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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    An Emirati report monitoring developments in the oil dispute between the federal government and the

    Rocky
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    An Emirati report monitoring developments in the oil dispute between the federal government and the Empty An Emirati report monitoring developments in the oil dispute between the federal government and the

    Post by Rocky Wed 15 Feb 2023, 1:47 pm

    [size=30]An Emirati report monitoring developments in the oil dispute between the federal government and the Kurdistan region
    [ltr]2023.02.15 - 18:54[/ltr]
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    Baghdad - Nas   
    An Emirati report monitored developments in the oil dispute between the federal government and the Kurdistan Regional Government.  
      
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    The report, published by the "Emirates Center for Policy" and seen by "NAS", (February 15, 2023), says, "The oil dispute between the federal government and the Kurdistan region of Iraq over a decade caused a loss for both parties, as the arm-twisting process on the part of Baghdad and the evasive methods of Erbil side to undermine the possibility of linking their energy industry, and to maximize their financial returns from the sale of oil.  
      
    The report added, "It is possible that Baghdad's legal victory in the International Court of Arbitration, and after the ruling of the Federal Supreme Court issued on January 25, 2023, will turn into a political loss in the event that an agreement is not reached between the Kurdistan Region of Iraq and the federal government."  
      
    He continued, "Unifying positions in the Kurdistan region represents the cornerstone for moving forward towards forming the Iraqi energy sector on solid legal foundations. However, Baghdad will welcome any opportunity to strike separate deals with each of the two main Kurdish parties instead of dealing with the Kurdistan region as a unified entity."  
      
    He pointed out that "the dispute between Baghdad and Erbil over energy requires mediation that is acceptable to both parties, and the United States seems to be a candidate to play this role. Although the two parties did not ask Washington to mediate in their dispute, the US Department of Energy prepared a special report on the promising future of the gas sector in Kurdistan Region, to help encourage and justify such negotiations.”  
      
    The following is the text of the report:  
    On January 25, 2023, the Federal Supreme Court of Iraq issued a final and binding ruling annulling all government decisions related to transferring funds to the Kurdistan Region. It is certain that this ruling, along with the other ruling issued by the International Court of Arbitration regarding the export of the Kurdistan region's oil via Turkey, will strengthen Baghdad's position seeking to control the energy sector in the Kurdistan region of Iraq. Although the Iraqi federal government can currently enjoy such legal victories, if Baghdad does not manage this issue intelligently, these victories are likely to further complicate the many political, diplomatic and economic quarrels the government faces with Turkey and the KRG.  
      
    One country, two energy policies  
    Since 2014, the administration of the Iraqi energy sector has been divided between the Iraqi federal government and the Kurdistan Regional Government. The Iraqi constitution provides for joint responsibility between the federal government and the Kurdistan Regional Government over the oil and gas sector. However, these texts are ambiguous, and Baghdad and Erbil adopt different interpretations of them. Also, the Iraqi Parliament has not yet been able to ratify the Federal Oil and Gas Law, which is supposed to clearly define these rights and responsibilities. Political deals and fait accompli dominated the situation in the absence of such a law, as each side began shaping the facts on the ground based on its own interpretation of the constitution. Iraq ended up with two different sets of policies for managing the energy sector, contract models, international oil companies, and buyers.  
      
    Meanwhile, the Iraqi government sought to return the energy sector in the Kurdistan region to Iraqi sovereignty using elements of its political, legal, financial and military power, but the KRG resisted these efforts. This competition has exhausted a lot of energy and resources, and imposed its influence on the legislative and economic tracks in the form of depriving the country of the long-term benefits of regulating the energy sector and reaching a sustainable agreement between the two parties. As a result, Iraq has failed to maximize its revenues from oil sales, or to speak with one voice to international oil companies or to OPEC. Desires for political control trumped transparency and good governance. Contrary to the goal that was sought when establishing the Iraqi oil federation, this federation did not turn into a remedy for the reality of Iraq as a rentier country that is highly dependent on oil as its main source of income.  
      
    Local problems with international repercussions  
    The Parliament of the Kurdistan Region of Iraq enacted its own law when a dispute between Baghdad and the Kurdistan Region delayed the ratification of the draft oil and gas law in 2007. The newly formed Ministry of Natural Resources in the region began signing co-production agreements with international oil companies, adopting a contracting model aimed at transferring risks The investment went to the companies, but in return he rewarded these companies handsomely if they discovered oil. And while such partnerships with foreign companies were accepted by the Kurdistan Regional Government, which owes its existence and survival to Western support, the Iraqi government rejected this type of contract that makes foreign companies co-ownership of the fields, and found in it an abandonment of the national rights to be the owner of the oil fields before. The Iraqi state (where the Federal Ministry of Oil relies on the model of service contracts rather than partnership contracts).  
      
    Then came the dispute over oil exports, when the KRG began looking for an export outlet as soon as its oil fields started producing, signing a long-term agreement with Turkey and building a local pipeline linking to the Iraqi-Turkish pipeline. By May 2014, the oil of the Kurdistan region of Iraq began to flow to international markets through the Turkish port of Ceyhan. Then the Iraqi government hastened to file a case against Ankara in the International Court of Arbitration because of its permission to export the oil of the Iraqi Kurdistan region through the joint oil pipeline without the approval of Baghdad. After repeated delays due to the Corona pandemic, the death of some arbitrators, and the Turkish and Kurdish governments’ request to Baghdad to stop legal procedures, a draft ruling was issued by the International Court of Arbitration in January 2023. Although the details of the ruling were not published in its final form, it is expected to be in favor of Iraq, which Claims damages of $ 36 billion.  
      
    The arbitration decision is the latest episode in the pressure campaign launched by Baghdad against the Kurdistan Regional Government of Iraq. In addition, the federal government reduced the region's share of federal budget allocations, which caused a financial crisis from which the KRG never recovered. Since then, the two sides have reached several short-lived circumstantial budget agreements, depending on oil prices and the balance of power between Erbil and Baghdad. For example, the Iraqi government - after repelling the "ISIS" organization and the Peshmerga forces' control of Kirkuk and the oil fields in 2014 - began relying on the oil pipeline in the Kurdistan region of Iraq to export oil from Kirkuk. However, Baghdad resumed its pressure on the Iraqi Kurdistan Regional Government after Iraqi forces regained control of Kirkuk following the independence referendum in the Iraqi Kurdistan Region in 2017.  
      
    The rulings issued by the Federal Supreme Court in Iraq put more pressure on the Iraqi Kurdistan Regional Government, in addition to political and financial pressures. In February 2022, the Federal Supreme Court in Iraq issued a ruling ruling that the oil and gas law of the Kurdistan Regional Government, issued in 2007, was unconstitutional, and considered the oil contracts and exports signed by the regional government illegal. Perhaps what increased the financial difficulties of the regional government was the ruling issued by the same court in January 2023, which ruled that federal financial transfers to the region were illegal. This ruling restricted the ability of the new Iraqi prime minister, Muhammad Shia' al-Sudani, to reach a compromise with the KRG.  
      
    Own goals and race towards the abyss  
    The decade-long conflict between Baghdad and Erbil caused a loss for both sides. Arm-twisting on the part of Baghdad and evasive tactics on the part of Erbil undermined the possibility of linking the energy industry of the two parties and maximizing treasury returns for each. Baghdad had decided early on to put any company operating in the Kurdistan region of Iraq on the blacklist, which led to the suspension of the activity of some companies, and the deprivation of the country of opportunities to increase production and develop the energy industry.  
      
    For its part, the Kurdistan region of Iraq used to sell its oil at very low prices, about 15-18 percent less than the price of Brent crude, in order to facilitate its exports and secure external support. Because of the regional government's refusal to bow to Baghdad, it was forced to rely on Turkey, international oil companies and oil traders, which caused it to lose many revenues and exhaust its treasury with debts amounting to billions of dollars. Therefore, the KRG's income is not sustainable even when oil prices rise, as 60% of total oil revenues for 2022 were used to service debts. The bloated public sector in the Kurdistan region of Iraq also consumes about $800 million a month, paid in the form of salaries and to ensure the loyalty of the local population. Such a legal dispute and short-sighted policy exacerbate already endemic corruption, infiltrate militias and alienate investors. Despite the Iraqi reassurances, Exxon and Shell are concerned about the prospects for their investments in Iraq.  
      
    And when the federal government in Baghdad became stricter with the regional government after the independence referendum crisis in 2017, the Kurdish parties moved away from the Iraqi political arena, and the dominant Kurdistan Democratic Party strengthened its relations with Ankara and oil traders, but mostly from a weak position. Although the regional government succeeded - with Turkish support - in delaying the issuance of a ruling by the International Court of Arbitration, it failed to use the time it gained to push for the enactment of a favorable federal oil law in Baghdad. Among the missed opportunities for the Kurdish parties is the exploitation of the influence that is provided to them after each electoral season due to the need for their votes in the processes of forming successive governments. Instead, it squandered that influence on struggles for power and high government jobs.  
      
    Baghdad also benefited from the weak internal cohesion in the region, especially due to the competition between the two major parties, the "Kurdistan Democratic Party" and the "Patriotic Union of Kurdistan", between which the dispute deepened over the management of the energy sector and its revenues, especially after the shift in the balance of power in favor of the "Kurdistan Democratic Party". Since the death of the leader of the Patriotic Union of Kurdistan, Jalal Talabani. Nechirvan Barzani, the former prime minister of the region and the architect of the oil and gas sector in Iraqi Kurdistan from 1999 until he became president of the region in 2019, took a conciliatory approach to managing the bipartisan dispute in order to protect the energy industry from being divided along party lines (and the consequent consequences). Division within the Kurdish Peshmerga).  
      
    But his cousin, the current prime minister, Masrour Barzani, is taking a more hard line, and seems intent on forcing the PUK to act as junior partner in this regard; Although the Patriotic Union of Kurdistan is in a weaker position today, it is still able to play a disruptive or disruptive role. When Prime Minister Barzani promoted in mid-2022 the possibility of supplying gas to the Europeans as a result of the crisis caused by the Russian-Ukrainian war, investors did not show much interest in this regard, as the bulk of the natural gas fields in Iraqi Kurdistan are located in the areas controlled by the Patriotic Union of Kurdistan. ", which Masrour Barzani cannot speak about. Since October 2022, representatives of the Patriotic Union of Kurdistan have boycotted the meetings of the Kurdistan Regional Council of Ministers. Consequently, pressure is mounting on the KRG, and the Patriotic Union of Kurdistan may distance itself. himself on the unified energy policy in the region from now on, and follows a policy of his own. The permanent delay in financial payments and personal clashes negatively affected Masrour Barzani's relationship with international oil companies, which the region needs now more than ever before, and a problem in this regard led to the exit of the "Trafigura" oil trading company from the region.  
      
    Does the crisis continue without a solution?   
    The unification of positions in the Kurdistan region represents the cornerstone for moving forward towards forming the Iraqi energy sector on solid legal foundations, and in a way that contributes to energy security and independence in Iraq. However, Baghdad would welcome any opportunity to cut separate deals with each of the two main parties rather than treat the Iraqi Kurdistan Region as a unified entity. Such a policy will cause delays in passing the necessary legislation that would regulate the national energy sector. In the absence of unity in the Kurdistan region, the Iraqi parliament can pass a national oil law that ignores the region's views and point of view. In the past, both sides have resorted to short-term provisions in the annual budget law just to break the cycle of suspicion and mistrust. There are also damages resulting from the populist approach in dealing with the issue on both sides.  
      
    The solution to the conflict between the central government in Baghdad and the Kurdistan Region of Iraq is not lacking in ideas and proposals. Many rounds of negotiation were held between the two sides on contractual rights and export, as well as the advice provided by international agencies in this regard. The problem is that the two sides lack mutual trust and political will, and since the rule of law guarantees accountability, the first action that should be taken is to create a new Federal Supreme Court as per constitutional requirements.  
      
    In addition, it is likely that Iraq's legal victory in the Court of Arbitration will turn into a political loss in the event that an agreement is not reached between the Kurdistan Region of Iraq and the federal government. The populists in Baghdad need an international victory, but the wiser actors know better that Turkey will not pay billions of dollars in compensation to Iraq, nor abandon its lucrative deal with the Kurdistan region of Iraq. Even if Turkey changes its position, it will bear the losses of the Kurdistan region of Iraq, and will demand the conclusion of a more favorable gas deal with the region. Moreover, the timing is important now, as Turkey is suffering the effects of the recent devastating earthquake at a time when its politicians are preoccupied with the crucial elections scheduled for next May; Putting pressure on the Turkish president, who is currently on edge, could backfire on the diplomatic front. The value of Turkish exports to Iraq reached $13.7 billion in 2022, and Turkey is Iraq's gateway to Europe. As a better alternative, Iraq could reach a grand bargain with Turkey on water flows from its territory, border security, and energy exports if the appropriate Federal Supreme Court is formed and the necessary legislation in the oil and gas sector is enacted. In addition, the Arab countries neighboring Iraq are closely watching Baghdad's actions, especially in light of its efforts to link their economies to the Iraqi economy.  
      
    The impact of the internal conflicts between the ruling Kurdish parties on the one hand, and between the Kurdistan Regional Government and the Iraqi government on the other, extends to Iraq's relations with Iran, and beyond that. Iran is not pleased to see Iraq achieve more independence in the electricity and gas sectors. Iraqi militias closely related to Iran have targeted the activity of international oil companies operating in Iraq and in the Kurdistan region of Iraq, such as the Khor Mor gas field. The United States is also watching this issue. Washington has issued successive sanctions waivers allowing Iraq to import gas and electricity from Iran on the condition that Baghdad promises to take steps to achieve its energy independence in the future. However, Iraq remains highly dependent on Iranian sources of electricity and gas, and little progress has been made in this regard.  
      
    In a related context, the Kurdistan region of Iraq concluded a permanent contract with the Russian company Rosneft to build a gas export pipeline, although Russia's growing role in the energy sector in the Kurdistan region in the near term is still in doubt. The dispute between Baghdad and Erbil over energy requires mediation, but the last time Washington seriously engaged in this field was in 2008. Although the two parties did not ask Washington to mediate on this issue, the US Department of Energy prepared a special report on the promising future of the energy sector. gas in the Kurdistan region to help encourage and justify such negotiations. On the other hand, the oil markets could quickly lose 400,000 barrels of oil, the amount the Kurdistan Region currently exports, if the current crisis is not handled wisely.  
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