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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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    The turning point in the energy dispute between Iraq and the "Kurdistan Regional Government"

    Rocky
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    • Post n°1

    The turning point in the energy dispute between Iraq and the "Kurdistan Regional Government" Empty The turning point in the energy dispute between Iraq and the "Kurdistan Regional Government"

    Post by Rocky Sat 18 Feb 2023, 5:57 am


    [size=32]The turning point in the energy dispute between Iraq and the "Kurdistan Regional Government"

    - One Day Passed
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    Baghdad's legal gains will mean little if it mishandles political objectives, angers Turkey, and further damages Iraq's reputation as a reliable oil partner.
    The recent rulings of the “Federal Supreme Court” in Iraq and another imminent ruling by the “International Court of Arbitration” will certainly strengthen Baghdad's position to rein in the energy sector in Kurdistan. The Iraqi federal government could enjoy such legal benefits. However, it may complicate the political, diplomatic, and industrial impasse with Turkey and the KRG unless Baghdad adopts policies properly.

    One country, two energy policies

    Since 2014, energy and industry policy in Iraq has been divided between the federal government and the KRG. Despite the ambiguity surrounding the Iraqi constitution, it calls for the sharing of responsibility between these two governments regarding the oil and gas sector. However, the Iraqi parliament has not yet passed a national oil and gas law that defines these rights and responsibilities. And in [You must be registered and logged in to see this link.] , politics prevail. While each side created facts based on its interpretation of the constitution, it ended up creating two sets of the country's energy policies, contract models, international oil companies and buyers.
    The Iraqi government has sought, with force and influence, to return the KRG's energy sector to Baghdad's control. It used its political, legal, military and budgetary ingenuity. In turn, the KRG resisted these pressures. The short-sighted balance of power and political deal-making outweighed the more stable and mutually beneficial legislative and economic measures. The country has suffered as a result. and Iraq's failure to maximize revenue from oil sales or to communicate uniformly with international oil companies or OPEC. It is complete control that overshadows transparency and good governance. Contrary to its inception, Iraq's oil federalism—that is, the decentralization of oil policy and revenue streams—has not yet become a panacea for the infamous oil curse.

    Local problems, international repercussions

    When a dispute between Kurdish and Iraqi parliamentarians prevented the passage of a national oil and gas law in 2007, the KRG parliament passed its own law. The newly created Ministry of Natural Resources began entering into production-sharing contracts with international oil companies. Short of capital and technology, the KRG contract model would pass the risk of investment to the companies, but would then reward them handsomely if they discovered oil. Such partnerships with foreign firms have been satisfactory to the Kurdish government, which owes its existence and survival to Western support.
    However, this was disgraceful to the Iraqi government, where oil nationalism still exists. In the absence of a new oil law, the Iraqi government continued to run the energy sector on the basis of existing laws dating back to the Saddam era. Then came the dispute over oil exports. As soon as oil began flowing from the fields of the "Kurdistan region", the "regional government" began looking for an outlet. It signed a long-term agreement with Turkey and built a domestic pipeline linked to the Iraq-Turkey pipeline. By May 2014, KRG oil was flowing to international markets through the Ceyhan terminal.
    Immediately, the Iraqi government sued Ankara in the International Court of Arbitration for allowing Kurdish oil to flow without Baghdad's consent. After repeated delays due to the pandemic, the deaths of arbitrators, and requests from the Turkish government and the KRG that Baghdad halt its proceedings, the arbitrators issued an award in early 2023. Although details of the award have not been completed and it has not yet been announced, it is expected to be In favor of Iraq, which demanded compensation of $ 36 billion. Although Turkey is the defendant in the lawsuit and not the "Kurdistan Regional Government", it is expected that the latter will be the biggest loser.
    The arbitral award is the latest example in Baghdad's pressure campaign against the KRG. When KRG oil exports became imminent, the federal government cut the KRG's share of the national budget, causing a fiscal crisis from which the KRG never fully recovered. Since then, many budget deals have been struck and broken, according to oil prices and the balance of power between Erbil and Baghdad. For example, after Kurdish Peshmerga forces prevented the Islamic State (from advancing), they took over Kirkuk and its oil fields in 2014, and the Iraqi government relied on the KRG pipeline to export Kirkuk oil. However, Baghdad resumed its pressure shortly after Iraqi forces recaptured Kirkuk following the KRG's 2017 independence referendum.
    In addition to political and budgetary pressures, two rulings by Iraq's Federal Supreme Court have put more pressure on the KRG. In February 2022, [You must be registered and logged in to see this link.] that its oil exports and contracts were illegal. Adding insult to injury to the KRG's financial damages, the Federal Supreme Court ruled in January 2023 that transfers of the federal budget to the KRG were illegal.
    Indeed, the Federal Supreme Court tied the hands of the new Iraqi prime minister, Muhammad Shia al-Sudani, and his reconciliation efforts with Erbil. KRG officials pointed to Iran's influence on the FSC's sudden activity, especially since it coincided with direct and indirect Iranian attacks on the KRG's energy infrastructure. Iran rained [You must be registered and logged in to see this link.] of a Kurdish oil official, [You must be registered and logged in to see this link.]

    Own goals and race to the bottom

    The decade-old conflict between Baghdad and Erbil has been nothing more than a win-win dynamic for both sides. Pressure from Baghdad and evasive tactics by Erbil undermine the possibility of connecting their respective energy industries and maximizing revenues for their public coffers. Baghdad had decided earlier to include any company operating in Kurdistan on the blacklist, which led to the fragmentation of the energy market in Iraq.
    On the other hand, Erbil was selling its oil at a significant political discount, averaging $15-18 less than Brent crude in 2022. As the KRG lost revenue, it did not acquiesce to Baghdad, but conceded to Turkey, international oil companies, and oil traders. Oil, burdening its financial resources with debts amounting to billions. Hence, the KRG's finances are unsustainable even with high oil prices. In 2022, 60 percent of all oil revenues will go to paying off the KRG's debts. The bloated public sector in the "regional government" consumes $800 million a month. Such legal disputes and hateful policies multiply existing corruption, increase militia infiltration, and alienate investors.
    Despite Iraq's promises, "Exxon" and "Shell" companies hesitated about their investment prospects. Iraq continues to buy expensive Iranian gas and energy to make up for a third of what it needs while burning half of the natural gas it produces.
    Despite the KRG's nascent energy sector, its goals have been no less harmful. As Baghdad became increasingly strict in its dealings with the "regional government", the Kurdish parties abandoned Iraqi politics and deepened their relations with Ankara and Western oil traders, where Kurdish influence is significantly weaker. With Turkey's support, the KRG was able to delay the International Court of Arbitration's decision. However, the KRG did not use the time it gained to push for the passage of an appropriate national law for oil and gas in Baghdad.
    The missed opportunities included the influence that Kurdish parties have enjoyed after the elections and government formation processes since 2014. This influence was lost due to conflicts and higher government jobs. Despite the questioning of the constitutionality and integrity of the Iraqi “Federal Supreme Court,” the parties of the “Kurdistan Regional Government” voted in favor of the establishment of the “Federal Court” and they have representatives in it.
    Although downsizing the KRG's energy industry has been among the few consistent Iraqi policies across the various governments, Baghdad has been pressing the door increasingly open. Internal cohesion was at an all-time low since the Kurdish civil war of the 1990s. The dispute deepened between the “Kurdistan Democratic Party” and the “Patriotic Union of Kurdistan” regarding the management of the energy sector in the “Kurdistan region” and the flow of its revenues.
    Since the death of PUK leader Jalal Talabani, the balance of power has shifted in favor of the KDP. It should be noted that Nechirvan Barzani, who served as prime minister from 1999 until he became president in 2019, is the architect of the oil and gas sector in the KRG. To protect the energy industry from being divided along party lines along the lines of the Kurdish Peshmerga, Nechirvan adopted a conciliatory approach toward the weaker PUK.
    However, his cousin, Prime Minister Masrour Barzani, seems intent on forcing the PUK to become the junior partner as he sees fit. The PUK is weaker but still an active source of disruption. And when Prime Minister Barzani offered the prospect of tapping Kurdistan's gas to the energy-strapped Europeans in mid-2022, investors were unresponsive. The bulk of Kurdistan's natural gas is located in areas controlled by the Patriotic Union of Kurdistan, which Masrour cannot speak of or as the Patriotic Union.
    Since October 2022, the Patriotic Union of Kurdistan has boycotted KRG cabinet meetings. As pressure mounts on the KRG, the PUK may break away from the KRG's unified energy policy from now on and move forward on its own. Late payments and personal snubs have also chronically strained Masroor's relationship with international oil companies at a time when the KRG needed them most, most recently causing the withdrawal of Trafigura, which trades oil.

    We invite you not to waste the crisis

    The unified government of the "Kurdistan region" will be the basic building block for moving towards (consolidating) an Iraqi energy sector based on solid legal foundations and contributing to Iraq's energy security and independence. However, Baghdad welcomes the opportunity to deal separately with the KDP and the Patriotic Union of Kurdistan rather than with the unified government of the Kurdistan Region. This will further delay the issuance of much-needed legislation regulating the national energy sector.
    Without the unity of the "Kurdistan Regional Government", the Iraqi Council of Representatives can pass an oil and gas law that ignores the input of the "Kurdistan Government". In the past, both sides opted for short-term provisions in the annual budget law, but they were divided by mistrust. Populism was also devastating.
    There is no shortage of ideas and proposals to resolve the conflict between the "Kurdistan Regional Government" and Iraq. Numerous negotiations took place on contractual and export rights, in addition to advice provided by international agencies. But trust and political will are the two weak points. [You must be registered and logged in to see this link.] in accordance with constitutional requirements should be the first program of action.
    Without an agreement between the KRG and the federal government, Iraq will likely turn its legal victory in the Court of Arbitration into a political loss. The populists in Baghdad crave an international victory. But the wiser actors know what's best. Turkey will not hand over billions of dollars in compensation to Iraq, nor will it abandon its lucrative deal with the KRG. Even if Turkey backs down, it will pass its losses on to the KRG and demand a more favorable KRG gas deal.
    [You must be registered and logged in to see this link.] devastating earthquake , at a time when its domestic politics are preoccupied with crucial elections scheduled for May. The pressure on the Turkish president, who is in a state of tension, may backfire on Iraq diplomatically. Turkish exports to Iraq amounted to $13.7 billion in 2022, and the Sudanese Prime Minister believes that Turkey is Iraq's gateway to Europe.
    And if Iraq is further empowered by legislation for the Federal Supreme Court and oil and gas, it could strike a grand bargain with Turkey on water flows, border security, and energy exports. In addition, Iraq's neighboring Arab countries will be watching Baghdad's actions, especially as they seek to further link their economies to Iraq's economy, as in the case of connection to Iraq's electricity grid. Iraq is said to be close to connecting its electricity network to the Gulf Network, known as the Gulf Cooperation Council Electricity Interconnection Authority. Another example of Gulf investment is the Saudi Sovereign Wealth Fund, which has allocated about $10 billion to invest in Iraq.
    The impact of internal disputes between the ruling Kurdish parties and between the "Kurdistan Regional Government" and the Iraqi government extends to Iraq's relations with Iran. The Islamic Republic would loathe the idea of ​​not constraining Iraq's energy and gas sectors. Iraqi militias with close ties to Iran have targeted international oil companies operating in Iraq and Kurdistan, such as the Basra oil fields and Kormor gas field in Kurdistan.
    The United States also monitors this area. Washington has extended successive waivers allowing Iraq to import Iranian gas, on the condition that Baghdad takes steps towards energy independence. However, Iraq is still addicted to (buying) gas and energy from Iran.
    Given the energy shortages in Europe caused by Russia's war in Ukraine, the United States has worked to urge Iraq and the KRG to increase gas production and seek to export it. The KRG concluded a contract with the Russian company Rosneft to build a gas export pipeline. However, the intensification of the Russian role in the energy sector in the "regional government" is questionable in the near term.
    The dispute calls for the mediation of a certain party between the "Kurdistan Regional Government" and Baghdad. However, the United States has not played a mediating role since 2008, while the KRG and Baghdad have resorted to blame games rather than conflict resolution. Although neither side asked Washington to mediate, the US Department of Energy issued [You must be registered and logged in to see this link.] on the promise of (providing) gas from the "Kurdistan region" to contribute to the rationalization of these negotiations. On the other hand, oil markets may quickly lose 400,000 barrels of oil that the KRG is currently exporting if the crisis is not dealt with wisely.
    Bilal Wahhab
    The Washington Institute
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