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EU Energy Deal Sparks New Tensions Between Baghdad and Erbil
06/06/2011
EU Energy Deal Sparks New Tensions Between Baghdad and Erbil
New tensions are emerging between Baghdad and Erbil over oil and natural gas, four years after disputes over oil contracts strained relations between the two governments.
Abdulkarim Liebi replaced Hussein Shahristani as Oil Minister in 2010, and his decision to compensate oil companies that operate in the Kurdistan region was seen as a step forward in solving the ongoing political crisis. But recent events have called into question Baghdad’s commitment to mending relations.
On May 25, Shahristani, now Iraqi Deputy Prime Minister, struck a strategic energy deal with the European Union in Brussels for Iraq to join the Southern Gas Corridor project. Signed by Shahristani and EU Commissioner for Energy Guenther Oettinger, the agreement is part of a protocol signed between Iraq and the EU in Baghdad in January 2010.
Southern Gas Corridor is a project to supply energy to Europe from Southeast Asia, southern Caucasia and the Middle East. The Nabbuco Pipeline in Kurdistan is an important element of the project, which is expected to supply Europe with 30 billion cubic meters of natural gas per year.
The project is expected to provide Europe with 45 to 90 billion cubic meters of natural gas annually and aims to reduce EU’s reliance on Russian gas, which is transported through the Ukraine. Until 2020 around 12 percent of Europe’s need for energy will be met.
It also contradicts the principle of power sharing that requires the federal government and the Kurdistan region make these decisions together.
In August 2010, the German RWE company signed an agreement with the Kurdistan Regional Government to produce gas in the Kurdish region and carry the residue of the local use to Europe via the Nabbuco pipeline. The plan was due to finish by 2014 and cost around 8 billion euros. But Iraq’s Oil Ministry rejected the deal, declaring that the Kurdistan region has no authority to export gas.
What upsets the Kurdish officials most is that Shahristani’s agreement with the EU obliges the Europeans to comply with Iraq’s oil and gas law, and requires that any oil and gas contract or drilling in Iraq must comply with federal law.
In an interview last month with Rudaw, Shahristani said he would sign the agreement with the EU but maintained that Kurdistan would not be a part of it.
“Connecting the Kurdistan region to that project—a European project—is impossible, because this gas is Iraqi gas and Iraqi oil and gas is only exported by the Iraqi national oil company. It’s not like any province or a region can just go ahead and export its oil and gas as they wish.”
He also said that even if the Kurdish authorities manage to export oil or gas, other countries have been warned not to purchase it.
Shahristani said Iraq needs the gas for domestic power plants that the government is planning to build. The central government, however, did not provide fuel for the Kurdistan region in 2007, when Erbil’s 750 megawatt power plant faced a severe shortage. As a result, oil was purchased from abroad until the region’s own gas was developed.
One oil expert who asked to remain anonymous maintained that Erbil and Turkey were also upset by Shahristani’s deal in Brussels.
“(He) wants to shove Kurdistan aside,” said the observer, who closely monitors Kurdistan’s oil policies.
In Shahristani’s interview with Rudaw, the Deputy Prime Minister said he was committed to safeguarding Kurdistan’s interests. By signing this new deal, however, he is ensuring that the central government remains in full control of all oil and gas deals.
“This act is unconstitutional and it is against Iraq’s oil and gas law,” the observer said. “It also contradicts the principle of power sharing that requires the federal government and the Kurdistan region make these decisions together. There is no mention of the Kurdistan Regional Government (in the deal).”
Iraq’s draft oil law clearly mentions that every region acts based on its interests. But Shahristani told Rudaw that the situation is now different and the oil draft must be amended and resent to parliament.
Muhammad Ali Zeni, an oil expert and consultant, maintained in an article in Almustaqbal Alarabi magazine that when he was oil minister, Shahristani never sent oil contracts to the Iraqi government.
He argued that Parliament should no longer accept such actions, and criticized the delayed vote on Iraq’s oil and gas law.
“Passing a new law will open new doors to regulations for the national oil company and restructuring the ministry of oil,” Zeni wrote.
Rudaw has learned that the Kurdistan Regional Government (KRG) has expressed its concerns to the EU about the agreement with Shahristani, calling the deal “secret and contradictory to Iraq’s federal laws”.
The oil observer who spoke to Rudaw believes that the EU may have been deceived by Shahristani.
“They don’t know the reality of Iraq,” he said. “Shahristani isn’t Iraq’s oil minister. He has signed this agreement with the title deputy prime minister for energy affairs. There is no such title in Iraq. He is acting minister of electricity, but has no links with oil whatsoever.”
Kurdistan region officials have asked Maliki to explain the deal in an effort to determine whether it reflects the federal government’s policies. They are also inquiring with the EU as to whether they signed the agreement unknowingly or not.
It seems that even Maliki may be under pressure from Shahristani, who has close ties with the Grand Ayatollah Ali al-Sistani. Shahristani, who has ambitions of becoming prime minister, has backed Maliki into a corner, in essence demanding: “Are you with me or against me?”
The Kurds also intend to ask Maliki the same question, but the answer may not be to their liking.
It is not yet clear whether this new agreement will be sent to Parliament, but analysts believe it is unlikely given that Iraq’s original oil legislation is still stalled.
The Europeans have forgotten that the gas and oil is in Kurdistan and not in Baghdad
The EU’s decision may well have been made out of ignorance or it was intentional. In either case, it is obvious that they have taken a clear stance on Iraq’s sensitive domestic issues.
Shahristani’s agreement with the EU implies that oil and gas are federal issues, which directly contradicts the constitution that was approved by the Iraqi people in 2005.
According to the constitution when there is a dispute between the federal and regional governments, regional laws can trump federal legislation. In the absence of a current oil and gas law, the deal with EU is likely based on the outdated 1967 natural resources laws – even though Shahristani has consistently criticized the Kurdistan region for signing contracts based on its 2007 oil law.
Shahristani praises oil contracts signed under his term as minister of oil as Iraq’s most successful deals, arguing that he allowed companies to develop oil fields without becoming shareholders unlike those in the Kurdistan region.
Kurdistan’s authorities defend their contracts, noting that companies are responsible for investing in oil exploration. Thus if a company does not find any oil, the Kurdistan government does not lose anything.
Zeni maintains that Iraq’s oil contracts, some of which are valid for 25 years, will cost Iraq up to 75 billion dollars between 2017 and 2030.
The observer believes that the agreement will not last and if it does, it will harm the Nabbuco pipeline.
“If [Baghdad] finds a way to transport gas to Europe, we wish them good luck,” said the observer, indicating that the Kurdistan region would not let such a plan materialize. “The Europeans have forgotten that the gas and oil is in Kurdistan and not in Baghdad. So it’s not going to happen if we’re against it.”
Dr. Ali Hussein Balo, an oil expert, believes that Iraq won’t be able to export gas for another five years because the country first needs to supply its own demands. The Kurdistan region, however, can export gas much sooner.
“The Kurdistan region now provides gas for its power plants. If they work on producing more natural gas, it will be able to export in less than two years.”
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06/06/2011
EU Energy Deal Sparks New Tensions Between Baghdad and Erbil
New tensions are emerging between Baghdad and Erbil over oil and natural gas, four years after disputes over oil contracts strained relations between the two governments.
Abdulkarim Liebi replaced Hussein Shahristani as Oil Minister in 2010, and his decision to compensate oil companies that operate in the Kurdistan region was seen as a step forward in solving the ongoing political crisis. But recent events have called into question Baghdad’s commitment to mending relations.
On May 25, Shahristani, now Iraqi Deputy Prime Minister, struck a strategic energy deal with the European Union in Brussels for Iraq to join the Southern Gas Corridor project. Signed by Shahristani and EU Commissioner for Energy Guenther Oettinger, the agreement is part of a protocol signed between Iraq and the EU in Baghdad in January 2010.
Southern Gas Corridor is a project to supply energy to Europe from Southeast Asia, southern Caucasia and the Middle East. The Nabbuco Pipeline in Kurdistan is an important element of the project, which is expected to supply Europe with 30 billion cubic meters of natural gas per year.
The project is expected to provide Europe with 45 to 90 billion cubic meters of natural gas annually and aims to reduce EU’s reliance on Russian gas, which is transported through the Ukraine. Until 2020 around 12 percent of Europe’s need for energy will be met.
It also contradicts the principle of power sharing that requires the federal government and the Kurdistan region make these decisions together.
In August 2010, the German RWE company signed an agreement with the Kurdistan Regional Government to produce gas in the Kurdish region and carry the residue of the local use to Europe via the Nabbuco pipeline. The plan was due to finish by 2014 and cost around 8 billion euros. But Iraq’s Oil Ministry rejected the deal, declaring that the Kurdistan region has no authority to export gas.
What upsets the Kurdish officials most is that Shahristani’s agreement with the EU obliges the Europeans to comply with Iraq’s oil and gas law, and requires that any oil and gas contract or drilling in Iraq must comply with federal law.
In an interview last month with Rudaw, Shahristani said he would sign the agreement with the EU but maintained that Kurdistan would not be a part of it.
“Connecting the Kurdistan region to that project—a European project—is impossible, because this gas is Iraqi gas and Iraqi oil and gas is only exported by the Iraqi national oil company. It’s not like any province or a region can just go ahead and export its oil and gas as they wish.”
He also said that even if the Kurdish authorities manage to export oil or gas, other countries have been warned not to purchase it.
Shahristani said Iraq needs the gas for domestic power plants that the government is planning to build. The central government, however, did not provide fuel for the Kurdistan region in 2007, when Erbil’s 750 megawatt power plant faced a severe shortage. As a result, oil was purchased from abroad until the region’s own gas was developed.
One oil expert who asked to remain anonymous maintained that Erbil and Turkey were also upset by Shahristani’s deal in Brussels.
“(He) wants to shove Kurdistan aside,” said the observer, who closely monitors Kurdistan’s oil policies.
In Shahristani’s interview with Rudaw, the Deputy Prime Minister said he was committed to safeguarding Kurdistan’s interests. By signing this new deal, however, he is ensuring that the central government remains in full control of all oil and gas deals.
“This act is unconstitutional and it is against Iraq’s oil and gas law,” the observer said. “It also contradicts the principle of power sharing that requires the federal government and the Kurdistan region make these decisions together. There is no mention of the Kurdistan Regional Government (in the deal).”
Iraq’s draft oil law clearly mentions that every region acts based on its interests. But Shahristani told Rudaw that the situation is now different and the oil draft must be amended and resent to parliament.
Muhammad Ali Zeni, an oil expert and consultant, maintained in an article in Almustaqbal Alarabi magazine that when he was oil minister, Shahristani never sent oil contracts to the Iraqi government.
He argued that Parliament should no longer accept such actions, and criticized the delayed vote on Iraq’s oil and gas law.
“Passing a new law will open new doors to regulations for the national oil company and restructuring the ministry of oil,” Zeni wrote.
Rudaw has learned that the Kurdistan Regional Government (KRG) has expressed its concerns to the EU about the agreement with Shahristani, calling the deal “secret and contradictory to Iraq’s federal laws”.
The oil observer who spoke to Rudaw believes that the EU may have been deceived by Shahristani.
“They don’t know the reality of Iraq,” he said. “Shahristani isn’t Iraq’s oil minister. He has signed this agreement with the title deputy prime minister for energy affairs. There is no such title in Iraq. He is acting minister of electricity, but has no links with oil whatsoever.”
Kurdistan region officials have asked Maliki to explain the deal in an effort to determine whether it reflects the federal government’s policies. They are also inquiring with the EU as to whether they signed the agreement unknowingly or not.
It seems that even Maliki may be under pressure from Shahristani, who has close ties with the Grand Ayatollah Ali al-Sistani. Shahristani, who has ambitions of becoming prime minister, has backed Maliki into a corner, in essence demanding: “Are you with me or against me?”
The Kurds also intend to ask Maliki the same question, but the answer may not be to their liking.
It is not yet clear whether this new agreement will be sent to Parliament, but analysts believe it is unlikely given that Iraq’s original oil legislation is still stalled.
The Europeans have forgotten that the gas and oil is in Kurdistan and not in Baghdad
The EU’s decision may well have been made out of ignorance or it was intentional. In either case, it is obvious that they have taken a clear stance on Iraq’s sensitive domestic issues.
Shahristani’s agreement with the EU implies that oil and gas are federal issues, which directly contradicts the constitution that was approved by the Iraqi people in 2005.
According to the constitution when there is a dispute between the federal and regional governments, regional laws can trump federal legislation. In the absence of a current oil and gas law, the deal with EU is likely based on the outdated 1967 natural resources laws – even though Shahristani has consistently criticized the Kurdistan region for signing contracts based on its 2007 oil law.
Shahristani praises oil contracts signed under his term as minister of oil as Iraq’s most successful deals, arguing that he allowed companies to develop oil fields without becoming shareholders unlike those in the Kurdistan region.
Kurdistan’s authorities defend their contracts, noting that companies are responsible for investing in oil exploration. Thus if a company does not find any oil, the Kurdistan government does not lose anything.
Zeni maintains that Iraq’s oil contracts, some of which are valid for 25 years, will cost Iraq up to 75 billion dollars between 2017 and 2030.
The observer believes that the agreement will not last and if it does, it will harm the Nabbuco pipeline.
“If [Baghdad] finds a way to transport gas to Europe, we wish them good luck,” said the observer, indicating that the Kurdistan region would not let such a plan materialize. “The Europeans have forgotten that the gas and oil is in Kurdistan and not in Baghdad. So it’s not going to happen if we’re against it.”
Dr. Ali Hussein Balo, an oil expert, believes that Iraq won’t be able to export gas for another five years because the country first needs to supply its own demands. The Kurdistan region, however, can export gas much sooner.
“The Kurdistan region now provides gas for its power plants. If they work on producing more natural gas, it will be able to export in less than two years.”
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