ICG Report, Turkey, Iraq, ‘Kurdistan’, and the Nefarious, Age-Old Franco-Mongol Alliance

In two 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) and ‘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), I republished the Executive Summary, the Recommendations, the Introduction, and the First Chapter of the ICG Report "Oil for Soil: Toward a Grand Bargain on Iraq and the Kurds", which risks spreading chaos and discord, bloodshed and in the wider Middle Eastern region, by facilitating the procedures of the formation of a fake state ‘Kurdistan’.

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).

In this article, I republish further parts of the controversial Report that serves the promotion of a fake bargain between Turkey and the tyrannical elite of the terrorists Talabani and Barzani, which has been formed under combined French – UK – US guidance in order to man the pseudo-state under formation, ‘Kurdistan’.

Fallacies like this Report confuse even the educated Western readership because they make all believe that those called "Kurds" may support the aforementioned gangsters – puppets of the Freemasonic elites of Europe and America. This is absolutely wrong; not even 20% of those described within this Report as "Kurds" (without being so) support either the Barzani death squads or the Talabani Mafia.

As a matter of fact, ICG and all those who support and promote the creation of a fake state ‘Kurdistan’ intentionally contribute to the creation of an inhuman dictatorship that will be far worse than Saddam Hussein’s Iraq or the Iranian theocracy; it will be the state of Al Qaeda par excellence.

It will be comical to imagine that in case this state is formed, it will be ruled by Talabani and Barzani; these idiotic and pathetic pseudo-leaders are expendable trash that will be soon forgotten. Neither the Iranian nor the Turkish parts of the (truly speaking inexistent) Kurdistan will be allowed to provide the leadership of the evil state under formation.

The forthcoming iniquitous leader of Kurdistan will emanate from the restricted realm of Al Qaeda in the Iraqi Kurdistan, Halabja, which is so scrupulously protected by the imbecile Talabani puppet, and so mysteriously forgotten by the (otherwise feverishly ‘reporting’ about anything) Freemasonic Western mass media. Those who are today uncontrolled in the Shinirwe mountain will spread apocalyptic terror in the Middle East when they will rule in a black colour flagged Kurdistan.

Ankara should monitor very carefully the developments in Shinirwe because Turkey is the primary target. Behind all the trash about a ‘Kurdistan’, which is another French Anti-Turkish conspiracy, is hidden an ages old but momentarily forgotten, Franco-Mongol alliance. And the real force within a ‘Kurdistan’ will be as Anti-Turkish as only an Ilkhanid can be.

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

Middle East Report N°80

II. Escalating Conflict Over Oil

As Iraq’s single source of income, oil and gas play an inordinate role in politics, with questions revolving over who owns it, manages it, controls exports and gets what share of revenue. 83 Since April 2003, these have become incendiary, as the country has started to decentralise in a situation of ethnic and sectarian violence, widespread corruption and crime (including oil smuggling), and profound mistrust. The emergence of a powerfully autonomous Kurdistan region, in particular, has brought the oil questions to the fore. The Kurds, whose territory was neglected for decades, are eager to develop it but, lacking their own sources of income, wholly depend on the federal budget. Complicating matters, their relations with Baghdad are strained, their annual 17-per-cent budget allocation is contested, and they complain they do not receive the amount to which they are entitled, or do not receive it on a timely basis.

To escape this vice, the KRG has been keen to develop two potential sources of income: oil wealth suspected to exist in the Kurdistan region and, by incorporating disputed territories, the proven oil reserves of Kirkuk and whatever oil and gas may be found in other disputed areas. This has presented new hurdles. The Article 140 process has stalled, and the KRG’s ambition to produce its own oil and gas has been frustrated by the absence of a federal hydrocarbons law and a companion revenue-sharing law that would create the institutions and rules for managing and developing the country’s mineral resources and distributing income from their sale. 84 Negotiations over these laws have sputtered on aimlessly since the federal oil ministry and the KRG tabled two competing, incompatible drafts of a hydrocarbons law in early 2007. The KRG then passed its own oil and gas law in August 2007 and unilaterally began signing contracts with foreign companies in order to establish basic infrastructure for exploration and production.

This further aggravated relations with Baghdad (which in 2008 responded by signing its own unilateral contracts for oil and gas fields in the rest of the country), while highlighting the KRG’s next obstacle. Even if it succeeds in pumping oil, it will be unable to sell it unless it secures access to the export pipeline that runs to Turkey’s Mediterranean coast. Given its fears of oil-fuelled Kurdish independence, however, Turkey is loath to permit the KRG to export through its territory without a federal hydrocarbons law that would tie the Kurdistan region more closely to the Iraqi state.

In an earlier report, Crisis Group argued that "a transparent, efficient and equitable framework for the management of oil and gas wealth arguably is the most important building block of a new Iraq", and that the absence of such a framework discourages international investment in the oil industry and encourages actors such as the KRG to go it alone. 85 Negotiations over a hydrocarbons law have stalled over a deep rift concerning the state’s role in the economy, as well as the struggle between Kurdish and Arab nationalism. Kurds want to minimise the federal state’s role in managing the oil sector and claim final say over the development of fields on their territory. This reflects deep mistrust of Baghdad based on both distant and recent historical experience, including use of oil wealth by successive regimes to oppress them and the erratic release of agreed budgetary resources by the current government. Moreover, the Kurds appear to be seeking enhanced economic self-reliance to maximise their autonomy and, perhaps, chances of future secession.

Most other Iraqis, by contrast, including some Shiite political leaders such as Prime Minister al-Maliki, do not view the re-emerging state as a threat. They seek to strengthen it economically and institutionally and to dominate it. They oppose Kurdish nationalism and favour instead so-called resource nationalism, a sentiment that has expressed itself especially in the debate over who owns the oil (and thus in whose territory a given field is located) and whether foreign companies can be paid for their services in oil rather than money (see below).

The struggles over nationalism and the state’s role have created a link between the otherwise separate fights over oil and disputed territories. Not only does the unresolved status of disputed territories claimed by the Kurds that are thought to contain rich oil deposits complicate negotiations over the hydrocarbons law, but the Kurds’ frustrated quest for Article 140’s implementation has pushed them to withhold cooperation on both the oil law and a range of unrelated legislation. Moreover, in its efforts to reverse decades of Arabisation-related neglect and outright discrimination, the KRG has matched de facto control over some of the disputed territories with initial steps to explore and develop whatever oil and gas resources these possess. Disputes over oil and territories are thus intertwined, and the conflict has now become intractable and combustible.

Developing Kurdistan’s Oil Wealth

The KRG faces huge challenges in unlocking the region’s untapped wealth. Short on required skills, resources and political support from Baghdad, it has embarked on a journey both lone and long to carve out Kurdish autonomy with a self-reliant economic base.

What the region has is potential.86 Although exact figures are elusive, 87 some Kurdish officials are bullish that substantial quantities of oil and gas will be found. Ashti Hawrami, the KRG’s minister of natural resources, said, "I’m not expecting to find another Kirkuk [as much as fifteen billion barrels]. But I think I will find a lot of fields that add up to Kirkuk". 88 Others were less optimistic: "Yes, KRG oil is important to us, but it won’t be an alternative for Kirkuk oil". 89

In 2008, still very little production has taken place, all of it from a single field, Tawke, in Dohuk governorate. Managed by DNO of Norway, it has been pumping a modest 10,000 barrels a day (b/d), reportedly for local consumption, but possibly for illegal export by truck to Iran. 90 Oil experts say DNO could quickly ramp up production tenfold if an export channel became available. 91 Exports are blocked, however, by the KRG’s conflict with the federal oil ministry and the concomitant failure to agree on a hydrocarbons law. Should that issue be resolved, KRG officials reportedly have predicted that total production of all of the region’s fields could reach one million b/d by 2013. Although independent oil experts use the more conservative figure of half a million b/d by 2013, they are optimistic that the region offers great commercial opportunity.92

Kurdish leaders’ drive to develop this hydrocarbons wealth is propelled by several motives. First, the KRG wants to increase its economic leverage vis-à-vis the federal government, on which it depends for the bulk of its income. 93

The federal government allocates 17 per cent of its budget to the Kurdistan region annually, but this amount is reduced significantly by deductions (mostly to cover "sovereign expenditures" relating to the federal government’s operations) 94 and has been challenged by political parties that contend the Kurds constitute a smaller percentage of the Iraqi population. 95 Even if the KRG shares revenues from its own oil exports with the federal government, as it has said repeatedly it will, it could use this income as collateral against any attempts by the federal government to withhold funds to which the KRG deems itself entitled. 96

Becoming less economically reliant on the central government is viewed as all the more critical given the KRG’s urgent need to provide its people with basic utilities, such as power and fuel (and, stemming from this, clean water, sewage disposal and the like). All these have been in short supply, causing popular discontent. The region has no refineries and few significant power stations. 97 By selling oil and gas the KRG could generate funds to build such essential infrastructure and then provide the raw materials for it. This would end its debilitating dependence on imports of refined fuel from Turkey and elsewhere, often at prices unaffordable to ordinary citizens. 98 Finally, to the extent that Kurdish leaders harbour aspirations for independence, they want a strong economic base, which the region’s hydrocarbons wealth would afford. Although they have declared publicly that they wish to remain within Iraq, they have made sufficient threats – relating to non-implementation of Article 140 and other aspects of the constitution – to persuade many Iraqis that the Kurds merely are waiting for the opportunity to bolt. 99 Under this perspective, what matters most to the KRG is not a fair share of revenues (which they still need today but would be irrelevant upon independence), but ownership and control of oil fields.

In pursuit of these objectives, the KRG has carried out an aggressive strategy to attract foreign investment, spearheaded by Ashti Hawrami, its minister of natural resources, who was appointed in May 2006. When talks over a federal hydrocarbons law broke down in 2007, the Kurdistan national assembly passed its own oil and gas law, based on the KRG’s interpretation of the federal constitution; 100 the law, and the model contract it includes, has been touted (by industry representatives) as among the best in the industry. 101

Thus equipped, the KRG proceeded to renegotiate a handful of contracts it had concluded earlier 102 and sign fresh contracts with companies willing to take the plunge. By September 2008, it had sealed more than twenty contracts. 103 Given the risks involved (the uncertain presence of commercially recoverable oil and gas, the absence of infrastructure, the lack of a financial system and the inability to export in the absence of a federal hydrocarbons law), 104 the first takers tended to be small companies lacking requisite resources or capabilities to single-handedly set up an industry. Though they were able to start exploration through test drills and, in at least one case, pump oil, their signatures had a primarily symbolic and political, rather than economic, significance. 105 The KRG pointed to these contracts as evidence that the region was worth foreign investment and to instill a competitive spirit based on the presumption that if the pickings promised to be rich, no medium-sized oil company would dare stay away.

The KRG used the announcements of initial discoveries to lure larger companies, including through shared contracts of previously allocated blocks and by allotting new ones.106 If some of the initial investors were muscled aside by bigger competitors, 107 this only increased the KRG’s leverage. Its ultimate aim was to bring in major oil firms. As an oil expert put it, "Ashti Hawrami does not want small companies in the Kurdish region right now. He wants more experienced companies. He wants to create facts on the ground". 108 The majors have been reluctant, however, given the uncertain investment climate in the Kurdistan region and, more importantly, the federal government’s threat that any company signing with the KRG would be barred from bidding for contracts with the federal ministry of oil, which controls the much larger oil fields of southern Iraq (see below).

The KRG covets contracts with larger companies for their greater resources but also, perhaps more importantly, for their political clout. 109 The KRG president’s Article 140 envoy, Qader Aziz, said, referring to Kurdish leaders, "they believe that if big companies come to Kurdistan, they will protect the region, because they are supported by big countries"

The Wall Street Journal summed it up:

Kurdish officials look at the flurry of oil contracts they’re signing as a two-pronged insurance policy. By cutting deals with companies from countries as diverse as Australia, Britain, France, India, Russia, South Korea, Turkey and the U.S., the Kurds say they hope to win international political support in case things go awry with Baghdad. And in case Iraq were to break up, the Kurds would have their own abundant revenue stream. "Has this been deliberate? It certainly has", says a beaming Mr Hawrami, the Kurdish natural-resources minister. 111

While arguably this strategy makes sense, it runs up against the stark fact that the Kurdistan region is landlocked and realistically can hope to export its oil and gas only via Turkey. Doing so requires permission from the federal government to pump Kurdish crude through the Kirkuk-Baiji-Ceyhan pipeline. In the current stalemate, however, the KRG cannot expect Baghdad’s cooperation. Even if the KRG were to circumvent that obstacle by building its own strategic pipeline through the Kurdistan region to the Turkish border, it would still need Turkish permission for transit to the Mediterranean. 112 Some KRG officials appear to be banking on Ankara’s eventual agreement given its own pressing energy needs 113 An energy expert said:

If the KRG is right about its projections of one million b/d in five years, then economics may dictate that Turkey circumvent the Iraqi government and deal directly with the KRG. Turkey requires 800,000 b/d of crude. It produces only 43,000 b/d itself, and this is both poor quality and relatively expensive oil. If the KRG could produce enough to satisfy Turkey’s needs, it would be very tempting to Turkey. 114 Ankara officials have ruled this out. They see the federal hydrocarbons law as an essential building block of a unified Iraq that would include the Kurdistan region and say they will oppose exports of Kurdish crude until that law is in place. 115 For all practical purposes, therefore, Kurdish oil largely remains bottled up pending resolution of the hydrocarbons law tangle, just at a time when many of the contracting companies are primed to start production.

Notes

86. See map in Appendix D below.

87. The region has no listed proven reserves, as these are determined by actual drilling, mapping and continuous production. The little production that has taken place must have given the KRG some proven reserves, but data has not been made public. Mostly, however, the KRG has incomplete and untested data on the basis of which it would be difficult to make reasonable estimates. Crisis Group email communication, international energy expert, 27 September 2008.

88. Quoted by Neil King, Jr., "Wildcatters plunge into North Iraq", The Wall Street Journal, 9 July 2008. An international energy expert said, "A lot of oil will be found, but a lot of companies will not find oil". Crisis Group interview, Istanbul, January 2008. Before 1991, when the Kurds wrested control of the Kurdistan region from the central government in the aftermath of the Gulf War, drills had been struck at only four locations inside the region: at Taq Taq, Demirdagh, Chamchamal (gas) and a dry field near Dohuk. An Iraqi oil expert said that geological surveys had identified many prospective structures and that a number of locations had been designated for drilling but that recurrent Kurdish rebellions after 1961 had prevented any further development. Crisis Group interview, Amman, 19 October 2008.

89. Crisis Group interview, KRG official, Suleimaniya, 21 October 2008.

90. In July 2008, The Wall Street Journal reported that "dozens of tanker trucks" lined up at the Tawke field to transport "some 7,000 barrels a day" that it claimed were "pumped straight from the wellhead for the local market". King, op. cit. In the absence of local refineries, it would make sense to export this oil; without a hydrocarbons law, it would be smuggling. There are some indications this may be happening. At least one Kurdish eyewitness reported seeing tanker trucks entering Iran from Kurdistan in late May 2008 and again in late July, when he himself crossed the border. He said the traffic began in March 2008 and was halted after July following a U.S. protest to the KRG. Crisis Group email communication, Kurdish traveller, 5 October 2008. There is plenty of precedent for this: in the 1990s, an estimated 100 Iraqi tanker trucks, each with a 36,000-litre capacity, crossed to Jordan daily in a tolerated violation of UN sanctions. The same occurred on the Iraqi-Turkish border.

91. Crisis Group interview, international energy expert, Erbil, 16 June 2008. DNO’s discovery of oil in the Tawke field was first announced by the KRG on 11 June 2006. Other than DNO, only Genel Enerji has struck oil so far (in Taq Taq) and could start producing the moment it can export.

92. Crisis Group interview, international energy expert, Amman, 27 January 2008. Ashti Hawrami, KRG minister of natural resources, said he expected exports of 250,000 b/d by the end of 2009. Quoted by King, op. cit.

93. About 95 per cent of KRG revenues are derived from the federal government. Denise Natali, "Kurdish Crude", Soma (PUK-associated English-language weekly in Suleimaniya), 14-27 December 2007.

94. These expenditures cover the operations of the council of representatives, the presidency, the council of ministers, the federal supreme court and a number of federal state agencies. They also cover operations under Article 110 of the constitution, which outlines the federal government’s exclusive authorities, including defence and foreign policy. It is unclear how much the KRG receives after deductions – some observers suggest 14 per cent. Natali, op. cit. In turn, Natali, asserts, the federal government has accused the KRG of failing to pay its fair share of revenues from the Iraqi-Turkish border crossing it controls at Ibrahim Khalil. A senior KDP official claimed: "The region of Kurdistan’s budget is well-known to be 17 per cent of Iraq’s total revenue. Large sums are deducted from this sum, however, and only 14 per cent of Iraq’s revenue reaches the region. Part of our budget is deducted under the name of sovereign allocations for the Iraqi Army. The Regional Guard forces and the Peshmerga are identified as part of Iraq’s defense system, that is, they are part of the Iraqi armed forces.

When we demand appropriations for these forces, however, the federal government says ‘no’ and claims that these forces are part of the region of Kurdistan, and their appropriations should come from its budget. The federal government uses a double standard with us. In obligations we are part of Iraq, but when it comes to rights, we are sidelined. When we are asked to carry out certain tasks, we do so and are always prepared to help, but when we demand our rights, we are ignored". Masrour Barzani, head of the KDP’s security services, interviewed in Al-Sharq Al-Awsat, 18 September 2008.

95. During January 2008 budget negotiations, some parties tried to change the Kurds’ 17 per cent allotment. They failed but inserted a clause into the budget law that it will be revised once a census is held. The Los Angeles Times, 14 February 2008.

96. For example, rather than transferring its oil revenues to the federal government, the KRG could keep this amount and simply deduct it from its annual federal budget allotment.

97. While the region does not have an oil refinery, the KRG reportedly has plans to build a number of small ones. Crisis Group interview, Stafford Clarry, adviser to the KRG prime minister, Erbil, 19 June 2008. The challenges are enormous, however, as refineries are expensive and take time to construct. An international energy expert summed up: "A refinery with a capacity of 100,000 b/d would cost half a billion dollars or more. You would have to build it near an export line to add value. To find half a billion dollars is tricky, as is finding people to build it. The skilled-labour market is scarce. In the Gulf they are working flat out, and for companies there a half-a-billion-dollar refinery in Kurdistan is not sexy enough.

Moreover, to finance it, the KRG would have to provide financial guarantees, but the KRG gets all its money from Baghdad, which won’t help. Instead the KRG is telling oil companies that as part of their contract they have to build small refineries with a capacity of 20,000 b/d. This hasn’t started yet. It’s not within these companies’ expertise, nor in their commercial interest: such refineries would be for local consumption, not export, so to the oil companies they add no value". Crisis Group interview, Erbil, 16 June 2008. The KRG signed a contract with Crescent Petroleum/Dana Gas of the UAE to lay pipelines to ferry gas from the Khormor field to power stations in Erbil and Suleimaniya. In October 2008, they announced they had started pumping gas at Khormor. Agence France-Presse, 4 October 2008.

98. Turkey buys Iraqi crude, refines it and sells fuel products back to Iraq, including the Kurdistan region – obviously at a much higher price. Moreover, smugglers have taken advantage of fuel subsidies in Iraq to buy up large quantities of fuel from government agents, smuggling it across international borders to sell for a profit in a neighbouring state, then buying fuel on the open market there and selling it on the Iraqi black market at a price diverging widely from the official one. The estimated loss to Iraq is between $2.5 and $6 billion a year, 10 to 20 per cent of the budget (in 2006). Crisis Group interview, Greg Muttitt, co-director of Platform (an NGO in the UK), Amman, 5 July 2006.

99. In the Kurds’ eyes, the constitution’s non-implementation could be cause to dissolve the state. The last sentence of the its preamble states: "Adherence to this constitution preserves for Iraq its free union of people, land and sovereignty".

100. The "Oil and Gas Law of the Kurdistan Region – Iraq" (6 August 2007) and the KRG’s model contract are available in Kurdish, Arabic and English at www.krg.org/articles/detail.
asp?rnr=107&lngnr=12&smap=04030000&anr=20267. The law’s final section, "Necessitating reasons", states: "This Law was issued to develop the petroleum wealth of the Region in a way that achieves the highest benefit to the Kurdistan people and all Iraqi people, using the most advanced techniques of market principles and encouraging investment, in a manner consistent with the provisions of Articles 111, 112, and 115 of the Federal Constitution, to promote and adhere to the highest standards of transparency, accountability, and fairness in the petroleum sector, to provide special petroleum revenue allocations for all citizens of the Region, for the future generations of the Region, for those who suffered as a result of the previous regime in Iraq[;] for the natural environment of the Region; and to facilitate cooperation on petroleum management with the Federal Government[,] provided that revenue is shared equitably, as required by the Federal Constitution".

101. "The industry recognises the KRG’s oil and gas law as a first-class piece of legislation. The drafts that preceded it were terrible". Crisis Group interview, international energy expert, Istanbul, January 2008. The expert represents the oil industry and has commercial interests in Iraq and elsewhere.

102. Before the Kurdish parliament passed its own oil and gas law a year later, the KRG (and before it the parallel administrations run by the PUK and KDP) had signed six contracts with foreign oil companies, including one before the U.S. invasion. They include: a January 2003 PUK contract with Pet Oil of Turkey (later joined by Prime Natural Resources of the U.S. and Oil Search of Australia); a January 2004 PUK contract with Genel Energi of Turkey (later joined by Addax Petroleum of Switzerland); a July 2004 KDP contract with DNO of Norway; a May 2006 contract with Western Zagros of Canada; a 2006 contract with Crescent Petroleum/Dana Gas of the UAE; and a 2006 contract with A&T Petroleum of Turkey (a subsidiary of Pet Oil) and Prime Natural Resources (later joined by Oil Search). Pet Oil was forced to renegotiate its 2003 contract at least three times: "In 2005 we were told that it would be impossible to keep our area [Pulkhana], so we agreed to revise the commercial agreement. Later we learned that the PUK was negotiating with another company, Western Zagros, over the same area…. Then we were told that our Pulkhana structure was located in the Arab part of Iraq, so the PUK gave us the Shakal structure instead, on the Talabani [PUK] side. We revised the agreement once again and had to settle for much lower terms….In 2006 we were given another structure, called Bina Bawi, on the Barzani [KDP] side for which we signed a new contract….In August 2007 the Kurds passed their own oil and gas law, which has a clause stating that all previous contracts should be made consistent with the law. So in March 2008 we revised our two contracts, and our shares dropped again. For the moment we do not expect another change, but if the federal oil law is passed in Baghdad, they may tell us to revise our contracts yet again". Crisis Group interview, Ali Ak, general manager Pet Oil, Ankara, 3 June 2008.

103. The precise number depends on how one counts. Some companies have more than a single contract area, and some contracts involve more than one company. The following companies had oil and gas contracts with the KRG in September 2008: DNO (Norway), Addax Petroleum (Canada/
Switzerland), Genel Enerji (Turkey), Western Zagros (Canada), Pet Oil (Turkey), Prime Natural Resources (U.S.), Oil Search (Australia), Crescent Petroleum (UAE), Dana Gas (UAE), Norbest (an affiliate of TNK-BP of Russia), OMV Petroleum Exploration (Austria), Hunt Oil (U.S.), Hillwood International Energy (U.S.), Perenco (France), Aspect Energy (U.S.), Gulf Keystone Petroleum (UK), Texas Keystone (U.S.), Kalegran/MOL (Hungary), Reliance Energy (India), Heritage Oil and Gas (Canada), Sterling Energy International (U.S.), Niko Resources (Canada), Vast Exploration (Canada), Groundstar Resources (Canada), Korea National Oil Corporation (South Korea) and Talisman Energy (Canada). The KRG awarded four blocks to the Kurdistan Exploration and Production Company (KEPCO), which it owns, on condition it bring international companies as partners into its contract areas. See map in the Appendix.

104. Regardless of the inability to export as long as Iraq does not have a federal hydrocarbons law, small companies are prepared to sign contracts with the KRG because it enables them to put expected oil reserves on their books, which raises their stock. Crisis Group interview, international energy expert, Istanbul, 2 June 2008.

105. "The KDP’s contract with DNO is mostly a political statement". Crisis Group interview, international energy expert, Amman, 28 November 2006.

106. Medium-sized oil companies that have signed contracts with the KRG include Hunt Oil, OMV, Reliant Oil, Talisman and TNK-BP, a Russian firm half-owned by BP. For a map of the KRG’s block allocations to internationals, see http://media3.marketwire.com/docs/klm.pdf; for a KRG map of "discovered fields", http://media3.marketwire.com/docs/dfm.pdf.

107. For example, Western Zagros was forced to share its block with Talisman, which signed a contract with the KRG in June 2008. Crisis Group interview, international energy expert, Istanbul, 5 July 2008. The smaller companies’ interests are not necessarily harmed, and they may hope to be bought out by larger companies once these find the Kurdistan environment more permissive.

108. Crisis Group interview, oil expert, Istanbul, 2 June 2008.

109. The KRG’s September 2007 contract with Hunt Oil is a special case. Its chief executive officer, Ray Hunt, is a major financial supporter of President Bush and a member of his foreign intelligence advisory board. The KRG may have courted Hunt Oil so as to pre-empt criticism of its approach and set a useful precedent. The deal provoked a storm of controversy in the U.S. but was not cancelled. Documents show State Department officials publicly opposed the deal, preferring companies to wait until a federal oil law was signed. But the company went ahead, apparently with support from other branches of the U.S. government, including the Commerce Department. Washington Post Investigations (blog), 3 July 2008, at http://blog.washingtonpost.com/washingtonpost
investigations/2008/07/dems_administration_knew_more.html.

110. Crisis Group interview, Suleimaniya, 26 June 2008.

111. King, "Wildcatters", op. cit.

112. Theoretically, the KRG has two options in exporting its oil, assuming agreement is reached under a federal hydrocarbons law. Either it needs to build two branch lines, one from its promising Taq Taq field to Kirkuk (60km), the other from its producing Tawke field near Zakho to the Kirkuk-Ceyhan line (a mere 6km). DNO already built a pipeline from Tawke to the Kirkuk-Ceyhan line, but it remains empty in the absence of permission to export. Given the sensitivities, DNO has not even publicly announced this pipeline.

Alternatively, the KRG is considering constructing its own strategic pipeline from Taq Taq to Zakho that would likewise link up with the Kirkuk-Ceyhan trunk line near the Iraqi-Turkish border. This is complicated by terrain and a history of conflict: It would have to cross low mountains and, in some places, minefields. Crisis Group interview, international energy expert, Erbil, 16 June 2008. If the Kirkuk field starts producing at maximum capacity (up to one million b/d; see below) and the KRG reaches its one million b/d target, a second pipeline would be needed for the additional volume; presumably it would run from Taq Taq to Zakho and then to the Mediterranean parallel to the existing Kirkuk- Ceyhan line. Crisis Group interview, international energy expert, Istanbul, 5 July 2008. See map in Appendix D below.

113. Crisis Group interview, academic who follows oil-related issues, Erbil, 16 June 2008.

114. Crisis Group interview, international energy expert, Istanbul, 5 July 2008.

115. A senior Turkish official said, "We cannot do much without Iraqi government authorisation. We cannot afford a breach of trust. So before the Kurds can export their oil and gas through Turkey, there will have to be a federal hydrocarbons law". Crisis Group interview, Istanbul, 21 July 2008. A subsequent Crisis Group report will discuss Turkish perspectives on Iraqi Kurds.

Note
Picture: Map of Oil resources in Northern Iraq (published in the ICG Report)