Foreign oil companies are being both courted and sidelined by Iraq’s central government
Love and favour can be achieved in the Iraqi energy market if you drill in the right areas. And, for the central government in Baghdad, the country’s semi-autonomous Kurdish region is certainly not one of those areas. Over the last week, temperatures have been rising between the government, the Kurds and external energy firms. Baghdad seems to be dishing out most of the orders, and all its demands seem to follow the theme of ‘Them (the Kurds) or Us’.
In 2011, the US oil giant Exxon Mobil was censured by the central government after it penned a deal with the Kurdish regional government. It has now been given an ultimatum by Baghdad; politicians have been trying to win the Americans over with the prospect of developing the lucrative southern fields. Exxon would like to be able to work in both the north and south of the country but the relations between Iraq’s national government and its restless, independentist Kurds up north have been deteriorating quickly recently.
The Kurdish semi-autonomous region is made up of three of the northern provinces along with parts of three more neighbouring provinces. It has been in charge of its regional politics and its armed forces since 1991. It feels that it is constitutionally allowed to pursue its own oil deals with foreign countries without Baghdad’s permission. The central government says that signing any such agreements behind its back is illegal.
The central government has already been weighing in when it comes to those sought-after southern fields. Earlier in the week, Baghdad signed a deal with the Kuwait Energy and Dragon oil group to explore an area near the Iranian border. However, the government stuck its oar in to ensure that the Turkish affiliate which had originally been involved was kicked off the team. Turkey has been one of the countries doing pipeline deals with the northern Kurds.
These arguments aptly demonstrate the power of the the growing black gold market in the Middle East. They also show us the contentious flare-ups that can arise when outside forces get involved in regional disputes. What may seem a simple problem (who drills where in Iraq) can be shown to be a serious undertaking despite an outsider’s first glance showing both sides to be part of the same country. The Kurdish issue is one of Iraq’s domestic fault-lines but we can find examples of bitter religious and cultural divisions across the region. The Kurdish example includes four nations – any future Kurdistan state would encompass land from Iran, Turkey and Syria as well as Iraq. Then there is the obvious conflict between Israel and Palestinian Territories, which is taking place on disputed territory. Syria, which is suffering from a devastating civil war at the moment that, on a simple level, pits Sunni Muslim rebels against the Alawite-led government (the Alawites are a smaller group, split off from Shia Islam).
In Bahrain, the Shia majority have been demonstrating against their Sunni rulers but their protests have been suppressed, in part, by Saudi Arabia. Despite being wary of Shia unrest in Bahrain, Riyadh has been more than happy to help Sunni rebels in Libya and Syria. In Egypt, Coptic Christians (who number about an eighth of the population) have been on the receiving end of attacks on their churches. The whole region is split up externally and internally along blurry fault-lines.
This is why the choices of companies such as Exxon Mobil cannot be taken lightly. The risks, pitfalls and blood-letting are clear when outside powers try to exert their hard influences on a particular place. But the reaction of the Baghdad government to this current oil argument also shows the significance of soft outside influences inside such unsteady countries. It is all very well planning (although in the case of Iraq it could be argued that the Western forces did not do that as well as they should have done) for the problems and transitions caused by international conflict, or hard pressure. But it is just as important to focus on the soft pressure side of foreign relations – be it who is supplying arms to whom in Syria or who is drilling where in Iraq.