The origins of the Iraqi Kurdistan conflict: Oil revenue autonomy

CAIRO – 19 October 2017: Kurdistan has grown ever more poignant in the political scene since the rise of the Islamic State (IS) in 2014, due to the remarkable resistance by the Peshmerga forces while seizing back many territories and oil fields. Amid the defeat of IS in both Iraq and Syria, there have been demands by Kurds for independence crystallized in the results of the recent referendum.

The development of the conflict between the Iraqi central government, and the Kurdish Regional Government (KRG) gives little room to understand the origin of the dispute, closely related to the control over oil and gas fields and exports in Iraqi Kurdistan.

Oil transport pipelines in Iraqi Kurdistan

In the 1970s, the Kirkuk-Ceyhan Oil Pipeline was constructed by the Iraqi central government to be Iraq’s largest crude oil export line. It extends from oil-rich Kirkuk to the Mediterranean Ceyhan port in Turkey. It has been used for exporting 550,000 barrels a day (bpd) to the international markets until it plummeted this month to 250,000 bpd.


The Kirkuk-Ceyhan pipeline - CC via Wikimedia CommonsAmirki

That comes in light of the Iraqi government’s decision to repair the pipeline that was damaged three times. The first time was in 2003 amid the U.S. invasion of Iraq, while the second and third times were in 2009 and 2013 respectively due to blasts. The operation of the Kirkuk fields used to be split between Baghdad’s North Oil Company and the KRG.

However, the company lost control over its fields in 2014 after they were captured by IS and subsequently by the Peshmerga forces, before the Iraqi government regained control over them and over Kirkuk this week with a military operation.

During 2013, the KRG completed the construction of another export pipeline composed of two sections. The first section, from the Taq Taq field to the Khurmala Dome, has the capacity of 150,000 bpd. The second section, from Khurmala to Dohuk, has the capacity of 700,000 bpd.

On the border with Turkey, both the Khurmala-Dohuk pipeline and the export pipelines from the Tawke field, the latter having a capacity that exceeds 250,000 bpd, are tied to the 40-inch section of the Kirkuk-Ceyhan Oil pipeline. The 40-inch section currently has a 700,000-bpd capacity.


The two new sections added in 2013 to the Kirkuk-Ceyhan pipeline by the KRG - CC via Wikimedia CommonsAmirki

Kurdish oil exportation ambitions

According to the Iraqi constitution, Kurdistan’s region has a 17 percent share in Iraq’s oil revenues. It was delivered regularly till IS took over the oil fields four years ago; selling crude oil in the black market which contributed in plummeting its prices globally.

The Russian integrated oil company Rosneft has joined this year the list of oil buyers from KRG which has been exporting oil independently since 2014. As Reuters reported, the company lent the region hundreds of millions of dollars in loans guaranteed by future oil sales. Those are used to finance the struggle against IS and to ease the financial crisis caused by the decrease in oil prices.

Sources close to the deal told Reuters that Rosneft would invest more than $1 billion in funding a natural gas pipeline in Iraqi Kurdistan. The funding would also target developing gas fields in five blocks along with the gas transport infrastructure in the region; ultimately aiming to export to Europe through Turkey, which also needs energy for its economic sector.


(Dmitry Kostyukov/AFP)

With Rosneft's help, Kurdistan would supply six percent of total European gas demand, and one-sixth of current gas volumes by Russia, the largest gas supplier to Europe, according to Reuters.

The pipeline’s capacity will reach up to 30 billion cubic meters of gas exports a year, in addition to supplying domestic users. “Kurdistan sits on some of the largest untapped gas deposits on Europe’s doorstep,” Reuters reported. The construction of the pipeline is set to be finalized in 2019 for Kurdish domestic use, with exports due to begin in 2020.

Internal issues

An academic paper titled, “Redrawing the Map: Pipelines and Politics in the Kurdish Quest for Independence,” indicated that there have been five “external shocks” disrupting the construction of that pipeline. These five external shocks consist of the seizure of oil fields and territories by IS, the incurred displacement and instability, the oil crisis, and the great political factionalism.

The paper was written last year by Cameron Bell who is a former special assistant and aide to former U.S. Secretary of State Condoleezza Rice.

A well known incident of such internal conflict is the war that ignited in 1994 between the Patriotic Union of Kurdistan and the Kurdistan Democratic Party (KDP), with which current Kurdish President Massoud Barzani is affiliated. That war lasted for three years and resulted in casualties among civilians and militants ranging from 3,000 to 5,000. Kurdish factions from Iran and Turkey later on joined the war, rendering the casualty estimates over 8,000.

Internal conflicts still rage causing the Kurdish parliament to freeze, and Barzani, who was elected in 2005, still occupies office although his term ended in 2015. Also, elections set to take place in November are less likely to happen.


Iraq's Kurdistan region's President Massoud Barzani speaks during an interview with Reuters in Erbil, Iraq July 6, 2017. REUTERSAzad Lashkari

Bell said that the KRG also wants to direct its crude oil exports to Shekhan District located in the Ninevah Governorate, and Iran. His research also demonstrates that Iraqi Kurdistan is in debt of $20 billion to Turkish oil companies and Iran, which used to export gas oil to the region. On the other hand, KRG wants to refine oil in Iran.

In 2011, ExxonMobil defied the “U.S. policy of a unified Iraq” and continued exploration in six oil blocks in Iraqi Kurdistan. However, it retreated in 2016 from three of these blocks. According to the Iraq Oil Report, international oil companies have renounced a total of 19 exploration blocks in Kurdistan since 2014.

Kurdish oil production has been predominantly assumed in the past few years by mid-sized firms such as Genel and DNO. Larger companies such as ExxonMobil and Chevron are still at the exploratory stage, Reuters stated.


A view of the Exxon Mobil refinery in Baytown, Texas September 15, 2008. REUTERSJessica Rinaldi

“Pipelines divided Kurds and did not unite them. International oil companies are concerned about institutions and governance rather than independence and politics,” Bell stated in a lecture held at the American University in Cairo on October 4.

Bell further elaborated that “gaining autonomy within Iraq is not guaranteed; some suggest that there will be negotiations.”

Practically, Iraq, Iran, Turkey, and even Syria would not allow Kurdistan to become independent and sovereign, which would not be able to survive any possible blockades for different reasons anyways. Because Kurdistan lacks a qualified systematic army and local production of basic goods, such blockades would end its resolve swiftly.

Demographics of Iraqi Kurdistan

Iraqi Kurdistan, also called Southern Kurdistan, is also the predominant Kurdish region of Northern Iraq. Its official semi-autonomous ruling body based in Erbil is the KRG, which was founded in 1992 comprising 19 ministries.


A general view shows the Citadel of Erbil in Erbil, Iraq April 23, 2017. REUTERSAzad Lashkari

Some 75 percent of its population – amounting to 8.35 million in 2013 – is below 25, while 70 percent of adults work for the government. Iraq has the second largest Kurdish population after Turkey (14.5 million); constituting approximately 17 percent of its population. Iran and Syria have respectively 6 million and 2 million Kurds.

Oil revenues have been distributed upon various ethnic groups in the region. However, no numbers are released to determine the shares of each group.