Iraq is plagued by many conflicting trends, including Iran's influence and meddling in all aspects of the country's affairs, at a time when the U.S. forces are scheduled to withdraw from the country by the end of the year. In addition, many provinces in Iraq are seeking to become [autonomous] regions – akin to the Kurdistan Region. This is amid opposition by the Prime Minister and the Da'wa Party to such projects, out of fear of seeing their influence shrink should the idea of autonomous regions spread from Kurdistan to other provinces, given the broad financial and administrative powers the 2005 Constitution grants such regions at the expense of the central government. Amid these developments – which have placed Iraq in a vicious cycle of disputes at the expense of the country's development and the basic services for the citizenry usually provided by governments (security, water, electricity and combatting corruption)- the Kurdistan Regional Government (KRG) announced that six partnership agreements have been signed with the U.S. oil giant ExxonMobil. With the signing of these agreements, the total number of exploration and drilling contracts signed by the KRG with international oil companies approaches 50. The oil authorities in Baghdad have been aware of the agreements with ExxonMobil for some time. The agreements were signed last month, while Abdul Mahdi al-Ameedi, Director of Contracts and Licenses at the Ministry of Oil, had sent three letters last month to the U.S. company warning it of “dire consequences” if agreements are to be signed with the KRG. In a statement to Reuters, Ameedi said, “ExxonMobil might be disqualified and its contract with the ministry may be terminated”. At the time of writing this column, “the company had declined to comment on the matter”. Furthermore, the Prime Minister's media office warned against ExxonMobil's move, and did not rule out the possibility of taking measures against its interests in Iraq. But ExxonMobil's agreement with the KRG is an important turning point in the history of Iraq's oil industry: The Kurdish authorities have managed to attract one of the most important international oil companies to their region, despite Baghdad's opposition. The Iraqi oil policy has been so far based on the clear principle that oil belongs to the Iraqi people as a whole. Subsequently, only those contracts signed with the oil ministry are recognized, and oil companies that enter into agreements with Iraqi autonomous regions (i.e. Iraqi Kurdistan) are barred from operating in the remainder of the Iraqi territories, or even from buying and exporting Iraqi oil. However, ExxonMobil, along with Shell, had been awarded a contract by the oil ministry to develop the first phase of the super-giant West Qurna oil field in the Basra province, which holds a reserve of 8.7 billion barrels of oil and is currently producing 370 thousand barrels per day of crude oil. But what's new here, and what is a great gain achieved by the KRG at Baghdad's expense, is not only the fact that the boycott against the companies operating in Iraqi Kurdistan – and the ban against them from operating in the rest of Iraq- has been challenged. Also, the KRG has also succeeded in attracting an important company that is currently operating in Iraq, and to entice it into operating in its territories. Since ExxonMobil has been purchasing Iraqi oil and marketing it in the United States and elsewhere for decades, this will represent yet another challenge for the oil ministry- so the question is, will the ministry continue to sell ExxonMobil oil or not? Moreover, there are many reports – in the absence of a clear official statement yet – indicating that the scope of the contracts with ExxonMobil does not entirely fall in regions that are “disputed” with neighboring provinces. In fact, these disputed regions are the subject of another major spat between the Iraqi government and the KRG. For this reason, these agreements will only add fuel to the fire. It should be noted here that it is a well-known fact that ExxonMobil is cautious in its actions, and it is therefore not likely to have taken this initiative without prior knowledge of the repercussions and political controversy that would ensue. For some time now, there have been negotiations between the KRG and Prime Minister Nuri al-Maliki, including over items such as dividing oil revenues, and the legal and financial status of the Kurdish Peshmerga forces. Also at the top of the agenda is the issue of the draft oil law that has been the subject of much dispute since 2007. There are three draft laws on oil being deliberated at present. The first one is a plan by the cabinet that calls for broader powers for the oil ministry. The second was proposed by the oil committee in the parliament, and it calls for taking the powers of the regions and provinces into account, and also their roles in managing the oil industry, while also granting a larger say to the parliament in major oil-related decisions. Of course, the dispute regarding the interpretation of the role of the oil ministry, or the role of the regions and provinces, is a result of the disputes caused by the rather ambiguous Constitution of 2005. Now, there are efforts to formulate a third draft by the oil committee in the parliament, in an attempt to reach a consensual formula that combines the provisions common to the draft laws mentioned above, while avoiding the contentious items in them. One of the basic issues here is approving the agreements that have been already signed between the KRG and international oil companies (especially as copies of these have been deposited with the Ministry of Oil at an earlier time). The success of the third (consensual) draft assumes, without a doubt, that positive results will be reached during the negotiations between the Prime Minister and the KRG, in order to secure the needed support of a majority in the parliament. Nevertheless, it is clear that ExxonMobil's agreement with the KRG will leave a negative impact on this latest effort. Also, the ongoing Iraqi-Kurdish oil dispute has many adverse implications, not only over the Iraqi oil industry, but also for the future and unity of the Iraqi state, especially if autonomous regions are to increase in number. Subsequently, this problem must be resolved wisely and in the shortest possible timeframe in order to prevent them from escalating in the future. *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
