Baghdad and Erbil Clash Over Oil
The Iraqi energy sector is more divided than ever, writes Denise Natali. As Baghdad insists on central control over the country’s resources, the Kurdistan Regional Government (KRG) is busy developing its own oil market. A cold war is brewing between Baghdad and Erbil as the Iraqi prime minister consolidates power and the Kurds attempt to check it.
The Iraqi energy sector is more divided than ever. While Baghdad insists on central government control of the country’s natural resources, the Kurdistan Regional Government (KRG) is autonomously developing its own oil market. Underlying these differences is a brewing cold war between Baghdad and Erbil, particularly as Iraqi Prime Minister Nouri al-Maliki consolidates power and the Kurds attempt to check it.
Still, Baghdad is regaining leverage over Iraq’s energy arena. Increased state oil production and revenues, despite the mediocre results of the fourth bidding round, have reinforced central government authority and the means by which it can appease and control challengers. This trend, along with the absence of a cohesive anti-Maliki block and the unlikelihood of a direct KRG pipeline deal with Ankara, will further frustrate negotiation of a national hydrocarbons law and keep Kurdish crude in political and economic limbo.
Baghdad’s energy ambitions reflect the larger goal of reaffirming central authority in Iraq. Despite the ongoing chaos, security threats, administrative bottlenecks and the KRG’s "export embargo," the central government has increased oil production to nearly 3 million barrels per day. Last April, it realized its highest export level since 1990.
These developments, alongside improved economic relations with regional and international actors, have strengthened Baghdad’s sense of resource nationalism and state control of energy management. Even though major international oil companies (IOCs) showed little interest in Iraq’s fourth energy auction, Turkey’s state-run oil company TPAO secured another contract with a Kuwaiti consortium, marking its fourth investment in Iraqi fields that border or are near Iran. These regional interests may not raise Iraqi reserves to the levels planned, but they affirm important state-to-state energy-sector ties.
