ICG Report and the Re-Mapping of the Middle East

In four earlier articles, entitled "ICG Report Reveals Freemasonic Plans for Destruction of Turkey, Diffusion of Pseudo-Islamic Terror" (http://www.buzzle.com/articles/icg-report-reveals-freemasonic-plans-for-destruction-of-turkey-diffusion-of-pseudo-islamic-terror.html), "ICG Report Rejected as Fallacy – There is no Kurdistan, and there are no Kurds" (http://www.buzzle.com/articles/icg-report-rejected-as-fallacy-there-is-no-kurdistan-and-there-are-no-kurds.html), "ICG Report, Turkey, Iraq, ‘Kurdistan’, and the Nefarious, Age-Old Franco-Mongol Alliance" (http://www.buzzle.com/articles/icg-report-turkey-iraq-kurdistan-and-the-nefarious-age-old-franco-mongol-alliance.html), and "US-Ally "Al Qaeda", White and Gray ‘Kurdistan’, Turkey, Iran, and the ICG Report" (http://www.buzzle.com/articles/us-ally-al-qaeda-white-and-gray-kurdistan-turkey-iran-and-the-icg-report.html), I republished the Executive Summary, the Recommendations, the Introduction, the First Chapter and parts of the Second Chapter of the ICG Report "Oil for Soil: Toward a Grand Bargain on Iraq and the Kurds". The Report diffuses ideas and suggestions that risk spreading chaos and discord, bloodshed and in the wider Middle Eastern region, by facilitating the procedures of the formation of a fake state ‘Kurdistan’. In this article, I republish further parts of the controversial Report.

As I already said, such a state would be a tyrannical fabrication that will enslave several historical nations of the area which is falsely called ‘Kurdistan’ (Turks, Aramaeans (involving ‘Chaldaeans’ and ‘Assyrians’), Turkmen, Shabbak, Loris, Armenians and Azeris), and many nations and ethno-religious groups who have been fallaciously called "Kurds" whereas they are not (the Zazas, the Hawramis, the Gilakis and the other Goranis, the Failis, the Yazidis, the Ahl-e Haq (Yarsanis), the Mukris, the Ardelanis, the Hawleris, and the other Soranis).

These local level realities matter very little to organized interests of the colonial powers and the Oil cartel. In fact, the dissolution of Iraq and the progressive creation of three states, the emergence of a fake state ‘Kurdistan’, the prevalence of chaos in Iran, Turkey, Saudi Arabia and Egypt, the dismemberment of the five largest states of the Middle East, and the ensuing grave deterioration and conflicts are a late reflection of the notorious colonial Sykes - Picot Agreement (1916).

Blue Zone corresponds vaguely to Kurdistan and Red Zone matches with the under formation Shia state of Southern Iraq and Southwestern Iran. Zone A is then a vague sketch for Syria and Zone B represents a mere merge between Jordan and the Sunni section of central Iraq.

The stage is very well prepared by the colonial diplomacies with many local (f)actors being unaware of the fact that they are managed and maneuvered without their choosing; in fact, their actions and reactions have been a matter of pre-arranged machination and sophisticated staging, out of which they have no mental capacity to pull themselves.

This concerns even local heavyweights like Turkey and Iran where the local leaderships fail to understand how well the local and regional developments to which they thoughtlessly contribute do suit the interests of the colonial diplomacies. The Iranian theocracy has pursued a crash trajectory the tragic termination of which remains unfortunately unclear to the blind leaders of Iran.

Turkey’s Islamists are equally blind, but among the Turkish secularist academia, judiciary, financial establishment and the military there are astute individuals with a pragmatist approach to current developments. They know that Turkey has reached an impossible position, namely that of an ally to its own enemies.

Projects and agendas feverishly promoted by the colonial establishments of England, France and America directly and gravely contradict Turkey’s national interests – even if they are viewed through a most minimalist viewpoint.

Due to this situation, one should not expect the Iranian rulers to be in a position to properly respond to the current developments that are all part of a vast machination. The only country of the Middle East that could avert the ominous future that the colonial powers have prepared for the entire area between the Eastern Mediterranean and China is therefore Turkey. By this, I mean the secular establishment of the country that has become top target of the evil colonial plans.

The possibilities of Turkey to react and avert the disastrous colonial projects hinge on the elimination of the pathetic Islamist regime of the present president and prime minister.

There are many ways and forms under which this can be materialized, but what matters most is the formation of a group representing elements from various sectors (academia, diplomacy, judiciary, finance, public administration, politics and the military) that will be characterized by total impermeability and until the moment of action will stay unknown to the US, English and French agents and diplomats.

Contacts with Russia and China must also be undertaken because due to the West’s colonial agenda, the great Asiatic powers’ interests in the Middle East are met with a severe blow. Following a systematic preparation, a new regime must emerge in Turkey that will remove the country from NATO and entering the Shanghai Cooperation Organization, will herald the beginning of the end of the Western influence in the former territories of the Ottoman Empire that are currently called ‘Middle East’. On this, I will expand further in several forthcoming articles.

Oil for Soil: Toward a Grand Bargain on Iraq and the Kurds

Middle East Report N°80

II. Escalating Conflict Over Oil

The Battle over the Hydrocarbons Law

Kurdish officials are buoyant over their success in finding oil and claim that their region’s oil wealth will benefit all Iraqis since the KRG has agreed to share revenues. The president of the Kurdistan national assembly, Adnan Mufti, said, "our oil policy is right. We don’t want to go begging the federal government for help. We want to be economically strong and share our wealth with the rest of Iraq and jointly rebuild the country". 146 Likewise, Karim Sinjari, minister of state for the interior, after complaining that "we want to increase Iraqi exports [by pumping oil in the Kurdistan region], but the federal government says it’s enough", declared: "We want to rebuild Iraq, but for this we need money. There is not a single good road between Basra and Zakho. If oil exports were to be increased, we could rebuild Iraq for the good of all Iraqis". 147

Such outwardly warm feelings have not been reciprocated by the federal oil ministry, which has taken a dim view of the KRG’s unilateral actions. Oil Minister Hussain al-Shahristani declared the KRG’s contracts null and void, blacklisted companies doing business with the KRG and threatened to do the same with those contemplating similar moves. 148 Moreover, he has blamed the KRG for blocking progress on the hydrocarbons law by unilaterally issuing production-sharing contracts and has announced that, in response, the federal government would have no choice but to issue contracts for oil fields under existing law, a Saddam-era legacy that favours the kind of central control over the oil industry that is anathema to the Kurds. 149

As stated above, negotiations over a new hydrocarbons law have stalled over deep differences about the state’s economic role, as well as a struggle between rival nationalisms. On one side stand the Kurds. They are pursuing broad autonomy to shake off decades of ethnically based neglect, discrimination and underdevelopment. To accomplish this, they seek the right to extract their own oil without interference from a central state that has historically thwarted their economic self-reliance and well-being. They want a fair share in revenues from all Iraq’s oil and gas but, more importantly, full control over their mineral resources. They do so not only because of the secondary economic benefits of having a full-fledged oil industry (infrastructure, investments and employment), but also because the KRG requires direct control should it seek independence.

An energy expert stated:

The Kurds care about owning and managing the oil industry more than about revenue sharing because they want to establish sovereignty and build up a record over time of examples in which the KRG has exercised effective sovereignty and use this as a basis for a claim of independence under international law. 150

If and when the Kurds achieve independence, revenue sharing, along with all agreements enshrined in federal law and the constitution, would become moot. As Crisis Group previously argued:

The Kurds have repeatedly asserted that it should not matter who controls the oil fields – the federal government or the KRG – and therefore whether the disputed territories are incorporated into the Kurdistan region, because the KRG has agreed to transfer revenues from oil sales from fields in the Kurdistan region to the federal government. But although this may not matter today, it will if and when the Kurdistan region seeks or declares its independence: Why would an independent Kurdistan agree to transfer oil and gas revenues to a neighbouring state, Iraq, if these revenues are a key to its own survival? 151

The Kurds need a federal hydrocarbons law to gain access to viable export channels. However, they appear willing to do without one, at least for now, if terms are unsatisfactory regarding control and management. Among other objections, the KRG opposes the establishment of a federal oil and gas council empowered to veto contracts and rejects the oil ministry’s proposed annexes classifying producing and non-producing oil fields. It contends that these measures, respectively, would give too much power to the federal government relative to the regions and assign fields to the federal government that instead should fall under the KRG’s control. 152

On the other side stands a group of officials inside and outside the federal government who, raising the banner of Iraqi nationalism, express concerns first that the future law will permit a sell-out of the country’s natural resources to foreign nations and companies through production-sharing contracts and, secondly, that the extreme decentralisation permitted by the constitution will spark unregulated competition between federal regions over oil production for export and thus undermine Iraq’s unity.

As the past five years have shown, Iraqi nationalism is a potent force. It has tripped up the U.S. more than once, and it has deep roots. In 1972 it led to nationalisation of the petroleum industry. The resulting law prevented any foreign or private-sector interest from acquiring equity in oil and gas still in the ground. As a result, the oil ministry has issued only technical service contracts since that time. These pay foreign companies a fee for their services rather than a share of the oil they pump. The February 2007 draft law, by contrast, provides for so-called risk-reward contracts, also known as production-sharing contracts (PSCs). These would grant foreign oil companies equity shares of oil produced from the fields as compensation for their investments, their work and the commercial and political risks they assume. 153

Although the oil ministry has started to back away from PSCs in light of rising opposition (from trade unions to oil experts), 154 both drafts of the federal hydrocarbons law permit them, and indeed the KRG insists on them. 155 The KRG and foreign companies each favour PSCs for their own reasons. Companies prefer to be paid in oil because it swells their holdings and thus raises the value of their shares. 156 The KRG considers PSCs an indispensable tool for exploration, which is the Kurds’ top priority, having had no development in their region whatsoever. 157 The KRG uses the 2005 constitution to argue that Iraq’s nationalisation of oil has been superseded by market principles (Article 112), 158 which allow for PSCs, and that the KRG’s 2007 oil and gas law renders contradictory federal laws inoperable (Article 115). 159 Moreover, the Kurds say, PSCs enhance performance: a company will seek to increase its oil intake by pursuing maximum exploration, so Kurdistan will receive more oil to export. 160 Finally, those favouring PSCs argue they attract the best companies for technology and management expertise.

Critics charge that PSCs are the worst kind of contracts because they lock in fiscal and legal terms for an extended period – 32 years in some KRG contracts – and freeze the political, legal and economic situation that existed at the time of signature; this could have a long-term adverse impact on human rights and the environment and would seriously encroach on the KRG’s, and Iraq’s, sovereignty. 161

This critique merges with a second – that the extreme decentralisation permitted by the constitution pre-empts a central oil strategy that would prevent over-development of oil and gas resources. Instead, it spurs unbridled competition by sub-state entities possibly no larger than a single governorate, with the overall result of tearing up the country. As Tariq Shafiq, a former senior oil executive, put it, referring to an earlier draft of the KRG’s oil and gas law:

The KRG draft petroleum law is tantamount to a sovereign act and, in effect, is a move in itself and by its implications that could encourage fast, unplanned, uncontrolled devolution. This will exacerbate these damaging trends by inducing similar provincial moves among the "haves", opening the way to border disputes with the "have-nots"….. This draft law is not in conformity with the foremost objective of the constitution to preserve the unity of its people, land and sovereignty. 162

The consequences of not having a hydrocarbons law are severe. Without a law, oil "super-majors" 163 will continue to resist investing in Iraq, however attractive the prospects may be, given the risks of operating in a lawless environment. For its part, the KRG needs access to a strategic pipeline, which only a federal law could provide. Any hope to pump oil straight from the Kurdistan region to Turkey is, literally, a pipedream. Turkey, which will do nothing to promote Kurdish independence, will request an Iraqi certificate of origin for any oil flowing through its pipelines. 164 The federal oil ministry will not issue one without a federal law to which the KRG is party.

The problem is pressing – DNO (Tawke) and Addax/Genel Enerji (Taq Taq) are primed to start pumping – but far from resolved. While rumours have circulated that the federal oil ministry may be prepared to issue an export license in the case of these two companies, because their contracts preceded the 2007 conflict over the hydrocarbons law and issuance of the KRG’s own oil and gas law, there also are signs that under such circumstances, the KRG may rebuff the oil ministry to avoid the implicit inference that its later contracts are illegal.

The KRG’s inability to export will soon be costing it $1.7 million a day ($620 million a year), based on 100,000 b/d at $100 p/b and current budget allocations. This would be extremely damaging to the KRG’s prestige and credibility at home, given pressing needs. It could have the same effect on the federal government, which would be losing $8.3 million a day (just over $3 billion a year) from the same sales. An oil expert said, "the government is cutting off its nose to spite its face". 165 This truth would hit home even harder once both the KRG’s discoveries and its output capacity increase, even at more moderate prices. 166

While simple economic calculus would suggest that, as another oil expert said, "it is in no one’s interest to land-lock a million barrels of oil a day", 167 the KRG and federal government are trying very hard to do precisely that. Unable to come to terms, they are unilaterally pursuing diametrically opposed policies that foretell a head-on collision. Both are holding their breath to see who can hold out the longest – the federal government by blocking the KRG’s exports, or the KRG by blocking legislative progress – and both may suffer due to their stubbornness.

Notes

146. Crisis Group interview, Erbil, 28 June 2008.

147. Crisis Group interview, Erbil, 29 June 2008.

148. Shahristani declared: "All these contracts have no legal base and do not fit with the existing laws, nor with the draft [oil law] which has been agreed….We hold these firms to be legally responsible … and we have warned them that they will bear the consequences", Reuters, 24 September 2007.

149. Agence France-Presse, 19 September 2008.

150. Crisis Group interview, energy expert, Istanbul, 25 May 2008.

151. Crisis Group Report, Iraq After the Surge II, op. cit., pp. 7-8.

152. For a discussion, see Crisis Group Report, Iraq After the Surge II, op. cit., p. 8.

153. The five main types of risk companies take in oil and gas projects are explained in Greg Muttitt, "Nationalizing Risk, Privatizing Reward: The prospects for oil production contracts in Iraq", International Journal of Contemporary Iraqi Studies, vol. 1, no. 2 (September 2007), pp. 145-146.

154. For a discussion, see Greg Muttitt, "Investor Rights vs Human Rights: The implications of oil contracts in the Kurdistan Region of Iraq", Kurdish Human Rights Project Legal Review, no. 13, June 2008, pp. 58-60.

155. For a discussion of the controversy over PSCs, see Crisis Group Report, Iraq After the Surge II, op. cit., pp. 6-7.

156. This is referred to as "booking reserves". According to an international oil expert, "For example, if a contract gives a company 10 per cent of the oil it pumps, and it takes out 100,000 b/d, then it walks off with 10,000 b/d, which at current prices and over twenty years is a huge amount of money". At an average of $100 p/b, the company would earn $7.3 billion in twenty years. Crisis Group interview, Erbil, 16 June 2008.

157. A critic has said that PSCs "are often used in countries with small or difficult oilfields, or where high-risk exploration is required. They are not generally used in countries like Iraq, where there are large fields which are already known and which are cheap to extract". Greg Muttitt, "Oil Privatisation by the back door", Niqash Analysis, 26 June 2006, at www.niqash.org. This is precisely the Kurds’ point: They live in a part of Iraq that historically has suffered from neglect, is now autonomous and aspires to economic self-reliance, so consider developing their oil industry, unhindered by federal restrictions, as essential.

158. Article 112(2) states: "The federal government and the governments of the producing regions and governorates shall jointly formulate the necessary strategic policies to develop oil and gas wealth in a way that yields the greatest benefit to the Iraqi people and relies on the most advanced techniques of market principles and investment promotion".

159. Article 115 states: "All powers not stipulated as exclusive powers of the federal government are powers of the regions and governorates not organised in a region. With regard to other powers shared between the federal government and regions’ governments, the law of regions and governorates not organised in a region shall have precedence in case of dispute".

160. For an economic analysis by a KRG consultant, see Pedro van Meurs, "Maximizing the value of government revenues from upstream petroleum arrangements under high oil prices", 7 June 2008, at www.krg.org/articles/detail.asp?
smap= 02010100&lngnr=12&asnr=&anr=24710&rnr=223.

161. Muttitt, "Investor Rights", op. cit. "[T]he oil contracts are set to lock in this [Iraq’s] weak rights framework for their entire duration. The contracts contain ‘stabilisation clauses’, which require the government to compensate investors for any costs incurred as a result of changes in the law, including human rights and environmental law. This threat of economic compensation is likely to discourage future governments from using regulation to protect the rights of its citizens". Ibid, p. 54. PSC critics say windfall profits to oil companies that they associate with PSCs contradict the constitution’s call for maximum benefits to the Iraqi people. Tariq Shafiq, an Iraqi oil expert and founder of the Iraqi National Oil Company (INOC), argued, based on the KRG’s draft August 2006 law: "[W]hile the draft law’s fiscal terms and conditions for the PSA [ie, PSC] are impressive, KRG’s record from its PSA agreements shows windfall profit to the investing contractor. This contravenes Iraq’s national constitution which requires maximum return to the nation". Middle East Economic Survey, vol. 49, no. 37 (18 September 2006).

162. Middle East Economic Survey, 18 September 2006, op. cit. Muttitt has claimed, citing Iraqi experts such as Tariq Shafiq, that "a fully regionalised and therefore fragmented oil industry, on the lines suggested by the KRG, would be unable to function successfully at a technical level". They argued, he said, that "much of the oil infrastructure (such as pipelines, refineries and export terminals) is necessarily shared between regions, and so requires central management; that effective economic, geological and industrial management requires central coordination (rather than competition between Regions); and that the Regions simply do not have the technical expertise or capacity to develop their oil industries independently". "Investor Rights", op. cit., p. 57.

163. The "super-majors", all publicly traded, are ExxonMobil, Chevron, Royal Dutch Shell, Total, Conoco-Phillips and BP. Powerful state-owned companies known as the "New Seven Sisters" include Saudi Aramco of Saudi Arabia, JSC Gazprom of Russia, CNPC of China, NIOC of Iran, PdVSA of Venezuela, Petrobras of Brazil (partly privatised) and Petronas of Malaysia.

164. Crisis Group interview, Ali Ak, general manager, Pet Oil, Ankara, 3 June 2008.

165. Crisis Group interview, independent energy expert, Erbil, 16 June 2008.

166. A future conflict could arise over an acceptable production balance between Iraq’s southern fields and the KRG’s, namely if and when overall output rises to such a level that OPEC would reinstate a production quota for Iraq. If, for example, the quota was 3.4 million b/d, a decision would have to be taken about how much the federal government and the KRG would each be allowed to produce to fill it.

167. Crisis Group interview, independent energy expert, Istanbul, 5 July 2008.

Note
Picture: Newly circulated maps about more states in the Middle East and Turkey, Iran, Saudi Arabia and Egypt sliced may simply be the very old Sykes –Picot Agreement re-modelled for a 21st century colonial rule in the Middle East.