policy. While the KRG has rightly enhanced its diplomatic influence in a challenging geopolitical environment, domestic politics has taken a back seat. The political parties influence still overpowers the KRG and Parliament, which has led to a chronic mistrust from the public and an unhealthy political rivalry. The tense political atmosphere has led to delays in decision-making and political polarisation endangering the unity of purpose for the political factions in Kurdistan, which is vital to the survival of the region.

Independence
It is true to say that the KRG still stresses the unity of Iraq and would want to be part of Iraq. This pragmatic approach is multidimensional. The KRG needs 17% of the Iraqi budget to sustain the current economic growth and development. While the government income is heavily reliant on oil export, the Kurdistan region will be at a disadvantage if it decides to go it alone and separate from Iraq at this stage, given the infrastructure limitation. Furthermore, there is the geopolitical dimension of a possible Kurdish state which neighbouring countries would object to for obvious reasons. The KRG have been known as kingmakers in Iraq. This may no longer be the case, but they are still very influential. Secession from Iraq will increase Kurdistan's reliance on Turkey for imports and exports at the same time and make it almost a vassal state, in which Kurdistan will lose its influence and become a junior partner in the relationship.

Relations with Turkey
The Kurds in Iraq understand that the AKP has been pursuing a multifaceted approach towards transforming its relations with the Kurds in the Kurdistan region and in Turkey through extensive trade and investment. The KRG on the other hand has been trying to act in parallel of this policy and become a partner, both politically and economically. Erbil's intention has been to use its shared cultural and religious heritages as well as economics, primarily in the hydrocarbon sector, to enable it exercise a degree of influence over Turkey by enticing Turkey with commercial interests.

And now the KRG is taking advantage of the religious dimension of this relationship too, as Kurds and Turks are both largely Sunni Muslims. Although not very relevant in the past, the emerging regional sectarianism which is playing out in Syria is making the differences more relevant. Moreover, KRG's good relations with Turkey is also been encouraged by the US, for strategic region given what is happening in relation to a Shiite Iran.

Today the relationship between Turkey and the KRG has developed beyond anyone's imagination, reaching its peak last year when Turkey's prime minister, Erdoğan, visited Kurdistan region. There is a debate about the meaning of this visit. However, to me it is a clear vote of confidence in the KRG and recognition that Kurdistan region does matter to Turkey and will play a role in region. New oil trade be it on a small scale and talks of new oil and gas pipelines going through Turkey directly from the Kurdistan region in spite of Baghdad's vehement opposition, is a clear indication of the strengthening ties.

The energy trade is an important element in the relationship. Turkey's economy is growing rapidly and economic growth requires energy. Turkey imports most of its energy needs, making it largely reliant on gas imports by pipelines from Russia, Azerbaijan and Iran. Moreover Turkish gas demand is set to double and the need for diversification and new suppliers is apparent. The Kurdistan region has the potential and the willingness to fill the gap, hopeful that by providing energy security and diversification to Turkey, they would receive more political recognition.

If Kurdistan region becomes a stable source of energy to fuel the Turkish economy, KRG seeks to become more self-sufficient and independent while giving Turkey a leverage when it comes to negotiating energy deal with others. This will also make Turkey more influential in Kurdistan region as its income will largely depend on oil and gas exports going through Turkey.

The KRG knows that Turkey is possibly the only reliable, or perhaps the most reliable neighbour. If the outstanding issues, which all culminate in the Kurdish question in Turkey can be resolved, the partnership could work much better.

The Kurdish question
The ongoing Kurdish issues in Turkey is one of the main barriers in further developing the relationship. On the one hand, the Turkish establishment largely denies the identity-based political rights of the Kurds; while on the other hand, the Kurdish public is sceptical of the intentions and motives of any Turkish government.

The KRG see its role as a mediator; persuading the PKK to lay down their arms in return for the Turkish government granting more political rights and autonomy for the Kurdish population in Turkey. The KRG also believes that Turkey has limited options but to use the Kurds in Iraq to peacefully solve the long-standing issue of the Kurdish population in Turkey. At the same time, the KRG realizes the importance of energy to Turkey and hopes that Turkey's economic interest will override its frivolous stance on the Kurdish question.

While the KRG has been upbeat about the prospect of a Kurdish-Turkish partnership, they are aware that, Turkey like any other country has its internal politics to deal with. It also recognizes that AKP party has made progress therefore wants to be part of the solution. Therefore KRG's intention has been to help the AKP party to enable it resolve the Kurdish issues in Turkey. Not only because of the geopolitical and security reason but because if they don't and the political landscape changes in Turkey in which the Kurdish issues becomes politically unappealing for AKP to fight elections over, moving more to the right. The result will be more violence and only extremist voices could be heard from both sides, jeopardizing any progress made.

The paper: Survival Strategies and Diplomatic Tools: The Kurdistan Region's Foreign Policy Outlook can be found here ]]> tag:www.huffingtonpost.com,2012:/theblog//3.1902984 2012-09-21T08:22:01-04:00 2012-11-21T05:12:01-05:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
Since then more large oil companies have joined ExxonMobil in the autonomous Kurdistan region, including Total, Chevron and Gazprom. While harsh language was used against ExxonMobil, Chevron and Total, Russia's Gazprom has not been on the receiving end of threats from Baghdad. Although sending the message it is plotting revenge, Baghdad has done little since its initial warnings.

Baghdad and Kurdish regional government (KRG) have been at loggerhead over oil policy and the rights to grant exploration licences. The KRG believes that the constitution allows it to control and manage its oil and gas industry but the Central Iraqi government disagrees and believes only the central government has the authority to do so. In the process the dispute has led to oil companies operation in Kurdistan region been blacklisted by Baghdad and crude export from Kurdistan Region halted.

A deal has emerged last week, between the two sides to resume production from Kurdistan region and Baghdad pay the cost for the oil companies in Kurdistan. However the deal would need to be ratified by both Kurdish and central government council of ministers. Moreover; a similar deal was brokered by Kurdistan region previous PM, Braham Salih, in 2011 but Baghdad did not make the payments and production was halted once again until last month, resuming as a gesture of good will by the KRG, to break the deadlock.

The deal will benefit both sides enabling Kurdistan region accelerate expanding its oil sector and Baghdad increase production to historical highs. Kurdistan Region has no independent pipeline and the only route is through Baghdad owned Kirkuk-Ceyhan pipeline. Therefore, the KRG feels that it has been left with no option but to truck oil to its neighbours and recently to Turkey, which has agitated Baghdad.

ExxonMobil's logistical preparation on the ground in Kurdistan is well underway. According to its contract, it is likely to have to start exploration which starts with the seismic survey soon. The standard Production Sharing Contract, stipulates that the IOC's is expected to start operation within the first sub period, which is three years. During which the first exploration well must be drilled with all the preparation that entails. Meanwhile, knowing a year has passed and not much work has been carried out and this deadline is nearing, Baghdad has upped the rhetoric and indirectly threatensed ExxonMobil with exclusion from its contract to develop the giant West Qurna-1 field in southern Iraq.

Most of the warnings have been coming from people close to the Iraqi oil ministry and the real power in Baghdad's oil sector, the Deputy PM for energy, Dr Hussain Shahristani. The strong language included " ...If they dig, they cannot take Iraqi oil", reported the specialist media group Iraq Oil Report , meaning if ExxonMobil start operation under their obligations, Exxon will risk its West Qurna-1 contract and at the same time they will not be able to sell their Kurdish oil through Iraqi pipelines.

Furthermore, the website quoted Baghdad officials saying that the way to retaliate and can take more subtle forms: "Do not give them permits to come, do not allow their people to work ... and they will find that they are not welcome here". These types of comments are worrying, though, more for Iraq than for ExxonMobil. If ExxonMobil's operations in the south are obstructed, the main loser will be Iraq as failure to increase production will cost Exxon less than $2 per barrel while Iraq and its people will lose over $100 per barrel. Needles to say that limiting ExxonMobil's operation may hurt the company somewhat financially if they lose what they have invested so far, but it will have far more reaching implication. Shell, which has been obedient to Baghdad and is ExxonMobil's partner in West Qurna-1 field, will also be affected if development hindered and lawsuits commences.

When ExxonMobil signed its deal with the Kurdistan region, Baghdad was completely taken by surprise. So far, Dr Shahristani has refused to accept that Dr Ashti Hawrami, KRG Oil minister, has outmanoeuvred him. Should Baghdad cancel the West Qurna-1 contract, ExxonMobil has made it clear that it will take legal action. Last week, information about the meeting ExxonMobil had with Baghdad officials has come to light; Dr Shahristani was reported to have been very frustrated and "hardly able to control his emotions" during the meeting.

Baghdad's options are limited when it comes to punishing ExxonMobil. Its strong language has been heard before, and it would need to demonstrate why, this time, it is capable of executing its warnings. As a sovereign government, Iraq can do as it wishes dealing with the IOCs. But if it does deliver on threats including cancelling contracts and making life difficult for ExxonMobil, it too will suffer.

June this year, in the Global Petroleum Survey carried out by Canadian research group the Frazer institute, Iraq was ranked at the bottom of countries for oil and gas investment, due to bureaucracy, poor security, lack of certainty and clarity about the law and regulation and the fiscal terms on offer. Although Iraq has amongst the world's largest conventional oil and gas reserves, official comments on making life difficult for international oil companies will not improve its rating.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1701069 2012-07-25T07:26:18-04:00 2012-09-24T05:12:25-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/


It is no secret that the majority of Kurds, if not in fact, all of them, would love to see an independent Kurdistan. And the easiest way for a Kurdish politician to become popular is to call for an independent state.

Although the Kurdish president, Massoud Barzani, has recently given the impression that he wants to see an independent Iraqi Kurdistan, the political party to which he belongs, the Kurdish Democratic Party (KDP), and the other major political party in the area, the Patriotic Union of Kurdistan (PUK), have so far resisted similar temptations. In fact, most Kurdish politicians are still talking about a "united Iraq" despite Kurdish public opinion against this idea.

And they have a point. If you are a Kurdish politician and you need to maintain diplomatic relations with your neighbours, and if you're aware of the economic and political realities for Iraqi Kurdistan, then it's very hard to call for Kurdish independence and really mean it.

It is possible that Iraqi Kurdistan is politically mature enough to be independent - but the region is not ready for such a step in economic or military terms. And it is true that, over time, the political consequences of Kurdish independence have always been considered greater than the economic consequences. But that no longer applies.

A clear example is the Kurdish rebellion against former Iraqi leader Saddam Hussein's regime in the early 1970s. When Hussein started to become friendly with the Soviet Union, then-US President Richard Nixon began to fund, , and encourage, the Kurdish to fight for their independence against Hussein, as part of a strategy to weaken Hussein's regime and general policy against the USSR. But just as the Kurdish revolutionaries seemed to be succeeding, it became clear that none of the parties supporting the Kurds actually wanted them to win their independence - the ploy was purely political - and support was withdrawn.

Additionally the question of Kurdish independence has always troubled the surrounding countries; none of them have ever wanted a Kurdish State.

But now, given Iraqi Kurdistan's oil and gas potential and the benefits that could bring surrounding countries in terms of trade, those neighbours have softened their stand on Kurdish independence - and they're likely to soften even further as trade ties develop.

There are also strong economic overtones to Baghdad's policy toward Kurdish independence. Baghdad sees the various disputes over revenue sharing, oil contracts and oil exports currently going on between Baghdad and Iraqi Kurdistan as necessary to its centralist agenda. Partially, it is about deterring other Iraqi regions, some of which have suggested the idea, from asking for independence to become a region with autonomy similar to that enjoyed by Iraqi Kurdistan.

Although, given the advanced stage of the oil industry in the Kurdistan region, Baghdad realises that their disputes with Iraqi Kurdistan are unlikely to end in their favour, they still have to send out a clear, centralist-flavoured message. Imagine, for example, if a province like Basra - which currently has most of the Iraqi oil reserves and which has the only access to ocean-going transport - achieved the same kind of independence Iraqi Kurdistan had. Given its strategic position, it might eventually become as powerful as the central government.

Even for the Kurdish themselves, the main question about an independent Kurdistan comes down to economics.

Up until now the economics of independence have always been an afterthought; even the Kurds have subconsciously ignored them. However in modern times, if the petro-dollars from Baghdad stopped flowing and people started to feel the pinch in their pockets, the idea of independence might not look so romantic after all.

This is the reality: Iraqi Kurdistan is land locked; it is dependent upon selling its own natural resources and importing consumables in exchange. Having bad, or no, relations with neighbouring countries is simply not an option for Iraqi Kurdistan.

And Iraqi Kurdistan has been operating like a state within a state, but without the duties of a state.

The Iraqis have continued to send 17 percent of the Iraqi federal budget to the Kurdish (although it was delayed this year). Most of the Iraqi federal budget is generated by oil revenues and currently, most of Iraq's oil is produced in southern Iraq, in places like Basra. Any northern oil tends to come from the disputed Kirkuk region.

Iraq's oil production is rising, set to reach over 3.4 million barrels per day by the end of the year according to former Iraqi Oil Minister Thamir Ghadhban, also Chairman of Advisory Commission to Iraqi Prime Minister.

And with this, the federal budget is also swelling - so is Iraqi Kurdistan's 17 percent share. However due to disagreements over oil policy, revenue sharing and Baghdad's refusal to pay oil company costs, Iraqi Kurdistan is pursuing its own oil production agenda.

However in Iraqi Kurdistan, this sector is still largely underdeveloped. And, due to this and aforementioned disputes, the state is not contributing as much as it can to Iraq's oil exports. Which is why many Iraqi politicians have already argued that the Kurdish are getting an unfairly large share of the country's income even while they're not contributing as much.

The most obvious move for the Kurdish would be to annex the disputed area of Kirkuk, where much of the northern oil is currently being produced, and get full use of the Kirkuk-Ceyhan pipeline to Turkey's Mediterranean coast.

The northern Iraqi city of Kirkuk has actually been one of the flash points of the struggle between the Iraqis and the Kurdish over the past few decades. During former Iraqi leader Saddam Hussein's regime, the Kurdish population was driven out of Kirkuk so that Arab Iraqis could control the oil rich area. Today Kirkuk remains largely Kurdish and the government of Iraqi Kurdistan claims it belongs to them. Although legally it belongs to Baghdad, currently the city is, in fact, under the de-facto control of the Kurdish government.

Even in the unlikely scenario that such an annexation happens, in the short term Iraqi Kurdistan would still struggle to generate as much income as Baghdad sends them. Putting the required infrastructure into place would take time and would need the consent of neighbouring countries, like Turkey.

The economic consequences of losing the over US$11 billion that the Kurdish receive from Iraq would be devastating for the region; the whole economy could implode, which in turn would lead to many political and social problems.

Iraqi Kurdistan has other income streams and income opportunities and the promise of a hydrocarbon pipeline to Turkey offers a life line but in the short term, this income will not be enough to pay salaries in the bloated public sector or to invest in rebuilding the infrastructure, that would eventually lead to growth and an increase in oil and gas production.

In fact it's disputable whether Kurdish oil production could ever match Baghdad's current contribution. If Kirkuk and other disputed territories are taken out of the equation, then the amount of oil Iraqi Kurdistan could export may never match up to the 17 percent of the budget that they're currently getting.

So although many Kurds yearn for independence, when the state's finances dry up and there are budget cuts, unemployment and a reduction in living standards, those views may well change - and, whatever other faults they may have, almost all Kurdish politicians can see this how this would be extremely unpopular.

An independent Iraqi Kurdistan would not just lose its Baghdad budget, the state would also go from holding some part of the balance of power in the Iraqi parliament - the Kurdish bloc has been referred to as "kingmakers" because the two major opposition blocs have fairly equal numbers in Parliament - to being a small state, surrounded by far larger, far less friendly states in the area.

Should Iraqi Kurdistan secede, it is not even clear whether the international community would recognise the would-be country as a fully fledged nation-state.

In international terms, Kurdish independence would rely heavily on the Iraqi Kurdish relationship with Turkey. In fact, contrary to popular opinion in both Turkey and Iraqi Kurdistan, an independent Kurdistan could benefit Turkey immensely.

Despite historical antipathies (Turkey is still fighting a battle against the Kurdish population within its own borders), Turkey is the most likely nation to support the idea simply because then they would have greater influence over Iraqi Kurdistan - and Iraqi Kurdistan has the potential to become a future, cheap energy source fuelling the booming Turkish economy.

In conclusion, if it comes to a referendum on independence - something that President Barzani has suggested during ongoing disputes with Baghdad - Kurdish politicians would be caught between a rock and a hard place.

On one hand, if they advocate independence, they face not only economic hardship but also regional isolation, a loss of influence in Iraq and increased dependence on the goodwill of both Turkey and Iran.

On the other hand, if they stay part of Iraq, then they must help to build the nation for real and find solutions to outstanding, contentious issues - such as the oil exports and the disputed territories like Kirkuk and Mosul.

Should they decide upon the latter for the time being- and this seems most likely and most sensible option- then Kurdistan can become more of an assertive regional player. Eventually this would give the region a better bargaining power when the statehood, that so many Kurdish long for has more potential to become a reality.
This article first appeared on Niqash.org]]> tag:www.huffingtonpost.com,2012:/theblog//3.1618131 2012-06-22T07:34:12-04:00 2012-08-22T05:12:22-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/ By Shwan Zulal:
This article first appeared on Niqash

In May, Turkey and Iraqi Kurdistan announced they would build pipelines taking oil and gas from Iraq into Turkey, then possibly Europe. But behind the energy dream lurks a nightmare of militant Kurdish independence fighters and the spectres of energy giants, Iran and Russia.

To some it is a dream come true, others think it's a nightmare that will never see the light of day. The May 2012 announcement by Ashti Hawrami, the Minister of Natural Resources in the semi-autonomous state of Iraqi Kurdistan, that they would build new oil and gas pipelines to Turkey shook the Iraqi government in Baghdad.

The first phase of pipeline construction is supposed to be completed by October this year and the second phase is due to be finished by August 2013. Another pipeline is to be built by 2014.

Baghdad reacted unhappily to this announcement, saying - as they had done with other oil deals - that the Kurds were working outside of the national remit. National Deputy Prime Minister for Energy, Hussein al-Shahristani, was dismissive of the pipelines and local media were also rather negative about it.

Yet it appears that Baghdad feels that that the northern state of Iraqi Kurdistan is slipping out of its control. For the last five years Baghdad has been trying to reign in the Kurdish government, especially when it comes to oil and gas.

Shahristani has blacklisted oil companies operating in Iraqi Kurdistan and even ensured that, during the recent lacklustre fourth round of bidding to do oil work in Iraq, there was a new clause preventing any oil companies from going into Iraqi Kurdistan without Baghdad's permission, as oil major Exxon Mobil did in November 2011.

It is true though that any such pipeline from Iraqi Kurdistan into Turkey will face more than a few challenges.

Needless to say the success of any pipeline will also hinge on the commercial realities of the deal and what stockholders would get out of it. Other dimensions are strategic and security related. Apart from annoying Baghdad, the Iranians and Russians are also likely to be unhappy. Iran has a long term contract, until 2021, to supply gas to Turkey at higher-than-market prices (the two countries are currently involved in a legal dispute over this issue). And Russia would see any potential new supplier to Europe as competition for its own gas. Additionally Russia is one of Turkey's largest gas suppliers, supplying 58 per cent of the Turkish gas consumption.

In early June, Kurdish energy minister Hawrami said that, by 2015, Iraqi Kurdistan could be producing one million barrels of crude oil per day, with that doubling by 2019. However it's not clear how much of that would be exported, how much would reach other countries outside of Turkey or whether the crude would only be refined and used for power generation inside Turkey.

Really though, the main obstacle is the political dilemma facing Turkey - it's cooperation on the pipelines means it must recognise a Kurdish entity, or even a Kurdish identity, something it has never wanted to do because of its own 'Kurdish problem', inside Turkish borders.

The outlawed Kurdistan Workers' Party (or PKK) has been fighting for greater rights for the Kurds of Turkey and Kurdish autonomy since the early 1980s. The group is designated a terrorist organization by some countries and the violent conflict between Turkish authorities and the PKK has claimed tens of thousands of lives over the years. The PKK tend to be based in the inaccessible Qandil mountains on the Iraqi Kurdish side of the border and launch their attacks into Turkey from there. And the PKK has been known to target the oil and gas pipelines in Turkey.

However, although Turkey would not want to see Iraq split - "when we consider these [energy] projects, our priority is the territorial integrity of Iraq," Turkey's energy minister, Taner Yildiz, told the Financial Times recently - Turkey seems to believe a trade-off can be arranged with the Iraqi Kurdish government. Although the Iraqi Kurdish authorities have made it clear that they will not confront the PKK militarily, they do have the option of cutting off the guerrilla group's supply lines and limiting their activities in the region.

It is not yet clear as to whether this is on the bargaining table. But it is possible that it is, if Turkey is serious about doing a deal with the KRG, not just posturing.

As Chris Bowers, the British Consul General in Erbil, put it during a conference held in London this week, Iraq Petroleum 2012, "Turkey used to see the Kurdistan region through the prism of security - but now it looks at [Iraqi Kurdistan] through the prism of energy."

There are also obvious international and regional ramifications. The discussion over pipelines is just a small part of ongoing problems between Erbil and Baghdad with wider, geo-political influencers also at work.

And lately relations between the Shiite Muslim-led coalition government in Baghdad, headed by Iraqi prime Minister Nouri al-Maliki and the authorities in Iraqi Kurdistan do not appear to be getting any friendlier.

In recent weeks, high ranking Iraqi Kurdish politicians have practised a kind of shuttle diplomacy between Turkey and Iraqi Kurdistan and statements have been made that indicate an increasing closeness between Erbil and Ankara and the growing distance between Baghdad and Erbil.

Both Iraqi Kurdistan, and now the Turks, have sheltered the Iraqi Vice President Tariq al-Hashimi, against whom al-Maliki issued an arrest warrant late in 2011, sparking a political crisis. It appears that mainly Sunni Muslim Gulf countries like Qatar and Saudi Arabia are also happy to see Turkey causing trouble for al-Maliki's government. Additionally Turkey has expressed its opposition to the conflicted Syrian regime whereas Iran has been more supportive; the Iraqi government has been mostly treading the stormy diplomatic waters in-between.

Nonetheless, although the pipeline deal has been announced, it is not yet clear what is driving such a deal for Turkey. Some have described current Turkish foreign policy as "neo-Ottoman-ism".

Does Turkey intend to isolate the PKK? Or it is a political statement aimed at Baghdad, and indirectly at Iran, a country that continues to become more influential in Iraq? Or both? At the moment, Turkish motives seem to involve a combination of all of the above but it is hard to say which is the major driving force for Ankara at the moment.

Meanwhile Iraqi Kurdistan have made it clear that they are eager to further strengthen the bilateral relationship with Turkey and that they relish the idea of being able to sell oil and gas directly to Turkey, and then on to Europe. However the red line for the Kurdish leadership is using military force against the PKK.

One thing that is clear is that sooner or later Iraqi Kurdistan's oil must reach the market. Comments made by Tony Hayward, former CEO of BP and current CEO of Genel Energy, a Turkey-based oil company with interests in Iraqi Kurdistan, at Iraq Petroleum 2012 indicate that many believe this. Hayward seemed to be covertly critical of Baghdad's role in preventing international oil companies from operating in Iraqi Kurdistan - but, as Hayward said, it would only be a matter of time before the oil made it to market.

His remarks sum up the inevitable and make it clear that it is in Turkey's interest to take advantage of its strategic position as an energy transit nation - something the Turkish would love the Europeans to take serious note of too. And Turkey's energy hunger, combined with the potential economic advantage, makes the possibility of a Kurdish-Turkish pipeline more than just a pipe dream.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1482309 2012-05-05T04:10:16-04:00 2012-07-04T05:12:04-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
This article first appeared on Niqash

The battle for Iraq's oil goes on. Iraqi Kurdistan is intent on controlling its own oil, Baghdad is intent on wresting that control from them. Will the impasse ever be solved? Only if both sides see reason, one commentator argues.

Ever since oil was found in Iraq nearly a century ago, there has been a battle to control the most important commodity the country has known. In the beginning, the struggle over oil played out between foreign or colonial powers. Then when the Iraqi oil industry was finally nationalised in the early 1970s, the struggle for control of the oil industry became internal. Today it dominates domestic politics.

Ever since the government of the semi-autonomous region of Iraqi Kurdistan, in the north of the country, decided to come up with its own version of oil and gas laws in 2006 and 2007, the Kurdish and the Iraqi federal government in Baghdad have been on a collision course.

The Kurdish formulated their own laws because they were largely frustrated by the federal government's inability to come up with such a law and to start to develop the oil industry. Iraqi Kurdistan then began to negotiate contracts with international oil companies and to move on without Baghdad's explicit approval.

Since then the powers-that-be have been deadlocked, with neither side willing to compromise. Baghdad is refusing to recognise contracts made by the Kurdish region and threatens to blacklist international companies operating there. In return the Kurdish halted oil exports from out of their region.

In fact, it is only relatively recently that the Kurds have been able to control the oil under their own feet - and it is hard to imagine they would ever give up those rights, especially now that huge companies like Exxon Mobil and other major oil companies are lining up to do business in the region.

Meanwhile the policy that Iraq's central government in Baghdad is pursuing, with regard to the Kurdish region, is not particularly realistic. It's outdated and it is hard to understand why Baghdad hasn't yet worked out that the Kurds will not let them dictate Kurdish oil policy or control Kurdish oil revenue.

Comments made by Abdul Mahdi al-Ameedi, head of the federal Ministry of Oil's contracts and licensing department, in the online industry portal, the Iraqi Oil Forum, indicate Baghdad's current opinions on the matter.

Asked if production sharing contracts, or PSCs as they are also known, were problematic, he replied that: "the state considers that production-sharing contracts are illegal and unconstitutional since the Iraqi constitution stipulates that oil and gas in Iraq is the property of the Iraqi people. Since a PSC gives foreign companies the right to a portion of the production under the form of profit oil, they are considered in contravention [of] the current constitution."

Judging by al-Ameedi's comments, Baghdad seems to be doing what it can to make PSCs that Iraqi Kurdistan signed, look illegitimate. Not because they think PSCs are a bad idea or because they are less value for money for Iraq. Rather, they are bringing the Iraqi Constitution into it as a way of putting political pressure on Iraqi Kurdistan, to try and prevent the Kurds from moving any closer to making disputed territories like Kirkuk part of their own semi-autonomous region and to try and reduce the percentage of the Iraqi federal budget that the Kurdish region currently receives.

Baghdad has realised that trying to take charge of the oil in some of the disputed territories - those areas that the Kurdish say belong to Iraqi Kurdistan but which Baghdad consider part of Iraq proper - is also beyond its reach.

So instead, they're going for damage control and trying to prevent the Kurds from entering into international deals in those disputed territories. And they have good reason. Because while Baghdad tries to wring concessions out of the Kurdish with arguments about PSCs being illegal, the Kurdish themselves are teasing Baghdad by granting licenses for oil work on the very borders of the disputed territories, including in some blocks where borders are not as clear or overlapping.

Although the Kurdish regional government has explicitly said that it won't grant any licenses in disputed territories, there are still question marks over several exploration blocks - including two that major international Exxon Mobil is contracted for.

Last November Exxon Mobil dropped a bombshell on Baghdad, announcing they had signed contracts with the Kurdish for six exploration blocks. Exxon Mobil already operates in southern Iraq and despite numerous warnings from Baghdad, the multinational went ahead and signed anyway. After complaints from the Iraqi government Exxon Mobil then apparently sent two letters to Baghdad promising to freeze its Kurdish activities. However evidence on the ground suggests otherwise.

Basically Baghdad has been mostly powerless - the most they have been able to do has been to exclude Exxon Mobil from bidding for oil contracts this May, a fourth bidding round that it appears Exxon Mobil was not much interested in anyway.

And while the Kurdish won't budge on the topic, they will happily continue to take their 17 percent share of the federal budget. Most of Iraq's national income is generated by oil revenues and currently, most of Iraq's oil is produced in southern Iraq, in places like Basra. Many Iraqi politicians have already argued that the Kurdish are getting an unfairly large share of the country's income even while they're not contributing, having stopped their own oil exports in early April

Still, the Kurdish themselves might argue that they're still exporting oil because of what is coming out of Kirkuk, a disputed territory that they believe is part of Iraqi Kurdistan. In April, Kirkuk's oil exports came to almost 400,000 barrels per day; Basra is exporting over 2 million barrels per day.

The northern Iraqi city of Kirkuk has actually been one of the flash points of this struggle, over the last four decades.

During former Iraqi leader Saddam Hussein's regime, the Kurdish population was driven out of Kirkuk so that Arab Iraqis could control the oil rich area. After Hussein was removed in 2003, Article 140 of the Iraqi Constitution was formulated to remedy this so-called "Arabisation". This includes a census to determine the demographic makeup of the area's population and then finally, a referendum to determine the status of disputed territories. Obviously if a census and referendum are used, then whether a disputed territory is home to mainly Kurds or mainly Arabs will have an effect on who can lay claim to it.

And in Kirkuk a census should have been taken already, with the city's fate decided by its inhabitants. But an unwilling Iraqi central government and lacklustre Kurdish authorities have failed to make this happen.

Today Kirkuk remains largely Kurdish and the government of Iraqi Kurdistan claims it belongs to them. Although legally it belongs to Baghdad, currently the city is, in fact, under the de-facto control of the Kurdish government.

Which makes any oil deals here difficult. For example, oil giant BP was reported to have been in talks with Iraq's federal government regarding a short term contract to boost oil production in Kirkuk. But the plan was a non-starter from the outset because nobody had asked the Kurdish authorities, who are really in charge in the city. A politically sensitive deal like this would require broad consensus.

Even though Kirkuk, with one of the largest and most prolific oil fields in the world, has been producing oil from early on, the city's residents are yet to reap the benefit of these riches. With rundown buildings and littered streets, Kirkuk epitomises the sorry state of the power struggle over the nation's oil.

Iraqi oil exports are on the rise and could promise a new prosperity for a nation badly in need of it. If Kurdish oil were added to the flow, then that increase could be even higher. But the policies being pursued by Baghdad, which fail to acknowledge the entrenched reality in Kurdistan, only serve to deepen distrust in this divided land. And the longer the deadlock continues, the more expensive it is for oil companies to operate in Iraqi Kurdistan and the more difficult it is, to secure funding for new oil industry projects there.

It is hard to take the politics out of oil or vice versa. But decisions relating to the oil industry and attempts to maximise its potential must be based on the commercial interests of the country. Currently oil issues are highly politicised in Iraq - so there can only be further confrontation.

If the current impasse continues, Iraqi Kurdistan will continue to try and look elsewhere to sell its oil and the rest of Iraq will remain resentful that the Kurdish still benefit from funds, from oil produced outside of the Kurdish region.

And while PM al-Maliki keeps centralising power, leaving most of Iraq's other political groups feeling marginalised, the Kurdish are only becoming more stubborn: they see oil as the only tool they have left with which to exert any influence.

Yes, it is easy to understand the points that both sides in this tussle have to make. But Baghdad's failure to accept reality and the Kurdish inability to compromise is only set to make both sides drift further apart.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1397227 2012-04-02T13:12:46-04:00 2012-06-02T05:12:01-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/ EUCERS Newsletter, No. 12
By Shwan Zulal

While crude oil is hovering above $100 per barrel, the rhetoric against Iran is ratcheting up, followed by the US and EU sanctions against the regime. With Iranian exports are being halted, global oil spare capacity is being squeezed. The Iraqi oil supply is on the increase and Libya is returning to near pre-war production levels. For the time being, the gap left by the Iranian sanctions has been filled by swing suppliers like Saudi Arabia but any interruption or further unrest in the Arab world, or elsewhere, will send oil prices at even higher level, with foreseen consequences for the world economy.

There are many on-going deep-water drilling projects and shale oil is becoming economically viable to extract. Nevertheless, the lack of Iranian oil will affect the market. Although Iran is finding other buyers and even giving favourable terms and discounts to buyers like Pakistan, EU and US reliance on the Gulf region for oil is also increasing, making the Saudis even more influential in the market.

The Kurdistan Region of Iraq has been described as the last onshore oil and gas frontier in the world; and it is on Europe's doorsteps. While Iraq has the potential to be one of the largest oil producers, or only second to Saudi Arabia in the future, the country and its oil policy is still in turmoil as the ethno-sectarian divide and its consequences hold back the promised rapid development of its energy sector.

Kurdistan has been autonomous and has its own government and parliament separate from Iraq but it is still within Federal Iraq. It receives 17% of the Iraqi annual budget and since 2003, Kurdish authorities have started to grant Production Sharing Contracts (PSCs) for exploration and production. To date, 47 PSCs have been signed with mainly European companies, such as OMV, MOL, Repsol and Genel, resulting in an extensive exploration programme which has yielded large hydrocarbon discoveries, like the Shekhan oilfield by the petroleum giant Gulf Keystone and Heritage's massive Miran gas find.

Kurdish PSCs have attracted a variety of companies. These contracts usually stipulate a five-year-exploration phase and an up to 20 year production period in which the company receives a share of the revenue after recovering the costs. Furthermore, the production cost is minimal apart from some initial infrastructure challenges, but the companies involved can capitalise on high oil prices.

In contrast to the service contracts awarded by the Iraqi Government for the existing oil and gas fields, the Kurdish PSCs offer much more generous terms. While Baghdad contracts on average pay the oil companies around $2 USD a barrel as a royalty, whatever the oil prices are, the Kurdish PSCs allow the IOCs a much higher profit, in return for taking a higher risk.

As Iraq is embroiled in political disagreements and deadlock, the Kurdistan region passed its own oil and gas legislation in 2007 and has since then managed to attract many big names like BP's former Chief Executive Tony Hayward and his investment vehicle, Vallares, which merged with Turkish Genel energy and is now listed in the UK's FTSE100, as well as more recent entrants, like the US supermajor, ExxonMobil.

ExxonMobil's entry has created an intense political atmosphere, with the Iraqi government feeling that it has been undermined. In the past, the central Iraqi government has threatened to blacklist the companies agreeing PSCs with Kurdistan area; therefore, it now assumed that the US oil giant is taking sides and has thus stepped over the Iraqi oil ministry's toes. Meanwhile, the Kurds feel triumphant and many believe that the acquisition of six exploration blocks by ExxonMobil can be a catalyst for more deals and will open up the market for consolidation, putting Kurdistan on the world oil map.

The Kurdish government is eager to develop the infrastructure and its ultimate goal is to become an independent state, although not stating the fact in public. While this will be difficult to achieve at this moment in time as the regional geopolitics and the economics of independence is not aligned. Nevertheless, it is a matter of when rather than if Kurdistan would be an independent oil and gas producer.

Therefore, the EU energy policy makers must surely have a plan as to how to approach this friendly but fledgling democracy which is known to be the most friendly nation towards the west in the whole of middle east region.

Kurdish institutions and infrastructure is still in its early stages of development therefore the EU must not miss this opportunity to adopt the region. Not only to make sure a democratic entity flourishes at Europe's south easterly borders but to participate in developing its oil and gas industry and make it a important strategic energy partner.

According to the US Geological Survey, Kurdistan has an estimated 45bn barrels of conventional oil reserves and around 60 TCF of gas.

The geopolitics of the region and the bitter disagreement over oil policy as well as the power struggle in Iraq over the control of the hydrocarbon sector, has stalled the development pace of the Kurdish oil and gas.

The Kurds are in control of their natural resources but because of Baghdad's opposition to this, many infrastructure and pipeline project have stayed in the sidelines and waiting for the dispute to be resolved. Ashti Hawrami, Kurdistan Natural resources minister, was quoted on the 7th march in Huston CER Week 2012 conference saying that Kurdistan can produce 1m bpd by 2014 and can build a pipeline to facilitate that within 18 month.

Moreover, the EU has a memorandum of understanding with the Iraqi central government committing to only buy hydrocarbon from the Baghdad and not enter any deal with the Kurdish autonomous region of Iraq.

The lack of political consensus over oil policy in Iraq and the Kurdish government not having the legitimacy of a state, therefore, consortiums or countries would find it hard to make any deals with a none state entity like Kurdistan region.

Kurdistan has the energy resources which is easily accessible less than 400 miles to the Mediterranean shores. The region may not been seen as reliable as a Norway for energy supplies but it has the potential to become a reliable EU partner, given the right policies perused. The current Kurdish government has shown eagerness to form such relationship, but so far, the EU has not engaged it directly.

While the plans for the much hyped up NABUCCO project-the trans Caspian gas pipeline connecting Asia to Europe through Turkey- is in turmoil and hope is fading, mainly dues to the politics of the project and partly to the issue of the supply. Kurdistan has shown the wiliness to commit to the project but because of indecision and lack of clear vision by the consortium controlling the project, the plans are on halt.

The Turkish minister for energy recently discussed the possibility of integrating the rival TANAP-alternative Trans Caspian gas project- project with NABUCCO, at the same time the Iraqi ministry of oil has made comments regarding the possibility of supplying NABUCCO.

Details will still needs to be worked out and, the statement from Iraq and the possibility of a merger of the two projects may yet be a lifeline for NABUCCO which many experts and analyst have written it off and see little a chance of becoming a reality.

If the EU policy makers are serious about diversifying supply and breaking the Russian gas monopoly, other unorthodox and new emerging players like Kurdistan region is key to be included in the new energy strategy. The Kurdish region is fast becoming a big player in the energy world and the sooner the EU includes itself in the bonanza the more influence they will exert.

Turkey is a key player and it has foreseen the potential of the region much earlier than Europe and become an important partner to Kurdistan. With its Kurdish population, Turkey is still overcoming its reluctance to accept a more confidant and possibly independent Kurdistan. However, the modern Turkish state realises the importance of the region and see the economic benefits.

However, lack of action by the EU and doing more waiting for events to unfold only further weaken the EU's influence in the region. UK listed companies are taking a lead and Genel is one of the biggest operator while the US supergiant is set to acquire more interest.

Total CEO, Christophe de Margerie, has been quoted saying that the Kurdish deal on offer is much better than those from Baghdad and his company has been tipped to make its first move out of the European major energy players into Kurdistan and their presence on the ground this could lay the foundation for grater EU-Kurdish energy cooperation.

To make sure the EU energy policy of diversification is a successful one, policy makers should not overlook new potential resources and in this case, at its doorsteps. There are challenges and uncertainties, but active engagement with Kurdistan at early stage of its development, would insure a greater European influence and participation in the making of potentially a new major energy producer.
http://kurdishviews.blogspot.co.uk/]]> tag:www.huffingtonpost.com,2012:/theblog//3.1314468 2012-03-01T16:25:51-05:00 2012-05-01T05:12:02-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
The banking sector in Iraq reflects the economic mess that the country is in. Basic modern banking practices - like electronic funds transfers for payroll or other banking needs - are almost non-existent and credit facilities are hard to come by. Automatic teller machines remain a novelty while mortgages and loans are a rarity.

Iraq has only a few banks with the ability to transfer funds electronically and the number of branches able to undertake this sits at around 240. Transferring funds directly to Iraqi banks remains a patchy process and it is more often done through other banks in the region, such as more reliable sister bank in Jordan or the United Arab Emirates.

Latest research estimates that around 80% of Iraqis do not have a bank account or even access to one. The public's trust in the Iraqi banking sector remains low. Which is why most banks in Iraq simply act as a glorified safety deposit box.

Meanwhile Iraq is on track to become one of the wealthiest countries in the world, with the fourth largest oil reserves in the world and the potential to be one of the globe's leading oil exporters, eventually matching, or even surpassing, Saudi Arabia, currently one of the largest oil exporters in the world. But despite incoming revenue and the potential for growth, economic progress remains slow - and this is partly due to dysfunctional banking sector. There is talk of sector reform and new electronic banking systems - yet this vital sector is still underdeveloped.

The financial sector in Iraq is still in its infancy and a lack of understanding of it, by the political elite and economically illiterate policy makers, has not helped.

Politicians in Iraq keep failing to grasp the importance of this vital part of the economy, a part that could transform the country's dated economic structure and bring it out of the cash economy and further toward the modern world of finance.

Iraq's banks were nationalised in the mid-1960s, in line with the government's nationalist and socialist policies of the time. Before then there had been a privatised banking system. In the early 1990s, former Iraqi leader Saddam Hussein's regime tried to kick start private banking again but two decades later not much progress has been made.

According to the website of Iraq's National Investment Commission, the minimum capital required to set up a bank in Iraq is IQD100 billion (around US$85 million). Currently there are 49 banks with licenses to operate - 42 of these are private banks, including 11 Islamic banks and foreign banks. The rest of the licensees are state owned banks like the giant Rasheed and Rafidain banks, which account for the vast majority of banking business in Iraq. There has also been a surge in the numbers of financial and investment firms, with around 40 such licences issued to date.

Interestingly, despite the capital requirement of IQD 100 billion though, some of the private banks have yet to comply with that regulation.

Iraq currently has around one local banking branch for every 60,000 people. Compared to other countries in the region, this is very low: for example, the average in Saudi Arabia is around one branch for every 3,500 citizens. Which means that despite the growth needed in the banking sector and the emergence of many small, boutique-style banks and investment houses, the population still has little, or no, access to banking facilities.

Most Iraqis rely on relatives and friends to borrow money. But obviously this can cause social problems. There are also small organizations that provide loans for start up businesses but the amount that these schemes can lend is usually minimal.

There is also the issue of trust in the banking system. In a recent banking scandal in the semi-autonomous state of Iraqi Kurdistan, local businessmen, most of them based in the city of Sulaymaniyah, lost around US$500 million. This was due to the drop in value of Iranian currency, after US and European sanctions were imposed, which led to the failure of a small but active Iranian "bank". The so-called bank had been operating as a middleman transferring funds to and from Iraqi Kurdistan, Dubai and Iran.

Incidents like this do not reinforce public trust in the banking sector; most Iraqis remain very sceptical about local banks due to a lack of rigorous regulation. And the weak banking culture simply encourages the current cash economy. All of which has stalled foreign and local investment needed to rebuild the country. It has also encouraged local businesses to be apathetic about taxation or social responsibility.

Another major issue plaguing Iraq's banking sector, and for that matter, the private sector too, is the prevailing ideology of top-down politics and big government. Many Iraqi politicians, including Prime Minister Nouri al-Maliki's ruling party, are suspicious of the private sector; they prefer to stick to what they know best, which is having the state control almost all economic activities - including the banks.

Looking around the world, it is clear that a strong banking sector is essential to a successful economy. Apart from helping the private sector and small business grow by providing financing, the government can also measure and quantify economic activity. Once the banking sector flourishes, and transactions are recorded and regulated, money laundering and corruption is automatically reduced.

Meanwhile on the positive side, the Iraqi stock exchange has been growing faster than any other index in the region, the main stocks being traded involve banking and projections for the stock market's growth are very optimistic. This is a big vote of confidence in the future of the banking sector.

Additionally there have been talks of banking sector reform, which has included the introduction of electronic banking. While only 20% of Iraqis have a bank account, around 80% have a mobile phone and phone banking was a hot topic at the "Integrating the Banking and Financial Services Sector in Iraq" conference held by USAID and the Central Bank of Iraq last November.

However modernising Iraq's banking sector will not be achieved solely by introducing new technology. Modernisation needs to start by opening up the markets and bringing in competition. As long as the public banks remain the dominant players in the market, there is not much chance of improving the current situation. Privatising the major banks would be a quick way of revolutionising the Iraqi banking sector. Having said that, this move seems unlikely given the current government record of maintaining control.

At least some of the problems Iraq has could be healed by a strong economy and more prosperous nation. And the long road toward this begins with better financial structures and a stronger banking sector, complete with all the regulations required.

A free market and the equal right of all consumers to participate in it, has helped to bring communities together. The failure of Iraqi politicians to grasp the urgent need to revamp the banking sector, and to understand the basic economics of growth, has had a significant impact on the pace of development in the country. The failure to carry out needed reforms - and not just those in the banking sector - is one of the major reasons that, as was reported recently, around 23% of the population in resource-rich Iraq are living below the poverty line.
Published on Niqash]]> tag:www.huffingtonpost.com,2012:/theblog//3.1282324 2012-02-16T13:26:34-05:00 2012-04-17T05:12:01-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
There is no doubt that Iraq has the potential to be one of the globe's leading oil exporters. The country's conventional oil reserves could match, or even surpass, that of Saudi Arabia, currently the second largest oil exporter in the world. Over half of Iraq's potential remains undiscovered and there will be a tremendous amount of interest in the country's oil for years to come.



However Iraq faces major challenges to the future of its oil industry. Superficially things look okay: daily production is just below 3million barrels per day and capacity is rising. Oil income has risen a whopping 60% but this is due more to high oil prices. In fact production only went up by 15% important issue, some of them exploit it for the purposes of political point scoring.

In order for Iraq to become the oil exporting power it has the potential to be in the future, the following issues will need to be resolved.

The Oil and Gas Law
The first draft of a national oil and gas law was put together in 2006 and 2007. But before the law even got its first reading in Parliament, the draft began to be tampered with. And eventually the law became so political that it became difficult to make any sense of it. The law became unworkable and the first attempt to legislate the sector failed. As such, it reflected the dysfunctional nature of Iraqi politics.

An election, further attempts at lawmaking and various regional disputes later and the current government has still failed to come up with a workable compromise on the oil and gas law. Several versions now exist, formulated by different branches of the government, but so far there has been no progress on an all-important law to regulate a vital sector that Iraq's economy is almost completely reliant upon.

Infrastructure Issues
Oil industry infrastructure has suffered from chronic under investment since the early 1980s. Three wars, civil unrest and poor management within the sector has left infrastructure in dire conditions. Serious investment is needed.

Today the presence of major international oil companies in the south of the country - some of whom are busy developing Iraq's infrastructure - is not due to sound policies. Rather it's due to the fact that Iraq has vast oil reserves that the oil companies cannot ignore.

It is true that oil production is on the rise. Iraq clocked 790.5 million barrels of oil in 2011, raising almost $83 billion in revenues. In 2010, Iraq sold 689.9 million barrels for US$52.2 billion in revenues. However given the fact that international sanctions against Iraq were lifted almost nine years ago, following the toppling of former Iraqi leader Saddam Hussein, current production is nowhere near the level it could be at.

As new wells come on line, capacity is increasing. But bottlenecks created by run down infrastructure, including pipelines and storage facilities, and a lack of investment affect production levels. Earlier targets were wildly optimistic: around 12 million barrels per day by 2017. And slowly but surely Baghdad has been decreasing these targets. The current aim is 7million barrels per day by 2017.

Regional Disputes
Since 2003, the semi-autonomous region of Iraqi Kurdistan has been eager to exploit their natural resources and start exploring their region, previously ignored by past Iraqi regimes. Although very few oil companies ventured into Iraqi Kurdistan early on the oil rush there began in earnest when it became clear that Baghdad was not going to manage to pass the oil and gas law any time soon.

The government of Iraqi Kurdistan introduced their own version of an oil and gas law and by doing so, managed to attract international oil companies into their region. The Kurdish made a conscious effort to go it alone and they carefully chose their own policy. However this inevitably led to conflict with Baghdad, with Iraq's federal government declaring the Kurdish law void and threatening to blacklist any international companies signing contracts with the Kurdish.

These kinds of policies, along with withholding oil payouts, has created more hard feelings and led to more of a deadlock on stalled oil legislation. At some levels Baghdad's policy has worked; it has deterred major oil companies and starved smaller oil companies of cash. However the policy unravelled somewhat when Exxon Mobil signed a deal with Iraqi Kurdistan in November 2011.

This was a watershed moment for the Kurdish and a blow to the al-Maliki administration. It challenged the Iraq's policy of black listing as Exxon already had a large stake in an Iraqi oil field in the south, West Qurna Phase 1.

Oil Contracts
Iraqis mistrust Western oil companies. Early on, after the fall of Saddam Hussein, the Iraqi people were sold this idea that the Western oil companies were there to ransack the country and take Iraq's oil for next to nothing, as was the case early last century. They believed this because in the past they had seen their oil flowing through the hands of foreign oil companies without seeing any actual benefit from it.

In 1928, four major oil companies - BP, Shell, Exxon Mobil and Total - formalised the Iraq Petroleum Company, previously known as the Turkish Petroleum Company, and gave themselves almost a quarter of the share of the profits each. A small royalty was paid to Iraq and for nearly 40 years, Iraq's oil was under the control of others before the oil industry was nationalised by Saddam Hussein's regime in1972.

The nationalisation of the oil industry was supposed to benefit the Iraqi people. But instead revenues were used to enter a mindless war with Iran and then later used to prop up Hussein's dictatorship and to suppress any dissenting voices inside Iraq.

Today, deciding which kinds of contracts international oil companies, that want to work in Iraq, should be awarded is not straight forward. In the early days, post the 2003 US-led invasion of Iraq that toppled Hussein, Western diplomats and international oil companies were lobbying Iraqi politicians for better terms and for the awarding of production sharing contracts. Meanwhile others warned against awarding contracts that were too lucrative and against giving too much oil away.

That latter argument won at the time as anti-Western fervour was whipped up and the Iraqi people believed that it was all about the theft of their oil wealth by internationals.

The best examples of such contracts can be found in Iraq's southern oil fields, where contracts went to the likes of BP, Exxon Mobil and Shell, among other major operators. In most cases, the service contracts paid the oil companies around US$2 per barrel of oil. This did not go down well with the large oil companies, who knew they would need to invest significantly in Iraq's oil industry in order to be able to produce the barrels of oil. These kinds of contracts may work in countries like the United Arab Emirates, where oil industry infrastructure is already in place and where less investment is required from the oil companies, but they cause concern in a country like Iraq.

The current policy of pressuring the international oil companies may be seen as a good move in the long term - it means that the Iraqi government gets the lion's share of oil revenues. But in the short term the cost to Iraq has been high, simply because it has taken nearly nine years to get the projects going and create the revenues needed to rebuild the country. And it remains to be seen whether these contracts will stand the test of time.

Recently it seems that some oil companies are looking for a way out of Iraq. In early February, it emerged that Norway's Statoil wants to sell its stake in the southern Iraqi West Quran Phase 2 field to Russia's Lukoil, also operating there.

Reuters reported that "the Norwegian state company has considered quitting Iraq for some time and turning its attention to less-risky assets elsewhere, industry sources said. It is planning billions of dollars worth of investments in areas such as offshore Norway and in the United States."

Additionally, events like Exxon Mobil's defiance of the Iraqi government in signing a contract with Iraqi Kurdistan is a sign that the oil company cannot be that worried about losing its contract in the West Qurna Phase 1 field.

The hard line policy of pressuring international oil companies may have gone down well with the Iraqi public but it appears to be unravelling as the oil companies start to realise that the terms they were offered, and the financial incentives, are not worth the risk. In a role reversal, the Iraqi government now needs to woo international oil companies in order to meet its own production targets and to keep the nation's revenue streaming in.

And perhaps as a result of recent events, such as the Exxon contract with Iraqi Kurdistan, it seems that Baghdad is beginning to realise. By all accounts, the next lot of contracts being offered to international oil companies in March will be more financially attractive than previous ones.

Lack of Expertise
If Iraq had the expertise and the intellectual capacity to develop its own oil and gas sector, the Iraqi national oil company would have been able to carry out most of the infrastructure and capacity building, with the help of foreign contractors.

But ever since the oil industry was nationalised, the country has been losing expertise and know-how. This is a vital piece of the oil industry jigsaw and it is not something that can be built up overnight; even if the right policies were in place, it would take decades and billions of dollars.

So it is obvious: the expertise and technology that international oil companies possess is needed here, in order to contribute to a more prosperous Iraq.

What Next?
The fact that attracting international oil companies into Iraq will be an ongoing challenge is illustrated by the delay in the fourth round of bidding for oil contracts. The bidding was to take place in January but has been postponed until the end of May. The contract on offer is a sort of new, hybrid version of contract. Some have noted that the contract is something of a production sharing contract in disguise - and the contract is disguised because of the general Iraqi public's belief that a production sharing contract is selling out their oil to foreign owners.

However for the oil companies themselves, if they are risking their money and going looking for oil, they find it difficult to quantify risks. Even if they did find oil, there's no guarantee that Iraq's infrastructure would be ready to help them begin pumping the oil out - especially given Baghdad's poor past record for completing projects and building capacity.

In conclusion then, Iraq has had grand plans for its own oil industry as well as ambitions for the power and influence that its oil could give it upon the world stage. However procrastination and misguided thinking about the oil industry's most chronic problems seem to have made these ambitions impossible.

Political power struggles have set the industry back and there doesn't seem to be any sign that the jostling for position will end soon. The fact that some oil companies are no longer sure if they even want to stay in Iraq can only be a testament to the fact that, after nine years, Iraq's oil policy has failed and that a change of direction is needed.

Published on Niqash ]]> tag:www.huffingtonpost.com,2012:/theblog//3.1235923 2012-01-27T04:51:39-05:00 2012-03-27T05:12:01-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/ Fans of a federal union of states in Iraq are accusing PM Nouri al-Maliki of taking on the role of dictator in Iraq. They see separation of sects as the only answer to Iraq's problems. Yet advocates of centralised power in Iraq support the PM's actions. Who's right?

The sorry state that Iraq is in today illustrates, once again, the complexity of the country's make up and the deep divisions and mistrust within. The idea of the democratic Iraq that was supposed to rise from the ashes of tyranny is gradually disintegrating. Only a month since US troops withdrew from Iraq and the country doesn't look as though it can hold itself together. Prime Minister Nouri al-Maliki seems to be ignoring all the warning signs that Iraq may be sliding back toward the levels of violence seen in 2006 and 2007.


Al-Maliki has been working to strengthen his power base by removing senior opposition politicians, his most controversial move being the issuing of an arrest warrant for Iraqi Vice President Tariq al-Hashimi, who has taken shelter in Iraqi Kurdistan. Meanwhile ordinary Iraqis fear that current violence could turn into a full blown, sectarian civil war between Shiite Muslims and Sunni Muslims.

In terms of political discussions, what commentators seem to be focusing on is the debate as to which is better for Iraq now: federalism, which would see Iraq divided up into different autonomous or semi-autonomous regions, or centralism, which would see power held by Baghdad.

A Federal Iraq

Those who argue for federalism say that the model of centralised power has failed and that it is not likely to resolve the current political stalemate. They believe devolution of power is needed. Partially this is because they believe that the current political problems are caused not only by political differences, but by sectarian and ethnic divisions.

The semi-autonomous region of Iraqi Kurdistan is often cited as an example of the federal model can work. And other provinces in Iraq want to replicate that model, asking to become similarly semi-autonomous regions themselves.

They argue that by separating the larger factions - that is Sunni, Shiite and Kurds, for example - in the smaller regions, this would make sectarian differences easier to work with.

It is true that the Kurdish region has been semi-independent for a longer time. And its success as a region, when compared to the rest of Iran, is not due to Baghdad, which has had virtually no control over it since 1991. The Kurdish model was fraught with problems at the beginning too but since 2003, when international sanctions on Iraq by the rest of the world, were lifted, the region has flourished, both economically and politically.

There is an effective opposition in Iraqi Kurdistan's parliament and the economy is progressing at a fast rate. There are some constraints as the democracy still needs nurturing - there are issues such as freedom of speech, press freedom and so forth - but minorities like the Christian and Turkmen communities enjoy more freedoms and are included in the political process. This could eventually lead to building trust within communities and get the political process on the right track. And on the whole, the model of Iraqi Kurdistan has been far more successful than what is happening in the rest of Iraq.

One of the major flaws in arguments for a federal system in Iraq can be found in economics - or, in other words, agreeing on a framework within which the Iraq's vast oil revenues can be shared. This must eventually have political ramifications. After over three decades of war, Iraq has very little commerce or industry and depends almost entirely on the income from oil exports. And due to the different geographical locations of Iraq's natural resources, the current provincial set up - if converted into federal states - would disadvantage some regions and benefit others.

Advocates of a centralist model believe the federal system would create injustices and give some provinces more power than others. However supporters of federalism, like the Kurds, believe the federal system can be made to work. Regions would be given more autonomy and could develop their own natural resources with most of their revenue eventually streamed back to the central government from where it could eventually benefit the region itself, and then the country as a whole.

If the federal system was suitably managed in an equitable way, and politicians agreed on system to share wealth fairly, then a federal Iraq, made up of semi-autonomous regions, could work.

Iraq united under a central power

The other camp, the advocates of a strong, centralised power over Iraq, argues that Iraq needs more centralised power - at least for now. Some centralists believe that only a strong man can save Iraqi from its woes and unite a country with so many ethnicities and sectarian divisions. The latter differences have led to the currently dysfunctional government, which cannot seem to agree on anything.

Many of those who would rather see Iraq as one do not believe that the country's ills are due to the multi-faceted sectarian and ethnic make up the inhabitants; they also believe previous conflicts were not entirely driven by those differences.

The current Iraqi Prime Minister seems to have chosen this path, believing it is the right way forward for the country. In reality though, the centralised model has allowed one sect, the Shiites to hang onto power and has left other sects feeling marginalised.

And a strong central government could work if Iraqi electors were voting for a party's policies and their votes were not based on ethnicity or sectarian allegiances. In the last election, Ayed Allawi, the former Prime Minister and the head of the Iraqiya list - the major opposition to al-Maliki's State of Law party - did manage to persuade some voters to choose him based on policy. But he failed to get his coalition of intricate and complex alliances in time to rule the country - and that was despite having one more parliamentary seat than al-Maliki's bloc.

Over the past years, the Iraqi government has squabbled and debated endlessly. And in the meantime, al-Maliki has become more authoritarian and has been calling for a centralized Iraq. The Kurdish, with their successful semi-autonomous state, have very different ideas and seem unlikely to agree to an Iraq run solely from Baghdad. And the Sunni Muslims have started to feel more marginalised and have been drawn closer to the Kurdish position.

The model of a powerful, central controller of the country has been tried in Iraq. And it went horribly wrong, as was witnessed during Saddam Hussein's regime. But federalism has barely been given a fair chance yet.

Over the past nine years, what we have witnessed in Iraq has only been a half hearted attempt at decentralisation and the result has been a dysfunctional country. The idea of true federalism has been regarded with suspicion as the popular assumption is that a federal Iraq means a weaker Iraq.

So far the politicians of Iraq have let their people down because they have not found a way to resolve their differences. Iraq's history is filled with instances of discrimination and violence against different sections of the community, including attempts at genocide.

Keeping Iraq from disintegrating requires a new approach. Whether the country is run by a centralised power or split into federal states, the only way to build a consensus and maintain a functioning country is to build trust - which is not an easy task.

The starting point needs to be policies of inclusion or reconciliation. Without this attitude, both models are doomed to failure at which the country will have to be forcibly divided, all of which would doubtless bring more conflict and misery for ordinary Iraqis who are often forgotten in this difficult debate.

This article was first published on Niqash]]> tag:www.huffingtonpost.com,2012:/theblog//3.1217572 2012-01-19T19:34:31-05:00 2012-03-20T05:12:01-04:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/ Niqash
Saddam Hussein's poison gas attacks on Halabja still claim victims today with locals sick and projects on hold because of contamination. International firms that supplied gas ingredients have never been brought to justice either. A new UK plan could change all that.



Of all the crimes against humanity committed by former Iraqi leader, Saddam Hussein, the one that many still remember is the poison gas attack on the town of Halabja, in the northern state of Iraqi Kurdistan, in 1988. It resulted in the deaths of an estimated 5,000 civilians and injury to thousands more. And despite the time that has passed since, residents in the town today are still suffering from the ongoing effects of the gas attacks, whether physical, psychological or environmental.

The victims in Halabja were buried in mass graves shortly after the chemical gas attack, during which substances such as mustard gas and the chemical weapons, sarin and tabun, were used.

The chemicals killed Halabja's residents indiscriminately and the mass burial that took place afterwards, happened without the decontamination of the victims' bodies.

Hundreds of thousands of Iraqis are buried in mass graves around the country and the process of exhumation and identification is an ongoing one. After the fall of Saddam Hussein's regime in 2003, crowds actually descended on some well known mass graves, looking for their missing loved ones. Emotion took over as people were desperate to know what had happened to their loved ones. This resulted in many graves being dug up and thousands of bodies being discovered; however the process was messy and unscientific.

The Halabja mass graves present an altogether different problem. "The last time we tried to dig the mass graves in Halabja a year ago, two of the workers died as a result and others were hospitalised due to their exposure to the mustard gas within the graves," Dr Yasin Kareem Amin, the director of the Forensic Laboratories in Erbil, said.

"The people in the mass graves were buried soon after the chemical attack and due to this there is a high risk of residual contamination. Therefore it is extremely dangerous to exhume these bodies without military standard chemical protection gear, equipment, expertise and training," explained Hamish de Bretton-Gordon, the CEO of British company SecureBio, which sent a delegation to Iraqi Kurdistan late last year to assess the situation with Halabja's mass graves. "If our project goes ahead, we will ensure that nobody else is killed or injured as a result of the Halabja genocide."

At a conference held in London last week - The International Exhibition and Conference on Mass Graves organized by the Iraqi Ministry of Human Rights to discuss and highlight human rights violations committed by the previous Iraqi government, led by Saddam Hussein - it was announced that SecureBio had submitted a plan for further exhumation and decontamination of the Halabja sites. The plan is due to go to Iraqi Kurdistan's parliament for approval shortly.

De Bretton-Gordon said that when he visited Halabja in November 2011, tests that SecureBio, a company specialising in what is known as CBRN (chemical, biological, radiological, and nuclear) training and consultancy, had carried out indicated there were still "traces of mustard gas" present.

"SecureBio has already forwarded plans to the Kurdish government on how to safely exhume bodies from Halabja mass graves," de Bretton-Gordon continued, "as well as a comprehensive plan on how to identify the bodies by taking DNA samples on the scene, without spreading contamination wider."

SecureBio's proposals have been forwarded to Iraqi Kurdistan's Ministry for Martyrs and Anfal Affairs, an authority founded to look into ongoing issues of the genocidal Anfal campaign, during which close to 200,000 were killed and of which the Halabja gas attacks were a part. According to the plans, the project will be made up of four stages and will include the training of local experts in de-contamination and body identification.

After the safe exhumation of the mass graves in Halabja, the following phases of the planned project in Halabja would involve collecting DNA samples from the relatives of the missing in order to help identify victims' remains. Then there would be a survey of the Halabja area, followed by decontamination of cellars and buildings.

As yet the SecureBio plan has not yet been approved but it already has the support it needs. As Aram Ahmed Mohammed, the state's Minister for Martyrs and Anfal Affairs, told NIQASH, "we are supporting the project fully and we will make sure that the residents of Halabja get the maximum benefit from it. The project will be presented to Cabinet and Parliament and at the appropriate time, a budget will be allocated for it when we are satisfied with the plans."

"We want this project to go ahead because we want to bring closure to the families who are still waiting to find out about their missing relatives, and we want to give the bodies a dignified burial in Halabja - this will serve as a reminder for next generation and the world about the crimes committed against our people," Mohammed concluded.

The mass graves are far from the only issue that the people of Halabja are still living with. People here are still suffering from emotional trauma and living with the consequences of the historical attacks. As building begins on many new projects in the town, some of the projects have been delayed because of ongoing issues with contamination.

A source inside the Ministry told NIQASH that a local newspaper had recently reported on builders taken ill while digging foundations. Many basements are also still contaminated and when locals are exposed, they have suffered burns and other health problems, some of them fatal.

Another aspect of the new Halabja project is chemical attribution; that is, finding out where the chemicals that Saddam Hussein used against the town came from originally.

"Once we start exhuming the bodies, we will certainly find traces of the chemicals that were used," de Bretton-Gordon said. "And theoretically speaking, we can trace the chemicals back to the factory that produced it, by looking into the chemical signature of the substance and the manufacturing process used."

Previously companies in several countries in both Europe and further afield have been accused of selling the ingredients and equipment to Iraq that allowed the manufacture of the poison gases used against Halabja's civilians. Some court cases have been brought but with relatively minor results. So although the SecureBio project will help to clean up Halabja and to bring emotional closure to local families, it may also provide evidence that is needed to finally bring those companies that knowingly sold chemicals to the former Iraqi dictator, to account.

It would be hard to predict the outcome of any court cases that result from the latter. Nevertheless the one thing that is guaranteed, if chemicals can be traced back to their suppliers, is that at least those companies responsible can be named and shamed.]]> tag:www.huffingtonpost.com,2011:/theblog//3.1160090 2011-12-20T08:35:47-05:00 2012-02-19T05:12:01-05:00

Shwan Zulal http://www.huffingtonpost.com/shwan-zulal/
It's been years in the making and the latest row about Iraq's much-debated, much-delayed and mired-in-controversy national oil and gas law only indicates once again that issues around the legislation should have been resolved by now. The resolution of issues around the oil and gas law, which has never been passed in parliament, is essential to not only Iraq's future but also to the stability of the region and it is way overdue.

The International Energy Agency forecast that Iraq would be the single most important source of new oil production between now and 2035, making the development of the country's energy industry critical to international oil markets.

The latest drama focuses on the tensions between the federal government in Baghdad and the semi-autonomous state of Iraqi Kurdistan. In mid-October American oil giant ExxonMobil signed a deal with the government of the semi-autonomous region of Iraqi Kurdistan, which is using a form of oil and gas law that they formulated themsleves and which has not been approved by Iraq's federal authorities, who are still using an older version. The contract signed by Exxon, which has been described as a "landmark deal" authorizes the firm to develop oil and gas in six blocks in the northern region. In doing so, ExxonMobil became the first major oil company to sign such a deal.

This was a huge public relations coup for Iraqi Kurdistan and for the policy makers in its capital, Erbil. It is certain to have an effect when Iraqi Kurdistan starts negotiations with Baghdad again on oil policy and oil legislation. As the Financial Times wrote last week "conventional wisdom says that the interests of US "Big Oil" and Washington go hand-in-hand. Thus, many see ExxonMobil, the largest US oil company, as an extension of the US State Department". And some analysts believe the deal must have been OK-ed by the US State Department in an attempt to undermine the current Iraqi government, led by Prime Minister Nouri al-Maliki, after acrimonious talks about the nature of the upcoming US troop withdrawal. It seemed very unlikely that Exxon could have acted without being given the green light by Washington.

However at a media briefing, officials from the State Department denied that they had known anything about the Exxon deal. "The United States has advised all of our companies, including ExxonMobil, that want to invest in the Iraqi [energy] sector that they run significant political and legal risks if they sign contracts with any parties in Iraq before there has been a national agreement to work out the complex issues having to do with oil revenue distribution within Iraq," an official from the State Department said. The State Department makes it clear that it does not differentiate between north and south by saying "any parties in Iraq", indicating as much disapproval of the Exxon deal in Kurdistan as any deal done in the south.

Meanwhile the Iraqi government is threatening to impose sanctions on any oil company that enters into a separate agreement with Iraqi Kurdistan. Most recently they announced that ExxonMobil would be excluded from the next round of bidding for further contracts. Despite the strong language though, the Iraqi government probably realize the risks of confronting one of the boggest companies in the world whose annual profits are larger that the entire Iraqi budget.

Then again, none of this is new. Baghdad and Erbil have been quarrelling about who controls oil and hydrocarbon policy in Iraq for a long time.

The first attempt at drafting legislation on the main, and possibly only, source of national income for Iraq was made in 2006 and 2007. The draft laws looked promising and were well formulated. However after much tampering and political negotiation - annexing, adding, removing and amending important sections - the law became unworkable and the first attempt to legislate the sector failed. As such, it reflected the dysfunctional nature of Iraqi politics. And amid all the political infighting, a frustrated Iraqi Kurdistan decided to introduce its own oil and gas law.

After the troubled introduction of the first draft of the Oil and Gas Bill in 2007, tensions between Baghdad and Iraqi Kurdistan have escalated. At one stage, all oil exports from out of Iraqi Kurdistan stopped. Baghdad said that it refused to acknowledge any contracts made by Iraqi Kurdistan on its own while the administration in Iraqi Kurdistan said that its right to grant contracts was guaranteed by Iraq's national constitution, which had also given the region its autonomy.

Over the past few years another two further versions of a draft oil and gas law have appeared. And at a recent conference on the subject held in Erbil, comments made by the Minister of Natural Resources in Iraqi Kurdistan, Ashti Hawrami, indicated that there might even be a fourth version (based on 2007's version) sometime soon.

Which is why it is hardly surprising that many ordinary Iraqis are baffled by this issue. There have been many analyses of the various versions and the legal jargon, lack of transparency and different variations of law have confused both legal experts and ordinary people. But it seems clear that it is increasingly important that ordinary Iraqis understand the basic points of the oil and gas debate that there is such fierce political disagreement on.

Simplifying the complexities of this law does not fully explain it but the major items of contention can be narrowed down to the following points.

The Federal Oil and Gas Council

In the 2007 draft of the oil and gas law, legislation specified the creation of a new body: the Federal Oil and Gas Council. One of the issues that Erbil and Baghdad disagree upon is what kinds of powers this council should have.

Before we go any further here, it is also worth discussing the two main players debating this issue in Iraqi politics. The Parliamentary Committee on the Oil and Gas Law (PCOGL) is chaired by Adnan al-Janabi, a member of the Iraqiya bloc, led by former Prime Minister Ayed Allawi that claims to be secular and which is the main opposition to current Prime Minister Nouri al-Maliki's ruling State of Law political bloc. This committee is supported by Kurdish politicians.

The second bloc in the Iraqi Parliament concerned with the oil and gas law is the committee on this issue within the Iraqi cabinet - somewhat confusingly it is also known as the committee on oil and gas law (COGL), except in this case, the committee members are made up from out of council of ministers, or Cabinet, who run the country.

The two parties are divided on what the entirely new body - the Federal Oil and Gas Council - would and would not be able to do.

Without going into major detail, the parliamentary committee wants to give the federal council more teeth, allowing it to have the final say on contracting, that is, which oil companies qualify for work in Iraq. It also wants the federal council's members to include members from itself, the parliamentary committee. The parliamentary committee wants to ensure that the executive branch of the government does not get to make the final decision on oil and gas policy. It wants the federal council to be the most powerful body in this area and this would leave Iraq's Ministry of Oil in a much weaker position.

The cabinet-based committee meanwhile, has quite different ideas and wants the federal council to have more limited powers.

What the parliamentary committee's desires add up to is a much more political process. The wrangling will continue and unless there is always some unanimous decision among the biggest groups, no decisions will be made. That is, business as usual. It's worth noting that this way of legislating currently suits the Kurdish politicians, who are seen as king makers in Iraq. The two major political groups are almost equal in terms of seats in the Iraqi parliament and whoever can bring the Kurds on side wins on the day.

One thing that the parliamentary committee does not mention though is which authority the federal council would be answerable to. Which is why it seems likely that, if they get their way, then a lot of the decision making would take place behind closed doors, debated by the three main political blocs in private.

Interestingly both versions of the oil and gas law appear to try and minimise the Iraqi Parliament's role in the oil sector. This means that a lot of the decision making in this area will be done behind closed doors.

The Ministry of Oil

The draft of Iraq's oil and gas law that the parliamentary committee supports would strip away much of the Ministry of Oil's powers and turn it into a regulatory body, rather than a decision maker. It would still be in charge of important processes - such as auditing, regulations, representation within OPEC (the Organization of the Petroleum Exporting Countries) - but its work would have to be approved by the Federal Oil and Gas Council.

Meanwhile the cabinet-based committee aims to strengthen the Ministry of Oil's power. The cabinet committee is currently the most powerful body in Iraq when it comes to oil policy - it has given itself the responsibility of drafting oil and gas laws and forwarding them to Parliament for debate. And the contention is that the Ministry of Oil is actually just an extension of the Iraqi Cabinet.

The rationale behind reducing the Ministry's power is to keep on decentralising power over the oil and gas sector, which would mean less interference from the federal government in related regional industry. This is something Iraqi Kurdistan is obviously already keen on, as they have their own oil and gas law already.

Additionally, although Kurdish politicians are represented on the Iraqi Cabinet, they don't have enough seats to challenge decisions. If the Federal Oil and Gas Council becomes the most powerful body in Iraq, then the Kurdish politicians would be better represented on it and would have more real power over decisions.

Regional Power

The parliamentary committee, supported by Kurdish politicians, would like to give the oil producing areas of Iraq more power. In the draft law being advocated by the parliamentary committee, regions may grant licenses for oil exploration as well as hold licensing rounds and supervise oil companies working in their own regions. Iraqi Kurdistan is currently the only semi-autonomous oil producing region in the country.

Meanwhile the cabinet-based committee says that licensing should be done by the central government, from Baghdad. Regions can participate but they cannot hold independent licensing rounds - which is what Iraqi Kurdistan has been doing, and what they did with the Exxon contract. This section of the draft oil and gas law is crucial to the Kurdish government.

Another big sticking point here: In order to be defined as an oil producing region and to get a say in decisions, a region must produce a certain amount of barrels of oil per day. The parliamentary committee backed by Kurdish politicians wants an oil producing region to come up with 150,000 barrels per day. The cabinet-based committee wants to reduce this to 100,000 barrels per day. If the cabinet-based committee gets their way then there would be more members eligible to be on any decision making body - such as the federal council - which means they have more chance of outvoting the Kurdish bloc.

Existing Oil and Gas Contracts

The parliamentary committee has said that all the oil and gas contracts granted before the enactment of any new law would need to be reviewed by a new three man commission. This would be made up of the Minister of Natural Resources from Iraqi Kurdistan, the Minister of Oil for Iraq and the head of the parliamentary committee itself.

The aforementioned federal council (which doesn't exist yet) would be given the power to review earlier contracts. However the Kurdish politicians are bound to make sure they are well represented on that council and more than likely, they would veto any decision that renders the earlier contracts illegal.

Sharing Revenues

The method for sharing out the revenues from oil production is currently enshrined in Iraq's constitution. Article 112 of the constitution requires the Iraqi government to distribute revenues to all the peoples of Iraq "in a fair manner" with consideration given to areas that the previous regime led by Saddam Hussein may have neglected or damaged.

At the moment, Iraqi Kurdistan gets 17% of the Iraqi budget. It is possible that a new law on revenue sharing may be introduced. However, trying to do this through the Cabinet committee would not go down very well with the Kurdish bloc because they are happy with the current arrangement and don't want their 17% share reduced.

Transparency and Contracts

The draft laws advocated by the parliamentary committee requires Iraqi and international entities to comply with measures aimed at reducing corruption. However there is not much mention of transparency. Meanwhile the cabinet committee's suggested law shies away from mentioning transparency.

The parliamentary committee doesn't go into much detail about standardised oil and gas contracts and uses relatively unclear language, which could lead to further debate and different interpretations of the law later. Meanwhile the cabinet-based committee tries to limit contracts to services rather than production sharing contracts. The latter are often used by countries that lack expertise or equipment to exploit their own oil resources - they involve the oil company taking on more risk and spending more but there is also more chance of profit for the companies involved.

Most of the contracts already signed in Iraqi Kurdistan were production sharing contracts.

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The main issue in all of this is trust. Or, at least, the distinct lack of it.

The Kurdish demands are clear: they want a decentralised oil industry within a federal Iraq. And the views of the federal government, headed by al-Maliki and represented by the Deputy Prime Minister for Energy Hussain al-Shahristani, are also clear: a centralised oil sector with the central government more powerful in related decisions. Iraq's federal government keeps trying to centralise power but Iraqi Kurdistan, which has been semi-independent for over 20 years, will not play along.

It's also a complex and fraught political issue. Al-Maliki's major opposition, the Iraqiya bloc, is sitting on the fence due to its very mixed composition - it represents both Sunni and Shiite Muslim interests as well as those of secular politicians and ultra-nationalists.

Meanwhile Kurdish politicians currently support al-Maliki's ruling coalition and are part of the ruling alliance, holding a number of important positions. However in the case of oil and gas law, they're working with the Iraqiya bloc. And that is despite deep ideological differences. The Iraqiya bloc is also happy to work with them, as they're pleased for any opportunity to weaken the current Iraqi Prime Minister's position.

In conclusion then, it is obvious that a forced marriage between all partners will simply not work. And that a decentralised Iraq is much better than a dysfunctional Iraq. There are many politicians in Iraq who believed in the utopian vision of a united nation. But this seems an impossible dream.

The Prime Minister of Iraqi Kurdistan, Barham Salih, said as much during the recent oil and gas conference in Erbil. To those who are still clinging to that vision, Salih said "it is time to move on".

This article first appeared on Niqash]]>