MESOP FRAGMENTS OF A UNITY : Exports doubt Baghdad-Erbil oil deal would last long

While their latest dispute was temporarily resolved last month to help finance the struggle against Islamic State, the accord has not addressed differences between administrations in Baghdad and Erbil that include the future of Kirkuk, northern Iraq’s main oil hub. The Iraqi government started pumping crude from Kirkuk via Kurdish pipes that bypass militant-held territory to Turkey, Al-Mada Press reported Jan. 1.

“The need to finance military operations has brought together the Iraqi government and the Kurds,” said Hussein Allawi, a Baghdad-based oil analyst. “But this is a temporary agreement that does not resolve fundamental differences.”Under the deal, the Kurdistan Regional Government will share revenue from the 250,000 barrels a day that it had been unilaterally shipping from its territory to the Turkish port of Ceyhan. Iraq says it intends to increase exports from Kirkuk, which Kurdish Peshmerga forces are defending from Islamic State attack, by 300,000 barrels a day during 2015. The central government in Baghdad has also resumed budget payments to Kurdish authorities, including a one-time payment of $1 billion to cover expenses of the Peshmerga. Should Baghdad try to withhold budget cash again “we hold a key to their oil exports,” Nechirvan Barzani, the prime minister of the KRG, said Dec. 3, according to his government’s website. The agreement also gives the KRG’s oil sales through its pipelines tacit approval by Baghdad.

The shift in the balance of power explains why the pact may not last long. “Independent oil sales from the KRG are not going to be tolerated by Baghdad in the long term and eventually this deal will collapse,” said Christian Sinclair, assistant director of Center for Middle Eastern Studies at the University of Arizona. “Neither party benefited from the previous deadlock, which played into the hands of the Islamic State,” said Anthony Skinner, head of analysis for the Middle East and North Africa at U.K.-based forecasting company Verisk Maplecroft, told Bloomberg by e-mail. Islamic State earned $2 million a day from black-market oil sales, powering its rapid expansion in Iraq and neighboring Syria.

U.S. airstrikes targeting Islamic State in Iraq since August have limited its oil revenue, and allowed Kurdish and Iraqi forces to roll back some of the militant gains.While the KRG and the Iraqi government are fighting together against a common enemy, the Kurds have not given up on their hope for full autonomy to go with their increasing financial clout, said Skinner. With Baghdad unlikely to grant further concessions and KRG President Massoud Barzani calling for a referendum on Kurdish independence last year, the map of Iraq that may not last long.