Follow the money: Kirkuk, Baghdad, Tehran and London, how oil drove an attack on Kurdish control of Kirkuk

By SETH J. FRANTZMAN

In mid-October 2017 Iraqi forces, backed by Shia militias, launched an offensive to take Kirkuk from the Kurdistan Regional Government. It was a major setback for the Kurdish region which had successfully defended the city from Islamic State and governed it for three years, bringing peace to a city that had been rocked by terror after 2003. Under the Iraqi constitution the status of Kirkuk was disputed between Baghdad and the autonomous region of Kirkuk.

The October Kirkuk crisis caught many by surprise. Baghdad had sought to isolate Erbil after the September 25 referendum. The parliament backed federal control of Kirkuk. But no one knew just how it would come about. In early October rumors swirled as Iraqi forces liberated Hawija from ISIS. Then ultimatums were sent to the Kurds. But it was still unclear what the Iraqi government was demanding. A redeployment to federal areas such as an airfield? What was the US-led coalition’s view. Until days before the Kirkuk offensive the coalition claimed to have no knowledge of it, only to then change its stance and claim it was “coordinated” and that any standoff with the Kurds was simply an error of movement.

Here are some of the stories about how oil played a key role. Throughout the crisis the question of oil hung over the Iraqi operation. There were clear demands to return oil fields to Baghdad’s control.

In September a report appeared that Iraq wanted all the fields back. In January 2017 Iraq had cut oil production.

“On Wednesday, Hero Ibrahim Ahmed, a member of the Patriotic Union of Kurdistan (PUK) Political Bureau, and wife of former Iraqi President Jalal Talabani asked Iraqi PM Haider al-Abadi to stop the exportation of Kirkuk oil via Kurdistan pipelines. Ahmed sent an official letter to Abadi to “explain the position of the PUK” on the Erbil-Baghdad deal to export Kirkuk oil jointly. The deal is split evenly where the KRG exports 50 percent and Baghdad exports 50 percent via the Kurdistan Region pipeline to Turkey’s Ceyhan port. “The ministry tried to restore control over the administration of all other oil fields in Kirkuk which was under the charge of the government-owned North Oil Company (NOC) before IS entered Iraq,” the Ministry added.”

Production loses

Iraqi forces took the major oil fields around Kirkuk on October 16th, including the oilfields of Bai Hassan and Havana (Avana). Initial reports noted production declining in the oil rich region. Bloomberg noted:

“The halt could affect 275,000 barrels a day in output, according to estimates compiled by Bloomberg. Kirkuk’s oil fields export through a Kurdish-controlled pipeline to Turkey. The Turkish port of Ceyhan received crude from northern Iraq and the semi-autonomous Kurdish region at a pumping rate of 510,000 barrels a day on Tuesday, down from 600,000 on Monday, according to a port agent who asked not to be identified because the information isn’t public.”

Enter the British

Within a day of Iraqi forces taking over Kirkuk, reports noted Baghdad was reaching out to British Petroleum. Numerous articles reported on the search for an agreement that began on October 18. “As soon as the city of Kirkuk fell to the Iraqi government after Peshmerga withdrew and pulled out its forces in mid-October, the UK government asked British Petroleum (BP) to begin work at Kirkuk oilfields which are currently under Baghdad’s control,’ writes Rudaw. Reuters noted on October 28: “expects to sign an initial deal in early September to revive Iraq’s northern Kirkuk oilfield, an industry source said, a move that could affect regional politics because the field straddles the border with the autonomous Kurdish region.” FT notes “The oil ministry said Jabar al-Luaibi, the minister, had “sent a request for BP to quickly come in to begin studies and restart measures to develop the oilfields in Kirkuk province”.

FT also notes:

“The KRG remains in control of the northern section of the Kirkuk oilfield, which pumps about 110,000 barrels a day. But Iraqi forces have retaken the Avana section, which produces about 80,000 b/d and two southern sections, including Baba Gurgur, that produce 130,000 b/d. Rosneft’s decision to enter Iraqi Kurdistan was announced earlier this year, and the Financial Times reported this summer that it was discussing the development of certain fields within the disputed territory.”

The Russian angle

Amidst the crises Russia’s Rosneft agreed to invest in the pipeline and work with Erbil. “Russia’s biggest oil company, Rosneft (ROSN.MM), has agreed to take control of Iraqi Kurdistan’s main oil pipeline, boosting its investment in the autonomous region to $3.5 billion despite Baghdad’s military action sparked by a Kurdish vote for independence.”

Turkey and the pipeline

In November reports emerged that “Top Iraqi oil officials met with a Turkish energy delegation in Baghdad to discuss resuming Kirkuk’s oil exports through the Turkish port of Ceyhan which were halted early in November.” Iraq also discussed building a new pipeline to Turkey.

“Oil ministry spokesperson Assem Jihad said on Sunday that the pipeline was too severely damaged to be repaired. The ministry has therefore begun planning for a new pipeline and is preparing to invite tenders. The Fishkhabur border crossing is within Kurdistan Region territory. Iraqi and Kurdish forces clashed near the border in October when Iraqi forces and Shiite militias attempted to take control of the key location where the Kurdistan Region meets Turkey and Syria.”

However after oil production fell in October and November members of the North Oil Company went on strike. A December 5 report notes “About 100 staff from North Oil Company (NOC) demonstrated in front of administration offices on December 4. They are demanding pay from the company, which is administered by the Iraqi government.” In nearby Baiji the infrastructure is still in ruins.

The Iranians move in

On December 10 reports claimed that Iran an Iraq had signed an oil swap deal. Yahoo writes: “Iraqi Oil Minister Jabar al-Luaibi said on Sunday that a deal signed with Tehran to swap up to 60,000 barrels per day of crude produced from the northern Iraqi Kirkuk oilfield for Iranian oil is for one year and subject to renewal.” Hurriyet adds detail on this Iran swap: “The deal in effect allows Iraq to resume sales of Kirkuk crude, which have been halted since Iraqi forces took back control of the fields from the Kurdistan Regional Government (KRG) in October. Between 30,000 and 60,000 bpd of Kirkuk crude will be delivered by tanker trucks to the border area of Kermanshah, where Iran has a refinery, Luaibi said.”

Production in Kirkuk has also been boasted. “Iraq’s Oil Ministry has added a new processing unit to the Kirkuk oil refinery, increasing the plant’s capacity to 56,000 barrels per day, the ministry said in a statement on Monday.” This was on December 10.

 

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