(October 26, 2012) The magnitude of Kurdish oil trumps diplomatic niceties.
Iraq’s Kurdistan region in the country’s north may not be recognized as an independent state by the United Nations, let alone by Iraq’s central government, but Kurdistan has all the recognition it needs from those who count — the U.S.’s ExxonMobil, France’s Total, Russia’s Gazprom, European trading houses Trafigura and Vitol, and other players in the world’s energy markets.
Last year, ExxonMobil signed an independent exploration deal with Kurdistan despite threats from a livid Iraq, which threatened to bar ExxonMobil from Iraq if it did. Chevron and others, also ignoring Iraq’s threats, soon joined ExxonMobil. This week, Kurdistan sent its first independent oil exports into international markets, in a deal with Gemel, a British-Turkish company headed by former BP chief Tony Hayward, and backed by international financiers Nathaniel Rothschild and Paulson & Co.
Iraq’s threats against these companies, and its demands that its sovereignty over Kurdistan be recognized, have come to naught because the magnitude of Iraqi Kurdistan’s oil and gas trumps diplomatic niceties. While Iraq’s massive but underperforming energy resources in the south of Iraq languish due to government infighting and bureaucratic neglect, Kurdistan in the north has become one of the world’s hottest and most profitable regions for energy exploration, its largely untapped potential already boasting an estimated 45 billion barrels of oil, and six trillion cubic metres of natural gas.
Kurdistan’s clout relative to that of the rest of Iraq may well increase, too, should the pro-Western Kurds declare independence and formally break away from Iraq in a civil war. South of the current borders of Kurdistan lie oil-rich lands, including the major Kurdish cities of Mosul and Kirkuk, its traditional capital, from which Kurds had been expelled by Saddam Hussein in order to Arabize the region.
If the Kurds succeed in establishing sovereignty over all their historic lands within Iraq, a much diminished Iraq would lose its recently regained status as OPEC’s No. 2 oil exporter while Kurdistan would emerge as one of the Middle East’s largest energy exporters. The oil majors’ willingness to rebuff Iraq in their play for Kurdish oil is, as much as anything, a bet that Iraq will not be able to regain control over Kurdistan.
It’s a good bet, largely because of the way the Iraq war has played out. With the U.S. Army having unexpectedly pulled out of Iraq without securing an ongoing military presence through a Status of Forces agreement, the country and its oil wealth is increasingly falling under Iranian control, to the West’s chagrin. The West would back Kurdistan’s survival in the event of war — a pro-Western Kurdish state would deny Iran energy resources that would help it finance mischief. Moreover, a Kurdistan would create a potent ally of the West in the Middle East, blunting the Muslim Brotherhood’s advance throughout the region and joining Israel as the West’s only reliable partner.
While an Iran-backed Iraq might seem a formidable foe in a war against a breakaway Kurdistan, it would likely not succeed. For one thing, the Kurds are fierce fighters and have been throughout their 2,500-year-history — it was a great Muslim Kurd, Saladin, who defeated the Crusaders to retake Jerusalem. For another, the dream of a country of their own — as promised to them after the Ottoman Empire collapsed in the First World War — is a national imperative. With arms from the U.S. and Israel, which have helped Kurdish resistance for decades, Kurds are likely to be more than a match against strife-torn Iraqi opposition.
The oil industry knows how to play geopolitics.
Lawrence Solomon is executive director of Energy Probe.
This article was first published by the National Post.