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Kurdistan Cuts Out Baghdad in Oil Sales

 

The Kurdistan Regional Government decided last month to sell its daily production of 650,000 barrels direct to international markets.
The Kurdistan Regional Government decided last month to sell its daily production of 650,000 barrels direct to international markets.

The decision by the Kurdistan Regional Government (KRG), taken in recent weeks, marks the latest escalation in a long-running feud with Baghdad over oil receipts.

The KRG decided last month to sell its daily production of 650,000 barrels direct to international markets. Previously, it sold most of its crude through Somo, the Iraqi state trading company.

Somo was in turn meant to reimburse Kurdistan for its share of total Iraqi output, which is 17%. Somo has instead made partial, sporadic payments, piling pressure on Kurdistan’s feeble finances.

The KRG’s territorial army, the Peshmerga, is fighting to keep Isis at bay along its 650-mile border with Syria. More than 1.8m refugees have flooded into its territory.

The decision to go it alone on oil sales has raised fears that the northern Iraqi region — with a population of 5m people, brutalised under Saddam Hussein — could hasten the disintegration of Iraq. A KRG official downplayed the possibility, arguing that the move was one of economic necessity. He said: “The door is open to negotiations with Baghdad, but Kurdistan needs to survive. Our troops can’t fight on empty stomachs.”

Once a backwater, Kurdistan’s power has grown in recent years after huge oil discoveries and a new pipeline, linking it to the Turkish port of Ceyhan, opened a path to economic independence. A decade ago Kurdistan produced no oil. By next year it aims to be pumping 1m barrels a day.

It is understood that the KRG is in talks with at least two large oil traders on pre-payment deals that would provide it with a big cash injection. Genel Energy, the London-listed company run by former BP boss Tony Hayward, is Kurdistan’s largest producer. Hayward is also chairman of Glencore, one of the world’s biggest oil traders.

Last month Kurdistan’s deputy prime minister, Qubad Talabani, led a delegation to London to woo City investors for what would be its first bond sale. The deal was meant to be priced last week, but market turmoil from the Greek referendum and the oil price drop has delayed it.

The Sunday Times

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