Terrorists have taken over much of Iraq in recent weeks, leaving the Kurdistan Regional Government (KRG) in the country’s north perhaps the most stable place within Iraqi borders. But the jihadist blitz isn’t the only thing moving the KRG out of Baghdad’s orbit.
An oil pipeline running from the autonomous Kurdish region of Iraq to the Turkish port of Ceylan, coupled with Kurdistan’s extensive oil reserves and its impressive military force, means that Iraq’s Kurdistan Regional Government is now almost entirely free of Baghdad.
Roughly a quarter of Iraq’s oil lies within Iraqi Kurdistan — although this amount is thought to be significantly more now that the Kurds have de facto control over the oil and refinery rich city of Kirkuk. Turkey estimates that anywhere from 100,000 to 120,000 barrels of oil a day flow into the country from Kurdistan. About 2.3 million barrels of oil are being stored in Ceylan.
Kurdistan is planning on increasing oil exports in July to 200,000 to 250,000 barrels a day, although the KRG wants to extract 400,000 barrels a day by 2015.
Even that undersells the KRG’s long-term oil potential. The Kurds estimate that if they connect Kirkuk to its Turkey pipeline, it could process an additional 250,000 barrels a day.
Baghdad has protested against the Kurds having the ability to independently sell their oil, and the central government has accused the KRG of plundering Iraq’s natural wealth. But Baghdad’s protests and its threats of blacklisting agencies that have handled Kurdish oil haven’t amounted to much. It is even thought that Israel and the Russian oil company Rosneft have bought Kurdish oil, although details remain scant.
Iraq doesn’t recognize or trade with Israel. If Kurdish oil has indeed ended up there, then it shows that the KRG feels little obligation to follow any of Baghdad’s rules.
Iraqi Kurdistan also has its own independent deals with oil companies. Exxon Mobil and Chevron are just two of the companies currently employed in the Kurdish region. The Kurd’s oil profits are currently stored in a bank account in Turkey. The Kurds say they will keep 17% of the profits, as agreed upon previously with the central government, while Baghdad is entitled to the rest.
But given Kurdistan’s immensely stronger bargaining position within Iraq in light of the jihadist group ISIS’s recent takeover of much of the country, the Kurds are considering pushing Iraq to increase the Kurdish share of oil revenue to 25% of the total.
It is also possible that the Kurds could opt to unilaterally declare independence from Iraq and keep the entirety of the oil profits for themselves.
Iraqi Kurdish President Massoud Barzani told CNN’s Christiane Amanpour that he believed Iraq was falling apart and that the federal government had lost all semblance of control.
Given the current state of affairs, Barzani said that “it has been proved that the Kurdish people should seize the opportunity now – the Kurdistan people should now determine their future.”
Hundreds of millions of dollars of monthly oil revenue would go a long way towards financing Iraqi Kurdistan’s independence, if that’s the course Iraq’s Kurdish community eventually decides upon.