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Economy News _ Baghdad
A press report, Tuesday, shed light on the nature of the oil disputes between the federal government and the Kurdistan region, in conjunction with the intensification of political skirmishes between the two parties.
The following is the text of the report published by Agence France-Presse and followed by "Economy News":
“Oil and its revenues have returned to a point of contention between the federal government and the Kurdistan region, while these current tensions resulting from endless political skirmishes threaten to weaken the desire of foreign investors to head to Iraq.
Since the beginning of the year, strained relations between the autonomous Kurdistan region and Baghdad have manifested in the judiciary.
Erbil believes that the central government is seeking to put its hand on the region's oil wealth, while Baghdad demands that it have its say in managing the oil resources that are extracted from Kurdistan.
Iraq is the second largest oil country in the Organization of Petroleum Exporting Countries (OPEC), and it exports an average of 3.3 million barrels of crude oil per day. As for Kurdistan, it produces more than 450 thousand barrels per day.
It is impossible to understand this dispute between the two parties without returning to the political crisis that has paralyzed Iraq since the legislative elections in October 2021. Political leaders in the region, as in Baghdad, are unable to agree on the name of a new prime minister and president of the republic.
Researcher Bilal Wahab of The Washington Institute for Near East Policy believes that "in the oil file, each of the two sides uses the carrot and stick method, and this depends on the prevailing political atmosphere."
He adds, "When there was a political agreement, the courts remained silent. The opposite happened when the disputes started."
In February, the Federal Supreme Court in Baghdad ordered the Kurdistan region to hand over oil produced on its territory to the central government, giving Baghdad the right to review and cancel oil contracts with the region.
And the Federal Court considered that a law passed in Kurdistan in 2007 to regulate the oil and gas sector was contrary to the constitution.
Since then, the Iraqi government has been trying to implement this decision.
At the invitation of the Ministry of Oil, a court in Baghdad in early July canceled four contracts between the Kurdistan region and Canadian, American, British and Norwegian companies.
It is also possible that the cancellation will affect three other foreign companies, whose decision is expected to be decided by the same court, as a senior official in the oil sector in Baghdad warned in an interview with Agence France-Presse, preferring to remain anonymous.
Yasar Al-Maliki, an economist in the Middle East Economic Survey MEES, considers that "when Baghdad expels foreign oil companies from Iraqi Kurdistan, this does not give Iraq the image of an important oil producer, which welcomes foreign investment."
The Kurdistan region wants to open the door to negotiations in order to preserve its independence in the field of oil. And he is working to establish two companies concerned with oil exploration and marketing, working in partnership with Baghdad, and this proposal was presented to the federal government, according to a spokesman for the local government in Erbil.
However, in early June, the region initiated two judicial moves, one of which targets Oil Minister Ihsan Ismail, whom Erbil accuses of trying to “intimidate” foreign companies operating in Kurdistan, according to a statement.
Bilal Wahhab believes that the two parties do not realize to what extent they "damage the public reputation of the Iraqi energy sector."
He adds that "the status of the sanctity of contracts is under question...adds legal risks to other organizational and governance risks that Iraq suffers from," adding that the dispute between the two parties "repels foreign investments that Iraq badly needs."
In a victory for Baghdad, Schlumberger, Baker Hughes, and Halliburton announced that they would not "apply for new projects in the Kurdistan region in compliance with the decision of the Federal Court." It added that it "is now in the process of liquidating and closing the existing tenders and contracts."
Relations between Baghdad and the Kurdistan region, which has been autonomous since 1991, are witnessing constant fluctuation.
Theoretically, the Kurdistan region was supposed to deliver 250,000 barrels of oil per day to be exported from Baghdad, in return for a share of the general budget paid as salaries for government employees and other expenses. But Erbil never delivered the oil, and payments from Baghdad were not regular
In recent weeks, missile attacks, not claimed by any party, targeted oil or gas sites in the region. Experts see this as an attempt to put more pressure on the Kurdistan Democratic Party, which is in power in Erbil, given that the dispute over the oil file is closely linked to the political crisis.
The Kurdistan Democratic Party seeks to obtain the presidency of the republic, which is usually held by its political opponents from the Patriotic Union of Kurdistan.
Yasar al-Maliki explains that "the sequence of events shows that this crisis began when the Kurdistan Democratic Party brought the Sadrist movement closer to confronting the coordinating framework," referring to an alliance that brings together several Shiite parties.
But "Iraq is a country based on compromises," according to al-Maliki.
In order to end the oil dispute with Erbil, al-Maliki believes that the best solution is a "political agreement" that guarantees Baghdad's adoption of a "flexible" law regulating the management of the oil file.
The expert adds that "pending this, the decision of the Federal Supreme Court will remain as a sword for Kurdistan."