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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 Washington Institute: The oil agreement between Baghdad and Erbil will not last more than 6 mont

    Rocky
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    • Post n°1

    The Washington Institute: The oil agreement between Baghdad and Erbil will not last more than 6 mont Empty The Washington Institute: The oil agreement between Baghdad and Erbil will not last more than 6 mont

    Post by Rocky Thu 13 Apr 2023, 4:57 am

    The Washington Institute: The oil agreement between Baghdad and Erbil will not last more than 6 months

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    Economy News-Baghdad
    An article by a writer from the Washington Center for Studies talked about the oil agreement concluded between Baghdad and Erbil regarding the export of oil from Kurdistan via Turkey, suggesting that the agreement will expire within 6 months.
    Full text of the article:
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    Iraq's bloated budget for 2023 has made way for the Kurds to get a share of the wealth this year, but preparing for the next opportunity for lasting solutions is even more important.
    On March 16, the deputy head of the Iraqi Kurdistan Regional Government, Qubad Talabani, spoke publicly about a new draft federal budget law for 2023 that includes provisions allowing the Kurds to receive a per capita share of planned expenditures. It is true that Parliament has not yet ratified this law despite the passage of 3 full months of this year, but the actual test will be its implementation, especially if the global price of a barrel of oil approaches the level of $70, or less, expected in the budget. Assuming the success of the KRG-Baghdad agreement, policymakers should think ahead about the technical and political challenges to its implementation, second-order unintended effects, and possible implications for broader understandings on federalism.
    What was just agreed upon?
    The respective budget lines will allow the region's four provinces to obtain a share of federal expenditures. Unlike Iraq's fifteen other governorates - which are officially referred to as "provinces not organized into a region" - the region has its own parliament, government and system of ministries, so most of its government functions are not serviced directly by line ministries within the budget. Instead, the region was forced to negotiate on more than one occasion a per capita share of the cost of services usually provided by federal ministries to the provinces (so-called "non-sovereign spending"). For its part, Baghdad has had to account for the various revenues generated by the region that are not usually achieved by an "individual" province - most notably the revenues from the production of 400,000 barrels of oil per day. These gains were often deducted from the "Kurdistan region" allocations in the federal budget.
    During the past years, debates over these allocations and deductions were mixed with broader questions related to the principle of federalism: Does the region have the legal authority to explore for and market oil? What should be the per capita share of non-sovereign spending in the absence of an official population census? What percentage of the budget should be allocated to non-sovereign expenditures? The government's approval of the current draft budget does not definitively answer these questions - it is simply an indication that temporary arrangements are once again being put in place for the opening of the national coffers.
    Indeed, each of Iraq's factions has its own strong motive for passing the budget as soon as possible. After a year-long wrangling government formation process following the 2021 parliamentary elections, the country was left without a budget in 2022, with expenditures limited to paying salaries and pensions. As a result, investments were frozen at a time when oil prices were high, and federal reserves have built up, now at a whopping $115 billion. This year, all factions are eager to take advantage of the resulting larger-than-usual budget, which is expected to include $152 billion in spending — a full 50 percent of the 2021 budget. So, allocating a share to the Kurds is within everyone's reach this year, and can The KRI's spending needs are met (albeit barely) without focusing on other beneficiaries.
    What is left to negotiate?
    In practice, a lot of decisions still need to be made, Talabani noted. Among the most important outstanding issues is the marketing of the quantities of oil produced by the "Kurdistan Region of Iraq", amounting to 400 thousand barrels per day, and the method of managing the generated revenues. In the past, Baghdad has devised overly complex schemes for the region to force it to hand over all or part of its oil exports to the federal authorities at the port of Ceyhan on the Turkish coast, where the pipeline route between Iraq and Turkey ends. This time, however, it appears that Baghdad will settle for a more pragmatic approach. Under the terms of the current budget bill, the region will market its oil and deposit the revenue into a bank account that federal officials can monitor. After that, Baghdad will deduct that amount from its monthly allocation to the region, with any excess money owed to the Kurds being transferred.
    But the arrangement will only be in effect for a year - perhaps only half a year in practice, given that finalizing the budget could take a few more months. A more sustainable system cannot be imposed until Iraq passes a federal oil and gas law, and perhaps a revenue sharing law as well. Only through a legal settlement at this level may be sufficient to reconsider the decision of the Federal Supreme Court issued in February 2022, which ruled the unconstitutionality of the Kurdistan Region's oil exports, otherwise the oil and gas law approved by the regional government in 2007 and related investment contracts will remain unconstitutional. legitimacy.
    Likewise, Baghdad, the KRG, and other oil-producing provinces need to agree on a few more things if they hope to facilitate further progress on these issues after the 2023 budget agreement: 
    Revenues are shared according to a fixed formula. In addition to determining the per capita share in the region of non-sovereign expenditures, Baghdad must resolve the debate over sovereign and non-sovereign expenditures. Thus, she has to determine the size of the "candy" from which the territory will get a piece. Lest such an agreement arouse resentment among the non-Kurdish voter base, the government would do well to include compensatory incentives in the executive ministry's projects in oil-rich southern Iraq for 2023 and 2024.
    Introduce gradual changes to oil marketing. For starters, the KRI must market its oil to pay off debts owed to traders amounting to $3.5 billion, as Baghdad appears unwilling to bear the arrears. After the debts are paid off, a joint oil marketing arrangement could be reached along the lines of the frequently floated proposal to establish the Iraqi and Kurdish Oil Marketing Company ("SCOMO").
    Exception to existing contracts. Any change in international contracts - almost all of which are codified in English law for arbitration in foreign courts - would lead to many lawsuits that would harm Iraq's level of friendship with investors. Thus, it is necessary for any new oil and gas law to exclude the clauses of existing contracts signed under the Kurdistan Oil and Gas Law of 2007.
    Introduce gradual changes to the governance of the sector. Leniency is necessary when managing the energy sector in the Kurdistan Region. If the proposed "Kurdish Regional Oil Company" is established as a joint venture between the federal and Kurdish ministries of oil, it should be given full local authority to approve annual plans and budgets for field development. This would require a future "Federal Oil and Gas Council" to create a cooperative mechanism that would allow Baghdad and Kurdistan to distribute production increases and cuts (for example, in order to meet OPEC quotas).
    Carrying out economic reforms in the region. Despite the large share of the huge national budget allocated to Kurdistan, the region will hardly be able to balance its regional budget this year. The situation is likely to be better in the coming years, so the KRG should prepare by undertaking economic reforms such as reducing subsidies, increasing efficiencies, and transferring public sector employees to the private sector.
    American role
    Twenty years after the US invasion to topple Saddam Hussein's oppressive regime, helping Iraq reach a lasting peace with the country's largest ethnic minority remains one of Washington's most significant accomplishments. The author of this article had published an article in 2022 entitled "The United States' Primary Role in Resolving the Conflict Over Energy Resources between Baghdad and Kurdistan," in which he refuted specific areas in which the United States could provide technical assistance that might help settle something in the energy sector, such as establishing a "company Kurdish regional oil,” providing support during audits, complying with OPEC production cuts, and mediating arbitration over the Iraqi-Turkish pipeline.
    On the political front, international actors - led by the United States - are credited with resolving the issue after urging the main parties in the KRI to show greater flexibility on local Kurdish issues and greater unity in their dealings with Baghdad. It is necessary to continue these efforts with the same intensity until the oil and gas law is ratified. Inaction now may quickly lead to a renewal of the dispute between the Kurds, which may eliminate the possibility of signing a historic agreement.

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    Added 04/12/2023 - 8:31 PM
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    • Post n°2

    The Washington Institute: The oil agreement between Baghdad and Erbil will not last more than 6 mont Empty The Washington Institute: Türkiye refuses to export Baghdad's oil except by dropping the latest comp

    Post by Rocky Fri 14 Apr 2023, 4:57 am

    The Washington Institute: Türkiye refuses to export Baghdad's oil except by dropping the latest compensation

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    Economy News-Baghdad
    A report by the American newspaper Al-Monitor confirmed, Thursday, that despite the agreement between Baghdad and Erbil to resume Iraqi oil exports via Turkey, the latter refused to resume exports except in exchange for new conditions that include not claiming compensation from Baghdad for the arbitration case.
    In its report, the newspaper quoted Bilal Wahhab, a fellow at the Washington Institute for Near East Policy, as saying that "Turkey wants pledges from Baghdad that it will not seek further compensation for the periods revealed by the arbitration case."
    The report added, "Iraq and Turkey had entered into a legal conflict over the export of Kurdish oil through Turkish export ports, as Baghdad says that the agreement concluded between Turkey and Kurdistan to sell oil without referring to Baghdad is illegal."
    He explained, "Iraq resorted to international arbitration through the International Chamber of Commerce, where the Chamber of Commerce imposed a fine on Turkey for violating the contract. Then Baghdad and the Iraqi Kurds agreed since then to resume exports under new conditions that give the central government a greater say. However, Ankara did not allow the resumption of exports." .
    And Wahhab said, "The issue gave the central government in Iraq control again over the pipeline going to Turkey, but it did not give Iraq all the compensation that Iraq demanded throughout nine years of export, which amounts to between 20 to 30 billion dollars, and gave Iraq compensation of 1.5 billion dollars." Only for this reason Turkey has stopped Kurdish oil exports since March 2023.
    He pointed out that "Turkey is exerting pressure on both Baghdad and Erbil because of the loss of oil revenues exported through the Turkish port of Ceyhan."

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    Added 04/13/2023 - 5:48 PM
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