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Oil flows again from Iraq’s Kirkuk thanks to US intervention

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Oil flows again from Iraq’s Kirkuk thanks to US intervention

Post  GirlBye on Fri Nov 30, 2018 2:37 pm

Washington is keen to curtail Iranian influence in Iraq and reduce oil prices






The return of oil flows  from the disputed region of Kirkuk in Iraq is a welcome sign of improvement in the relations between the Kurdistan Regional Government (KRG) and the Iraqi government. Recent geopolitical developments in the region looks to be slowly bringing the two sides closer together.


 Historically fraught relations between the two sides, which have seen decades of disputes, came to a head last year when the Iraqi Kurds held an independence referendum. This resulted in the Iraqi government taking control over the disputed region of Kirkuk and its surrounding oilfields in retaliation.


 But after almost a year of negotiations Iraqi officials have announced that an agreement has been reached to export Kirkuk crude through the Kurd’s pipeline, the only conduit to international markets. The breakthrough primarily came as a the result of an intervention by the Trump administration in the US, which is keen to make up for the fall of oil exports from Iran after placing sanctions on their oil industry. 


 The US has recently mounted pressure on Baghdad to restart crude export from Kirkuk to the Ceyhan port in Turkey. US State Department spokeswoman Heather Nauert stated on November 16 that the resumption of exports of Kirkuk oil was “another important step in our efforts to reduce Iran’s oil exports.” Earlier this month, the Trump administration granted Iraq a special waiver of 45-days for purchasing Iranian electricity imports.


 But the waiver came with conditions; Iraq cannot use US dollars for Iranian imports and must resume crude exports from Kirkuk working in co-ordination with the Kurds. US President Donald Trump has on several occasions stated that he wants to see lower oil prices. His administration has already convinced Saudi Arabia to increase production and it looks like similar efforts have taken place in Iraq. 


 The Kurds and the central government have previously struck agreements regarding the use of the Kurdish pipeline but budgetary and revenue disputes, as well as a Kurdish independence referendum, have led to the deals quickly breaking down. Yet we expect the situation will be different this time round.


 Iraq’s newly elected prime minister, Adil-Abdul Mahdi, has a long history of cordial relations with the Kurds having lived in the Kurdish region during his exile from Saddam Hussein. He was also the architect behind a shortlived oil and revenue deal that included Kirkuk in 2015. This fell apart due to both parties failing to abide by the agreement but demonstrates a willingness from his side to co-operate with the KRG. However, the increased US involvement is critical. Previous US administrations have played a marginal role in internal oil and revenue disputes. But by putting pressure on Baghdad and Erbil to abide by the deal, the Trump administration fulfils two major goals; reducing Iranian influence in Iraq and reducing oil prices.


 Closer co-operation between Erbil and Baghdad also means a stronger front in Washington’s fight against the Islamic state in Iraq. It is unlikely that Iraq will heed to Opec calls for a reduction in production. The country cannot afford the lost revenues and would want to keep the newly reaffirmed partnership with the US intact.  Another reason for the US to exert more pressure on KRG and Baghdad is Russia’s increasing presence in the country. Last year, the KRG struck a deal with Russian oil company Rosneft buying 60 per cent of the Kurdish-controlled pipeline. It is not clear how exactly how the deal will be stipulated or if Rosneft will have a say in this, but early reports suggest that Iraq will allocate a portion of the 2019 Iraqi budget to the KRG in return for use of the pipeline.


 Meanwhile, the KRG can continue exporting crude independently from fields under its control in Iraqi Kurdistan. Should the deal hold with exports from Kirkuk increasing, the market will see additional oil flows helping to keep the pressure on oil prices and, in turn, Iran.  With the US intervention and a new leadership in Iraq, there is hope that this deal will not only last but be extended to other areas of dispute between the two sides. 


It is vital for the Trump administration to keep the taps open from Kirkuk in order to fulfil its long strategy of containing Iran and keeping oil prices low. At the same time it could also lead to something none of his predecessors were able to do, namely resolving the disputes between the KRG and Baghdad. 



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