MESOP : Kurdish Oil & US Leverage in Iraq
FORBES MAGAZIN – 10-9-2014 -HOUSTON – As the Obama Administration ratchets up its confrontation with radical Islamists in Iraq, an idled tanker loaded with Kurdish oil off the Texas coast may provide a bargaining chip for enhancing US influence in Iraq.The US has been seeking to persuade Iraq’s Shia Muslim-dominated government to open itself to more inclusion, especially by the minority Sunni Arab population. Bringing beleaguered Iraqi Sunnis into the Baghdad power structure is seen as a way to diminish the appeal of the Sunni extremist group known as Islamic State in Iraq and Syria, or ISIS, which is bent on establishing an Islamic state.
At the same time, Iraq’s Kurds have sought an increase in autonomy that could ultimately result in an independent state across northeastern Iraq. Kurds have asserted their economic independence by increasing their oil production and exports via Turkey.
The travails of the United Kalavrvta, which entered the Gulf of Mexico in July carrying about one million barrels of Kurdish crude, are indicative of the Kurdish Regional Government’s attempts to market oil and establish financial independence from Baghdad.
The US government has responded to the tanker’s arrival by publicly supporting Baghdad’s claim of control over Iraq’s natural resources, including those in the Kurdish north. Unable to enter US territorial waters, the cargo languishes in a sort of legal limbo. We feel the Obama administration may be missing a prime opportunity to use the dispute to influence events in Iraq. As part of its overall strategy, Washington should consider tempering its unconditional support for Baghdad, making it conditional the government’s becoming more inclusive of Sunni Arabs and other minorities. Manifestations of the chauvinistic tendencies in Baghdad include brutal suppression of Sunni protests and the flight of Iraq’s Sunni Vice President Tariq al-Hashimi, exiled in Kurdistan since 2011.
If US diplomats let it be known in Baghdad that, if progress were not made on issues of concern to Iraqi minorities, the Obama administration could announce its intention to recognize Kurdish autonomy in its oil production and sales efforts. If the Kurdish oil came ashore in the US, the resource ownership battle could move to US courts. If the owners of the oil were unhappy with these prospects, they could offload elsewhere.Either way, the threat of establishing a precedent for Kurdish oil exports might focus minds within the new Iraqi administration of Prime Minister Haider al-Abadi on issues of importance to US policy in the region. The Kurdish crude would not have to be offloaded in the United States for this stance to be effective.
Why is this important? Reducing Sunni alienation from the Shia-dominated Iraqi government is crucial to the success of Obama’s campaign against ISIS. The brutality of ISIS is more tolerable in some Sunni areas because it provides an alternative to the oppressive tactics of Iraqi security forces under the sectarian dictates of former Prime Minister Nouri al-Maliki.There are, of course, ramifications to such an approach. At a minimum it would send a signal to the world that it is OK to bypass the central government in Baghdad and import Kurdish oil. This, in turn, would boost the already rising autonomy of Iraqi Kurdistan, taking it a step closer to de facto statehood.
Recent US bombings of ISIS positions in northern Iraq – backing the Kurdish peshmerga forces – have already conferred increased legitimacy on the Kurdish quasi-state. Objection to yet another US enhancement of Kurdish autonomy might also come from Turkey, which harbors its own separatist-minded Kurdish minority. For now, Turkey and the Iraqi Kurds are allies.
The battle over Iraq’s national resource ownership has gone unresolved for a decade. Meanwhile, the possibility that Iraq may be carved up into autonomous ethnic enclaves is growing. If Baghdad is unwilling to demonstrate its commitment to power-sharing, Washington ought to outline one potential cost: an end to our opposition to Kurdish control over natural resources.In other words, if Iraq wants to be treated as a unified state, it needs to act like one.
While we are not espousing US support for Kurdish independence, we feel that the facts on the ground already point toward greater autonomy. Beyond the oilfields within recognized Kurdish territory, the peshmerga now control the northern Iraqi oil center of Kirkuk, captured last month when the Iraqi army fled the ISIS advance. Iraqis have diminishing opportunity to maintain the territorial integrity of their state. The United Kalavrvta offers us a prospect to highlight the importance of Iraqi unity, before hope slips away. While a decision on Kurdish exports cannot be made in a vacuum, the administration should consider how such a stance could assist in its anti-ISIS strategy, and goals for a unified, functional Iraq.
The current opportunity may be short lived. The ship turned off its transponder recently, and then switched it on again. This is a strategy used when there is a plan to unload into smaller tankers, which can then transport the crude in ways that are harder to trace.
Once that happens, the Kurdish crude will disappear into the global market and the opportunity that is sitting 60 miles from Galveston will have slipped away.
Post by Jim Krane and Ted Loch-Temzelides
Jim Krane is the Wallace S. Wilson Fellow for Energy Studies and Ted Loch-Temzelides is Professor of Economics and Baker Institute Rice Scholar; both are based at Rice University’s Baker Institute for Public Policy, in Houston. http://www.forbes.com/sites/thebakersinstitute/2014/09/09/kurdish-oil-and-us-leverage-in-iraq/