Focusing On The Non-Oil Sector

Focusing On The Non-Oil Sector - Part 45 - Iraqi-Turkish Partnership Threatened. Turkey's powerful and secular Kamalists have resumed a warwith the country's Kurdish community, threatening peace withinIraq's Kurdistan and the potential of Iraq becoming theworld's largest exporter of crude oil. The development coincidedwith last week's visit to Erbil, capital of Iraqi Kurdistan, by USDefence Secretary Robert Gates who urged Kurdistan PresidentMas'oud Barzani to settle differences with Baghdad peacefully. On Dec. 19, however, Kurdistan Regional Government (KRG) officialsin Erbil said there were still differences with Baghdad concerning thefuture of the oil-rich Kirkuk region and petroleum E&P policy - twoissues still blocking final settlement with Baghdad and passage of acomprehensive petroleum law by Iraq's Council of Representatives(parliament). On Dec. 15, KRG's Natural Resources Minister AshtiHawrami said his region was ready to resume crude oil exports if thecentral government in Baghdad showed readiness to pay foreign companieswhich produced the oil. Baghdad on Dec. 11-12 held its second auction ofoilfields to be developed by international oil companies (IOCs) under20-year service contracts, while the KRG was still offering explorationand production sharing agreements (EPSAs) which are not recognised byIraq's Oil Ministry (see omt25IrqAuctn2Dec21-09). Iraq was in recent months approached by Ankara for a wide-rangingstrategic partnership with Turkey, which is slated to become the maincorridor for oil and gas exports to Europe and the rest of the worldfrom the Greater Middle East (GME). Iraq is at the heart of the GME, byfar the largest energy reservoir in the world stretching fromsouth-eastern Russia to AfPak and from China's Central Asian borderto Mauritania on the Atlantic (see Part 44 in ood5IrqTurkNov16-09). Baghdad has taken a step closer to getting this country to become asuper-giant on the global oil stage. But political manoeuvrings fromeither side of national legislative elections on March 7, 2010, may yetstall plans to raise Iraq's crude oil output from the current levelof 2.5m b/d to Oil Minister Hussein al-Shahristani's announcedtarget of up to 12m b/d, posing a challenge to Saudi Arabia and Russiaand by far over-taking Iran (see Part 43, ood4IrqOilUpdatesOct26-09). There is a window of opportunity for Iraq to become a largesupplier of natural gas to the EU/US-backed Nabucco pipeline project,proposed to supply Europe with this clean source of energy from the nextdecade. The opportunity is open to the central government in Baghdad andthe KRG in the north. This gas project was discussed on Sept. 16-17 with both governmentsby then visiting US Vice-President Joseph Biden. While the KRG and Nurial-Maleki's central government were competing with each other forthe project, Biden said this was an opportunity for both to be involvedin Nabucco and thus a gas-based partnership could be among ventureswhich should help resolve complex petroleum and land disputes betweenBaghdad and Erbil (see Part 42 in ood3IrqNabuccoSep28-09). Turkey, ruled by the Justice and Development party (AKP), has beenslowly steered towards some form of federation. This is a developmentencouraged by the US and keenly pursued by the EU's heavyweightslike Germany and France, with the latter having been suspicious by anAKP government which is Islamist-rooted. This new tendency in Turkey hasbeen conceived by some members of the country's academic elite,such as Foreign Minister Ahmet Davoutoglu who is the architect ofAnkara's shift of geo-strategic and socio-economic priorities tothe GME.