Tuesday, 31 July 2012, 09:56 GMT
Baghdad threatens to take KRG to court over oil dispute
By The Kurdish Globe

Is in no way a substitute for the existing Kirkuk-Ceyhan Pipeline.

Based on the constitutiofn and political agreements, Erbil has upper hand in any constitutional court case

Disagreements and tensions between Baghdad and Erbil regarding oil issues continue, as the number of Kurdistan Regional Government's (KRG) oil deals with international oil giants such as Exxon Mobil and Chevron, steadily increase.

The Iraqi government is now threatening to raise a court case against the Kurdistan Region. However, according to the constitution and the content of the political agreements among the Iraqi political groups, Erbil seems to have more chances to win the case.

According to political and constitutional experts, this triumph at the courts will be both constitutional and political.

The major point of disagreement between the two sides is the management of oil and gas resources. Erbil fears Baghdad's reach on the region and Baghdad fears a looming oil independence of Erbil. Hence after the agreements between Erbil and Ankara, the Iraqi government headed by Prime Minister Nuri al Maliki, who is under threat of being ousted from power, started to strengthen their opposition against the KRG.

According to the agreement with Ankara, Erbil currently exports crude oil to Turkey via tankers, while oil would then be exported through a future pipeline from Kurdistan to Turkey, with the pipelines set to be functional by the end of 2014.

KRG Minister of Natural Resources, Ashti Hawrami, argued that this is in no way a substitute for the existing Kirkuk-Ceyhan Pipeline.

The existing pipeline has a capacity to transport 1.5 million barrels of oil per day to the Turkish port of Ceyhan, but is currently only transporting 500 thousand barrels per day if, of course, terrorist acts allow.

Region's contracts are constitutional

Baghdad authorities, especially Prime Minister Maliki and his oil advisor Hussein al Shahristani, claim that the Kurdistan Region's oil and gas deals are "illegal" and "unconstitutional", something which has been rejected by the Kurds, who insist that their contracts are in accordance with the Iraqi constitution and their Region's oil and gas law, which was passed according to the constitution in 2007.

In the opinion of Qassim Mohammed, a Kurdish member of the Iraqi Council of Representatives and member of the Parliament's Oil and Gas Committee, the recent statements by the Iraqi officials about the Kurdistan Region, oil and gas policy, are reactions against the efforts to withdraw support from Prime Minister Maliki.

"Kurdistan's oil policy is constitutional," says Mohammed.

This opinion is echoed by Dr. Ali Balo, head of the Oil and Gas Committee of the first Iraqi parliament.

"This is a constitutional right and power of the Kurdish Region, and that is the very reason why Baghdad opposes it, and does not want Erbil to exercise this constitutional right," argued Balo. "The contracts are constitutional; hence even if the issue is referred to court, the Kurdistan Region will win."

Articles 109-112 of the Iraqi Permanent Constitution, addresses the issue of oil authority. According to Article 111, the power is shared between Baghdad and the regions where oil is produced. What Kurds mainly depend on is the Article 112, which states that in case of disagreements between the center and regions about oil, the "regional law" governs and will be the final reference.

"Baghdad knows that very well, but now wants to gain exclusive power," Balo told the Globe. "That is why they are creating problems now."

Draft laws and agreements

Observers believe that to solve this issue there are two ways, either through the 2007 draft oil and gas law or through the agreements between Erbil and Baghdad. The only other option is the constitutional court, which does not worry the Kurds.

There are two agreements concerning the oil dispute between Erbil and Baghdad. The first one is an agreement between the Iraqi and Kurdish oil ministers in January 2011, and the second is an agreement signed during a visit by a KRG delegation headed by the then KRG Prime Minister Dr. Barham Salih to Baghdad between October 24 -- 28, 2011.

However, as Balo alluded to, Baghdad failed to abide by any of the agreements.

The Iraqi political parties agreed on a draft oil and gas law on February 15th 2007, which was completely acceptable by the KRG. According to this draft the oil management authority will be given to a higher committee consisting of 5 ministers.

The committee is to be headed by the Prime Minister and his deputy, ministers of oil, industry, minerals, finance and planning will form the committee members. Additionally, the KRG Natural Resources Minister and representative from international oil companies will also be present at the committee.

According to the same draft, the committee will grant KRG the authority to sign oil contracts, but any contract signed by KRG should be filtered by the committee and if within one month no comments were raised on a contract, it would be automatically recognized.

If there are comments on a contract, they should be on a constitutional basis and then the KRG, according to the constitutional articles, revises the contracts. However, Balo argues that Shahristani is the obstacle to the path of this draft's approval.

Two months after the approval of the first draft, Shahristani added four appendices to the draft, in which he suggested that the oil fields be classified into four types, productive, semi-productive, unproductive, and those fields where no oil has been found. Moreover, he also asked that 90% of country's oil production to be under the authority of the national oil company. This became a major point of contention which the KRG did not accept.

Solution

Kurdistan Region, recently labeled as "the paradise of energy", owns 45 billion barrels of oil reserves and 3 to 6 trillion cubic meter of natural gas, a fact that continually reduces hope for a solution to the disagreements between Baghdad and Erbil.

Balo believes that the draft oil and gas law of 2007 solves the problems, and he argues that the reason for a lack of implementation is that Baghdad does not have an "absolute" authority.

"This will solve this problem as it suggests that the Kurdistan Region, with the support of the central government, would manage its oil and gas resources," Balo told the Globe. "Erbil would also participate in developing the country's oil and gas policy."