Petrodollars Would Increase Kurdistan’s Budget Exponentially

16/10/2012 RUDAW –  By BAYAZID HASSAN – SULAIMANI, Kurdistan Region — The issue of petrodollars has not been decided by Iraqi Parliament yet, but the proposed bill has the Kurdistan Region receiving US$1 for each barrel of oil extracted from Kurdish areas.

Bayazid Hassan, a Change Movement (Gorran) MP and a member of the oil and gas committee in Iraqi Parliament, said that there were still some disagreements among committee members regarding the petrodollar issue. “Some say it should be $5 for each barrel, while others say $1 is enough,” Hassan said, describing why there had been a three-year delay in resolving the issue. “It seems like it will be $1.”

The petrodollar is a new concept and only includes provinces that produce oil. “The environment and farmland in oil-producing provinces are harmed due to the refineries and need to be compensated,” Hassan explained.

Some provinces in the middle and east of Iraq do not have oil or refineries. These are known as the Sunni regions. “The MPs that disagree with the $5 proposal are the ones from the Sunni regions,” Hassan said. Petrodollars are part of a bill with the oil and gas committee but are not calculated in the Iraqi budget. Ali Hassan Balo, an oil expert and former oil and gas committee member, said that petrodollars were introduced by a Shia MP in a draft law that was not passed.”He demanded $5 a barrel,” Balo said. “Some MPs said that the provinces that do not have oil would be disadvantaged as the money required will be subtracted from the general Iraqi budget.”

“The provinces that do not have oil will agree if it’s only $1 a barrel,” he added.

Farhad Atroshi, another member of the oil and gas committee, said that the petrodollar issue had not been discussed by the committee for some time but would be addressed in the Iraqi budget bill next year.

“We have decided to give $1 for each barrel to the oil-producing provinces as compensation. It will be spent on the environment and social services,” Atroshi said.

Oil companies and refineries are present in the three provinces of the Kurdistan Region. “The oil from Kurdistan Region is sold through the Somo Company and passes through Kirkuk pipelines to the rest of the world. The three provinces of Kurdistan shall receive their share of petrodollars when the bill is approved,” said Hassan.According to a recent meeting between the Iraqi minister of oil and the Kurdistan Region’s minister of natural resources, an agreement between the two is close to being finalized. The agreement promises to end the oil and gas issues between the Kurdistan Region and the federal government, and entails an increase in oil production by the Kurdistan Region to 200,000 barrels a day by next year. For its part, the Iraqi government will pay the money it owes to the oil companies.

In petrodollar terms, this means Kurdistan will receive $200,000 per day, $6 million per month and $72 million in a year. Kirkuk has been receiving petrodollars for the past two years. It receives 400 billion Iraqi dinars annually as it produces 450,000 barrels of oil a day.

Rebwar Talibani, deputy to the Kirkuk Provincial Council president, considered developments in Kirkuk over the past two years and said, “If the Kurdistan Region receives this much money, it will develop much more.” “Our budget is 100 billion dinars, but the petrodollar money is 400 billion dinars. This means the petrodollars multiply the budget of Kirkuk by four. We have accomplished many projects with this money,” he said. But Muhammad Ali Mahhwi, an environmental expert and former director of Sulaimani’s environment department, said that the money should be spent on the environment, not social service projects. He referred to the environment fund box approved by Kurdish Parliament four years ago which required oil companies to donate part of their profits to environmental projects. “Up to now, not a single penny has been paid by these companies,” Mahhwi said. “We should now hope that some of the petrodollars will be spent on the environment.”