Rising tensions in the Kurdish-controlled region of Iraq are threatening the security of oil exports. Reports in October described Iraq’s army clashing with Kurdish forces, as it advanced on the city of Kirkuk’s oilfields and air base, seizing control of the city’s refinery.
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Iraq is one of the biggest oil producers in the world (the second biggest producer in OPEC) and the Kurdish-controlled region in the north of the country produces a significant proportion of it. Kirkuk, in the north, is home to Iraq’s oldest producing oilfields.
Iraq announced in mid October that it was looking to re-open its disused pipeline from northern oilfields to a port in Turkey, thereby bypassing Kurdish territory in Iraq. Minister Jabbar al-Luaibi directed the North Oil Co. and the State Co. for Oil Projects to complete repairs on the pipeline from Kirkuk to the Mediterranean port of Ceyhan, according to a statement. Iraq wants to restore the pipeline’s export capacity of 250 000 - 400 000 bpd. The pipeline has not been in operation for years due to sabotage in areas that were, until recently, occupied by Islamic State.
Kirkuk was seized by Kurdish Peshmerga forces and they built their own pipeline to the Turkish border after the Iraqi-controlled pipeline came under ISIS control in 2014 and Iraqi forces fled. The semi-autonomous Kurdish Regional Government (KRG) has held the city of Kirkuk for the past three years and its pipeline link exports 600 000 bpd via Turkey.
Following the retreat of ISIS from its key strongholds in Iraq, swathes of the northern parts of the country are now up for grabs between Iraqi military and the Kurdish forces that stayed behind and secured them back in 2014. With ISIS gone, all bets are off and old battle lines are being redrawn over land that both parties see as theirs. Against this backdrop, the KRG held a referendum on independence in October. More than 92% of the electorate voted for independence and, whilst the vote may not bring about actual independence, it is hoped that it will usher in a new period of self-determination for the Iraqi Kurds. Kirkuk produces about 400 000 bpd (10% of total Iraqi production), and so would represent a big loss for Iraqi central government should the Kurds manage to assert their independence. The referendum was strongly opposed by Bagdad, Iran and Turkey, and a co-ordinated embargo from all three powers was put in place following the vote. Baghdad has never recognised the Kurdish claim on Kirkuk, although it was happy to leave it to them during ISIS occupation. The central government has also long insisted that its crude marketing agency, SOMO, has sole authority to export oil produced anywhere within Iraq’s borders.
The US has urged Iraqi and Kurdish forces to back off and avoid further conflict, which it feels would destabilise the region further and detract from the continued battle against ISIS (for which the US provided both parties with weapons).
Turkey, too, feels the threat of Kurdish independence and is worried that the spirit of the vote might pass over its borders, where its own ethnic Kurdish population wishes for greater autonomy.
Turkey, which supports Iraq’s territorial unity, is most likely reviewing its policy of allowing the landlocked Kurds to export oil independently through the Turkish pipeline network. After the independence referendum, Turkish President Recep Tayyip Erdogan made a statement warning that he had the power to “close the valves” on the KRG-controlled pipeline. Kurdistan is in a difficult position: it needs the revenue from its oil exports, but these exports are totally dependent on transit through Turkey, there currently being no other way to market.
A ray of hope for the KRG is Rosneft, which has recently announced it is in advanced talks with Iraqi Kurdistan about a new gas pipeline. Rosneft, which has invested in the region with cash and infrastructure, has also long sought to challenge Gazprom, Russia’s gas export monopoly, in supplying gas to Europe.
Any escalation of conflict in this region threatens global oil supply: negotiation is needed fast to ensure that control of – and revenue from – these oilfields is organised and legitimised.