Kurds warn Baghdad amid rising tension over oil exports and revenues

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By Abbas al-Baghdadi

Azzaman, March 17, 2014

Iraqi Kurds have threatened “unspecified measures” if the central government in Baghdad persists in blocking their share of oil revenues.

The Kurds theoretically are part of Iraq but they have turned their region, comprising three provinces, into a semi-independent state.

Their parliament and government take decisions without recourse to Baghdad. They developed oil fields within their region, constructed a pipeline to Turkish terminals on the Mediterranean and promoted the status of Halabja to a province.

Baghdad wants to curtail what it sees as the Kurdish march towards ‘cessation.’ It seeks arrangements that will put oil output, export and collection of revenues under strict government control in Baghdad.

The Kurds object interference from Baghdad and have even started drilling for oil in areas which are outside their administrative control as an autonomous region, signing contracts with foreign firms to develop fields in the so-called ‘disputed areas.’

Baghdad’s only weapon is the Kurdish share which it pays out to Iraqi Kurds from revenues from own oil exports. The Kurds earn up to $20 billion a year as the government has been allocating up to 17% of the price each barrel Baghdad exports.

The government this year has stopped paying the Kurds, saying that they should first bring their oil industry under direct control by the Oil Ministry in Baghdad and funnel all their hard cash they earn from oil exports to Central Bank coffers.

The measure has been the harshest by Baghdad against the Kurds following the downfall of former leader Saddam Hussein in 2003.

The Kurds are reported to be unable to pay their civil servants, prompting the Kurdish authorities to restrict public spending and scale back projects.

It is not clear what measure the Kurds will take to confront Baghdad since they cannot run their economy and own region without massive financial allocations from the federal government.

The Kurds say they have a capacity to export 400,000 barrels a day and the government position is to stop paying them unless it regains full control over their oil output, export and collection of royalties.

Under current circumstances, the Kurds have little room to maneuver.