Jul
19

Oil Exports Hold Key to Kurdish Sovereignty

 

The Kurdish people have aspired for independence for over a century, and now, they are hoping the uncertainty surrounding the insurgency of the Islamic State of Iraq and Syria (ISIS) against the Iraqi government provides a window of opportunity to make progress towards a fully independent state of Kurdistan. ISIS, having fully penetrated Iraq’s North and West in its battle against the Iraqi government, has butted up against the Kurds in the north. During the period of peak violence, the Peshmerga, or Kurdish Special Forces, seized the oil-rich city of Kirkuk and also took control of two major oil fields, Bai Hassan and Kirkuk, at the end of last week. Given the current chaotic state of the country, analysts believe it is highly unlikely the Iraqi central government will be able to retake this territory from the Kurds in the near term. There are a number of motivations behind the seizure of the Bai Hassan and Kirkuk oil fields. First, seizing the fields is part of an effort to put pressure on the Iraqi government to pay the 17.5 percent share in oil revenues that Iraqi law requires be paid to the Kurdish Regional Government (KRG). Iraqi Prime Minister Nouri al-Maliki refused to pay out the Kurdish portion in February, prompting an ongoing back-and-forth between Maliki and KRG President Massoud Barzani. “The central government owes us a lot of money and I think the KRG could very well claim that they will use any oil sales from Kirkuk as compensation,” the Kurdish MP said. In response to Iraq’s refusal, the Kurdish political bloc pulled out of the ruling coalition in Baghdad, prompting accusations of KRG collaboration with ISIS and the cut off of cargo planes flying into the Kurdish region. Second, the Kurds are reportedly fearful that the Iraqi government and Maliki’s forces will attempt to sabotage the oil fields in the north, as has been reported by the Financial Times. This is a result of the high tensions between the two groups as the Kurds have made efforts to achieve greater economic independence by exporting oil independently of Baghdad. The KRG currently produces 125,000 to 130,000 barrels per day (bpd)—mostly of which flows directly to Turkey—but would like to raise that to 400,000 bpd to meet budget needs. In order to do so, the KRG would need to expand their customer base beyond Turkey, selling tankers from the point of Ceyhan. It remains unclear how easily the KRG will be able to offload its oil—only one of four tankers loaded from Ceyhan has reportedly been purchased, though Kurdish officials insist all have been sold. Baghdad has vowed to sue anyone who buys Kurdish oil. The two new fields acquired by the KRG can produce approximately 500,000 bpd, making them a major step towards Kurdish economic independence. Additionally, oil revenues are deeply needed at this point to continue funding the Peshmerga forces, essential for maintaining the physical safety of Kurdish territory against ISIS militants. However, even if they are able to keep control of these oil fields, economic concerns linger. The world’s most recent independent state, South Sudan in 2011, had an economic development program based entirely on oil revenues, and the state has faltered as a result. This has prompted experts to speculate on how an independent Kurdistan would fare as a major oil producer—various estimates put their production potential in line with Libya’s before the Arab Spring and more recent oil crisis. Given Iraq’s continued failure to achieve the promise of its massive conventional oil reserves, perhaps the Kurds would produce more of their resources in the north, as their territory sits on top of a few of Iraq’s largest oil fields. Although Kurdistan has intensified pressure on Iraq for independence, the current likelihood that they will achieve this goal remains extremely doubtful. For one, the U.S., which Kurdistan hoped would serve as an ally, is not outwardly supportive of Kurdistan’s aspirations for statehood. Secretary of State John Kerry publicly urged the Kurds to accept the Iraqi central government, which the US helped build during and after the Iraq War. Even more problematically, the Kurds lack the support they will inevitably need from their neighbors—which is not forthcoming. Syria is currently embroiled in an ongoing civil war, Iran has been firmly opposed to independence for some time, and Iraq, under the rule of Maliki, is seeking to strengthen its hold over regional governments. Support for an autonomous Kurdish state from Iraq will likely have to wait for a new government, and even then, remains highly unlikely. The Kurds could find an ally in Turkey, a longtime foe. Due to their conflicts with the radical Kurdistan Workers’ Party (PKK), Turkey has had bitter relations with the Kurds for decades. However, that trend has shifted in recent years, and the two are showing signs of increased cooperation. Their shared interest lies in oil; the pipeline connecting Kurdish oil to the world market goes through Turkey to the port of Ceyhan. Turkey now has over 1,000 businesses operating in the Kurdish region and has begun talks with the once outlawed PKK. Two weeks ago, Turkish senior official Huseyin Celik said that the Justice and Development Party (AKP), the ruling party in Turkey, would support an independent Kurdish state in Iraq. The AKP may be trying to garner support among Turkish Kurds, as Prime Minister Recep Tayyip Erdogan is running for president in the election later this year. The Kurds are planning a referendum for some time in the next year, but without economic stability and the support of neighboring countries, the independence they seek is not likely to materialize into statehood. More than an effort to bolster government coffers, though, the growth of Kurdish oil exports appears to be their best and most viable option towards achieving a self-sufficient Kurdistan.
Jul
17

Mullen & Hannah Offer Insight on Geopolitics & Energy Security

 

A transportation sector powered by multiple, diverse energy sources enables the United States to protect itself from an often-volatile oil market, while freeing foreign policy from reliance on a resource with important implications for the United States’ national and economic security. Yesterday on Capitol Hill, key policymakers and national security leaders confronted the question of our nation’s overreliance on oil at ...

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Jul
15

Intelligence Report: Iran Negotiations to Impact Oil Market

 

The July 20 deadline for nuclear talks between the P5+1—the United States, Russia, United Kingdom, France, China, and Germany—and Iran is fast approaching, and the outcome will undoubtedly have significant implications for the global oil market and overall regional political stability. In response to this emergent issue, SAFE has released its newest Intelligence Report: Iran Nuclear Deal: Scenarios for the Global ...

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Jul
11

Diesel Demand to Surge through 2040

 

When it comes to enhancing American energy security, policymakers often look to gasoline-powered passenger or light-duty vehicles as the largest and most profligate consumers of petroleum fuels. But recent forecasts by the U.S. Department of Energy suggest that, over the next 25 years, the fastest-growing petroleum-powered fleets may be, quite literally, much bigger. As the U.S. economy grows, so too will ...

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Jul
10

Oil Security Index Update: Spare Capacity in Focus

 

Today, SAFE is releasing the most recent update to its Oil Security Index, the only quantitative tool designed to enable policymakers and the general public to measure and compare the relative oil security of different countries around the world.Key findings from the latest Oil Security Index include: Iraq’s oil supply increased to its highest level since 1979 in Q1. Growth in non-OPEC ...

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