Iraq's Government, Kurds Squabble Over Oil Deals
STEVE INSKEEP, host:
For the first time in years, Iraq has newly drilled oil wells that are ready to start pumping - potentially good economy news and also a political problem. The wells are controlled by the Kurds in a northern part of Iraq. They say they have the right to cut oil deals with foreign investors. The Iraqi government insists that all agreements must go through Baghdad. And this dispute is making a lot of foreign investors nervous. NPR's Quil Lawrence reports from northern Iraq.
QUIL LAWRENCE: For the oil industry Iraq is the last great sure thing with proven reserves that might rival Saudi Arabia. The oil is easy to pump and of high quality and it's still being discovered.
Drillers in the Kurdistan region have hit oil in many small new fields, like this one near the city of Erbil. International companies from Europe, Asia and the United States have invested millions to find the oil, but then they've hit up against a political standoff between the Kurds and Baghdad.
The Kurdish regional government insists that the Iraqi constitution grants them the right to negotiate contracts as long as all profits go to the central government. Iraq's oil ministry disagrees and has threatened to boycott any company that deals directly with the Kurds. Assem Jihad is the oil ministry spokesman.
Mr. ASSEM JIHAD (Spokesman, Oil ministry): (Through translator) The Ministry of Oil warns that any company signing contracts with getting the oil ministry and the federal government approval, the contracts are illegal. And the ministry will not deal with this firm again and will put it on the blacklist. I think the statement is very clear.
LAWRENCE: But international companies aren't sure whom to bank on. Most recently, a major Korean firm signed a deal with the Kurdistan region. They got some encouragement from a state visit to Seoul by Iraq's President Jalal Talabani, who is Kurdish. Ben Lando edits Iraq Oil Report.
Mr. BEN LANDO (Editor, Iraq Oil Report): The Korean press announced that there was some sort of agreement on an oil deal. It struck me as funny, because the president of Iraq doesn't sign oil deals.
LAWRENCE: Right after the Iraqi president assured the Koreans that the deals were safe the Iraqi oil ministry slapped Korean with a ban from bidding on any of the giant fields in the south of Iraq. The Korean embassy refused comment.
But the Kurds may have now found an end run around the oil ministry. This week they announced pumping will begin from two new oil fields into the pipeline out through Turkey. Ashti Hawrami is the oil minister for the Kurdistan region.
Mr. ASHTI HAWRAMI (Oil minister, Kurdistan region): Iraq has a lot of oil to produce. And Baghdad has been failing to increase our production. We, thankfully, have achieved in a record time a big contribution to make to Iraq. The oil is going and the beneficiary will be only Iraqi people.
LAWRENCE: The profit goes to the central government, but Harami says the Kurdistan region will also benefit when it gets its normal share, about 17 percent. He refused to explain how the international partner will get paid, except to say that the Iraqi oil ministry has nothing to do with decisions about distributing revenues.
For the moment, it seems that the Kurdistan region will keep signing deals, the Iraqi oil ministry will keep blacklisting whoever signs with them, but the crude can flow. It remains to be seen how this might affect Iraq's oil law, which has been stuck in the Iraqi parliament for several years.
Quil Lawrence, NPR News, Erbil.
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