Opening a can of worms in the KRG

The December Baghdad-Erbil agreement on crude transfers to Somo at Ceyhan has been in trouble for months, with the two parties rowing over how much money the central government owes the regional government. But now the oil ministry (MNR) of the Kurdistan Regional Government (KRG) has gone public on infighting, inefficiency and self-interest within the proto state that, it says, has hindered management of the situation.

An extraordinary statement issued by the MNR takes aim at local politicians, accusing them of furthering “narrow and often damaging self-serving agendas”, undermining oil company and trader confidence in the KRG, dithering over key decisions, and frustrating finance ministry plans for economic reform.

To be sure, there is fair degree of self-justification. The MNR was sceptical about the deal with Baghdad from the start, it says. When things began to go awry, the MNR called for early action, but was rebuffed. The MNR has done sterling work in collecting more than the assumed revenues from KRG-marketed crude since June. It also defends the finance ministry’s efforts, contradicting rumours that the one was blaming the other for revenues not reaching spending departments. This hints at the construction of a technocratic alliance against political operators — or it would if KRG oil minister Ashti Hawrami was not, himself, renowned as a wily political operator.

The statement was issued in English, with a translation into Kurdish to follow, raising the question as to whose attention it was meant to grab. Was the prime motive “setting the record straight on oil export and revenue for the people of Kurdistan to judge for themselves”, or assuring the oil industry of the MNR’s competence, or telling the international community that the KRG is in trouble?

Since the Baghdad-Erbil agreement began “unravelling” — to use the Iraq government’s term — the central government has been strangely quiet about the KRG’s move to deprive it of all but a dribble of the crude flowing to Ceyhan. When Erbil started exporting crude on its own account in much smaller volumes last year, all manner of retribution was threatened against lifters, shipowners, and anyone else who facilitated the trade. But this time round, bar a spat at a London conference in June, the response has been muted. The tone of a statement issued by Baghdad this week was ‘more in sorrow than in anger’ and was largely a reiteration of the central government’s assertion that it has paid what the KRG is owed.

Part of the reason for this softly-softly approach is likely down to the more measured approach to the KRG of current Iraqi oil minister Adel Abdul Mahdi, who has seemed keen to build and maintain bridges, rather than burn them down. And the reason for that approach is likely that it is increasingly clear that the KRG can opt for permanent rather than short-run independence in oil exports, if it is goaded into doing so. It is probably also for the same reason that regional and international governments need to take an interest in the economic welfare of the KRG — along with its brother-enemies in Kurdish zones of Syria, it has proved to be one of very few bulwarks against Islamist group IS.

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