Conflict Rising in Iraq Over Oil Contracts and Revenues


John Daly
Oil Price

November 17, 2011

In a development that surprises no-one except armchair analysts, trouble is brewing in Iraq over the sharing of oil revenues between Iraq’s largely autonomous Kurdish region and the central authorities in Baghdad over the Kurdistan Regional Government’s unilateral agreement just signed with U.S. oil giant, Texas-based Exxon Mobil, to develop the region’s oil resources.

The agreement sets the stage for conflict between central authorities in Baghdad, who insist that the central government has overall oversight for the country’s energy agreements and Kurdish authorities in Arbil, working to carve out increased autonomy for retaining an increased share of their region’s oil revenues rather than sending it all to Baghdad to await repatriation of a fraction back to Arbil.

The issue is hardly minor, as Iraq contains the world’s fourth-largest oil reserves. Other major international oil companies working in southern Iraq, including BP and Royal Dutch Shell, have resisted venturing into areas controlled by the Kurdistan Regional Government, fearing the wrath of the Iraqi government.

Given the Iraqi government’s insistence that U.S. forces vacate the country by 31 December, central authorities are throwing away their major bargaining chip with the Kurdish authorities in Erbil, especially as the incipient signs for a post-American occupation deal are not good, leaving Baghdad bereft of an international ‘peacekeeper.”

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