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Iraq: whose oil is it anyway?

For Iraq's Kurds, selling oil on their terms is the key to independence. For Baghdad, losing control spells disaster.
Last modified: 23 May 2014 21:01
Businessmen discuss a $3bn redevelopment in Erbil [Reuters]

The oil tankers lined the roads on the Kurdish side of Iraq’s border with Turkey. Some of the drivers sat beside their vehicles, smoking and drinking tea, waiting for the word to cross. My Kurdish companion Muhammed joked that they were smugglers that all could see.

He was not far from the truth. The semi-autonomous Kurdish region of northern Iraq has for years been exporting oil to Turkey, against the wishes of the central Iraqi government.

On Friday, Baghdad took legal action against Turkey after Istanbul announced that oil from the Kurdish region was being sold on to international markets.

The Kurds say they have right to develop and market all resources drawn from their land, including striking international oil deals. Baghdad says only it has the authority to do so. Both sides quote the constitution to argue their point.

The dispute has meant that Baghdad has stopped paying the agreed 17 per cent from the national purse to the Kurdistan Regional Government, and Baghdad wants the International Chamber of Commerce to arbitrate in the dispute.

Oil is Iraq's lifeline. It has the fourth largest reserves on the planet, and sales account for 95 percent of the national budget. Controlling oil exports means you control the country.

In recent years Baghdad has cut the Kurdish region's share of the budget and publicly criticised its leaders, partly as punishment for building a pipeline to Turkey and partly to discourage further exports.

But Safeen Mohsin Dizayee, a spokesman for the Kurdish authorities, says its current arrangement is legal. "We have the right to sell oil to the Turks. It's based on the constitution and we are also willing to give, also as mandated by the constitution, five  per cent of that revenue to Kuwait as war compensation for 1991. We welcome the State Oil Marketing Organisation to supervise this transparent process of selling oil to Turkey."

At Baghdad's mercy

The policy is supported by many in the region. ‎Sarhank Belal, a businessman based in Erbil, the capital of the Kurdish enclave, says it is crucial to insulate his people from Baghdad interference.  "I support the idea of selling oil from the KRG to Turkey. We need to build an independent economy from Baghdad and not be under their mercy."

The dispute over oil feeds into the wider issue of independence - an idea ingrained into Kurdish thinking. Kurds live in Iraq, Syria, Iran and Turkey but have no homeland.

Every one of those groups has fought for independence, and the KRG has come the closest to achieving the dream of statehood. With the help of sanctions and a US, UK and French imposed no-fly zone in 1991 the Iraqi Kurds began to build their independent economy. It is oil that has financed that process.

On the streets of Erbil, the benefits are obvious. Shiny new shopping centres and mosques dot the landscape. Car dealerships are busy and restaurants and cafes do a roaring‎ trade. The region is safe and prosperous and has experienced little of the violence that still plagues the rest of the country.

Simply put, oil means independence for the Kurds. Once again businessman Serhank Belal is forthright: "Oil is our key. We need to strengthen international trade and commerce. That's a positive step forward for independence."

Independence. That's the challenge for both Baghdad and the Kurdish government and with ties already strained, many in the Kurdish enclave are wondering what sort of relationship they want with Iraq.

Follow Imran Khan on Twitter: @Ajimran