The Deputy Prime Minister of Iraq, Ali Allawi, was speaking on the sidelines of the Iraqi Energy Forum in Baghdad. It addressed the issue of oil in the Iraqi Kurdistan region. It aims to resolve the impasse over the KRG’s desire to create its own exploration and marketing companies. To do this, it relies on a decision of the Iraqi Federal Supreme Court and brandishes constraints on actors operating in Kurdistan.
Iraq-KRG oil duel
First, KRG oil is currently produced under several agreements with private companies. It is marketed by the regional government’s Department of Natural Resources. This is independent of the federal government’s oil sales. The public marketing company SOMO is in charge of this.
Thus, the Deputy Prime Minister recognizes the problem and wants to solve it. It is in this spirit that he addressed the sidelines of the Iraqi Energy Forum. He states:
“We have to recognize that there is a problem here. It needs to be resolved for the benefit of both parties.”
For his part, KRG spokesman Lawk Ghafuri wanted to assert the region’s independence in its energy policy. This is to avoid a possible Iraqi takeover. He was speaking on Twitter:
“The KRG is currently working on the creation of two oil companies. The first is called KROC, which specializes in oil exploration. The second is called KOMO, which specializes in the export and marketing of oil from the Kurdistan region.”
The Federal Supreme Court’s decision
Tensions between Iraq and the KRG have been rising since the beginning of the year. On February 15, the Iraqi Federal Supreme Court ruled that the 2007 Kurdistan Region Oil and Gas Law was unconstitutional.
In this judgment, it ordered the KRG to hand over its oil and gas operations to Iraq. In the dispute over KRG’s independent energy exports, the court found that this reduced SOMO’s sales.
It is this decision that is pushing Iraq to take the lead on the issue of energy policy in Kurdistan, according to Allawi. He explains:
“We are following the federal court decisions. We need to resolve these issues before we can move forward.”
On June 6, a KRG delegation visited Baghdad to discuss the hydrocarbon dispute. The meeting did not lead to any results.
Threats made against oil companies
First, on May 19, a Baghdad court reacted to the request of the Iraqi Federal Minister of Oil, Ihsan Ismaael. He issued subpoenas to international oil companies operating in Kurdistan. These include Addax, DNO and Western Zargos.
Second, on June 12, the Iraqi oil ministry threatened international oil companies operating in Kurdistan. Iraq could ban these companies from doing business in the country if they do not terminate their contracts with the KRG within three months.
In short, this judicial mishmash seems to be a dead end. On June 5, the KRG filed a civil suit against Mr. Ismaael. He accused it of intimidating international oil companies and interfering with their contractual agreements with the KRG. In addition, on June 13, the KRG Ministry of Natural Resources called the companies’ assignments “illegal actions.