Iraq Plans Tough Steps Against KRG, Turkey-Based Genel

Thursday, 17 January 2013 – Journal of Turkish Weekly – BAGHDAD — Iraq plans tough measures against the country’s Kurdistan Regional Government (KRG) region and foreign oil companies working there , including Turkey-based Genel Energy, to stop “illegal” crude exports in an escalation of its standoff with the autonomous enclave, the oil minister said in an interview on Jan.16.

Oil exports and contracts are at the heart of a wider dispute over territory, oilfields and political autonomy between the central govrenment in Baghdad and te autonomous KRG in the north. Abdul Kareem Luaibi said Baghdad intends to sue Genel Energy – the first company to export oil directly from the KRG territory – and may slash the government’s allocated budget to the region unless it halts what he rejected as smuggling. Speaking from his office in the oil ministry in Baghdad, Luaibi said it was “high time” for the KRG to stop “this very dangerous behaviour.”

Luaibi also revealed a preliminary agreement with oil major BP to revive the giant but ageing northern Kirkuk oil field, which – apart from being at the centre of a feud between the KRG and Baghdad – is suffering massive output declines.Iraq’s government insists it alone has the sole authority to export crude oil and sign deals, but Kurdistan says the constitution allows it to agree to contracts and ship oil independently of Baghdad. KRG has upset Baghdad by signing deals directly with oil majors such as Exxon Mobil and Chevron, providing lucrative production-sharing contracts and better operating conditions than in the south. Last week, the KRG gave permission to Genel to truck exports directly from its Taq Taq oilfield to Turkey, bypassing the federal pipeline system linking Kirkuk with the Turkish Mediterranean port of Ceyhan.

The trade is small, but symbolic.

Baghdad responded swiftly. Iraq’s state-run oil marketer SOMO issued a statement saying it had the right to take legal action against companies exporting crude independently of the central government. “We are going to proceed with judicial proceedings against this company and all others dealing with smuggled oil,” said Luaibi. “It’s our right to stop them.” He said the ministry, via SOMO, has sent a letter to Anglo-Turkish explorer Genel detailing its position. Genel declined comment.