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19:31, 24 June 2018 Sunday
16:43, 14 November 2014 Friday

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Kurds oil deal with Baghdad is shaky, experts say
Kurds oil deal with Baghdad is shaky, experts say

Analysts say agreement between Iraqi government and Kurdish region raises too many questions.

World Bulletin/News Desk

Analysts expressed concern Friday that the agreement on oil sales between Iraq's government and the Kurdish Regional Government may not last.

"Wait and see. It is a temporary agreement that does not address most issues. I am not rushing to conclusions," said Marina Ottaway, a Middle East expert at the Wilson Center, a Washington-based think tank.

"It is hard to imagine this is a lasting deal,"  comments Shwan Zulal, head of the London-based international affairs consultancy Carduchi Consulting.

The deal, announced late Thursday, requires the semiautonomous Kurdish region to provide about 150,000 barrels of its total oil production to the federal treasury.

In exchange, the Iraqi government agreed to provide $500 million to the cash-strapped Kurdish Regional Government, whose civil servants have not received pay in months. Iraqi Finance Minister Hoshyar Zebari said the payment represents a resumption of the budget allocation for October and would be followed by another for November.

For now, the Kurdish region will retain control of its oil exports, but negotiations are underway with Baghdad to settle the thorny issue of how revenue from sales of oil abroad should be distributed.

But experts have serious doubts about the deal's staying power.   

Ottaway points out that the Kurdish region seems to be be able to sell oil internationally on a regular basis. "Thus the international market appears to have concluded that the Kurdish region can operate as an oil exporter without Baghdad's permission," she said. "This makes the Kurdish region feel more confident at a time it is desperate to increase its revenue because transfers from Baghdad have dried up."

For Zulal, it is a question of lack of trust. "Given that Baghdad decided to play politics with the budget, it is hard to imagine the Kurdish region giving up the right to export, and leaving the control of export revenue to Baghdad now," Zulal explained.

Crude keeps flowing through Turkey, Zulal said, despite the violence from the Islamic State of Iraq and the Levant. Nor has Baghdad's opposition to oil exports cut off the supply. All this strengthened Erbil's hand.

The fraught question of the control of oil export revenue, which Iraq’s federal government claims, while Erbil argues the oil sales were in compliance with the new Iraqi constitution, remains at the center of the dispute.

And the pot to be shared is large. The Kurdish regional government announced in October that its oil exports would increase from 250,000 to 450,000 barrels per day by the end of this year.

 



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