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Middle East Amp North Africa
Iraq Kurds push for economic independence
From the Financial Times of Thu, 13 Nov 2014 08:47:10 GMT
Nechirvan Barzani©Sebastian Meyer

Nechirvan Barzani

Iraq’s Kurdistan Regional Government is taking a step back from its decades long push for secession but is staking out a tough position as it prepares for budget negotiations with Baghdad, insisting that it must from now on secure economic independence.

The northern region has been strapped for cash since the beginning of the year, when a dispute over oil sales led the former prime minister, Nouri al-Maliki, to cease paying the region’s share of the government budget.

The KRG says it is now owed about $12bn and officials complain that despite promises by the new government in Baghdad, budget transfers have yet to resume.

Nechirvan Barzani, the prime minister, told the Financial Times in an interview that the KRG was willing to give the government of Haider al-Abadi a chance and would work with it to combat the jihadis of the Islamic State of Iraq and the Levant, the group known as Isis. But he said the KRG would now insist on securing its share of the Iraqi budget through its own oil sales.

Ahead of expected negotiations with the new government, Mr Barzani said that the KRG would also demand the full 17 per cent share of the budget that it is entitled to, rather than the up to 11 per cent that Baghdad provided, after subtracting sovereign expenses.

“We will not give full control of oil sales to Baghdad again. That is not possible,” said Mr Barzani. “We need a mechanism that won’t allow Baghdad to disrupt the budget for the region . . . we would take 17 per cent of the budget.”

Analysts say that the KRG’s negotiating position will face stiff opposition in Baghdad, potentially setting the stage for a protracted crisis that is likely to frustrate an American government looking to bolster Iraqi unity and the credibility of the Baghdad authorities.

“Dividing oil revenues at the point of sale gives the Kurdish government control but any policy that enshrines financial independence is unacceptable to Baghdad,” said an Iraqi oil expert.

I won’t divulge who is buying. Those buying want to stay private. We’re getting market value and we have more demand than we can supply

- Ashti Hawrami, Kurdistan oil minister

The KRG’s exploitation of its own oil resources has been at the centre of a long-running dispute with the central government. With at least 45bn barrels in reserves, the KRG has charted its own course, attracting international companies including ExxonMobil, Total and Chevron. The conflict over oil reached a climax this year as the KRG prepared to pump oil through a new pipeline that for the first time directly connected the region with Turkey, bypassing federal government control.

The central government says Kurdish exports through the pipeline are illegal under Iraqi law and has launched legal proceedings in the US. Backed by the US, it has sought to block buyers, and several tankers carrying Kurdish oil have been reported stranded in search of buyers.

Ashti Hawrami, the Kurdistan oil minister, told the FT in a separate interview that the exports had, nonetheless, continued to climb, reaching close to 300,000 barrels per day, and they were on track to rise to 500,000 bpd by the first quarter of next year. “I won’t divulge who is buying. Those buying want to stay private,” he said, insisting that neither the slump in oil prices nor the threats from Baghdad have obstructed the KRG’s export strategy. He dismissed market speculation that the KRG was discounting its oil. “We’re getting market value . . . And we have more demand than we can supply,” he said.

The downplaying by the KRG of pressures on oil exports is part of a broader effort to strengthen its negotiating stance in talks with Baghdad. Officials say that despite the slump in oil prices, the KRG’s financial strains have eased and public salaries have been paid up to the month of August.

“We’ve been able despite the budget cuts to sell crude and borrow money locally and internationally against future supplies of oil. And we continue to borrow money,” said Mr Hawrami.

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