By/ Bahrooz Jaafar
Hydrocarbon rivalries in the main basins of the Gulf, the Black Sea, and the Eastern Mediterranean have sparked the most dialogue at various levels. In addition, we are in a new phase of international relations called the "Great Power Competition." Regarding geographical position, the Kurdistan Region of Iraq is between the three major strategic factions. This analysis discusses the level and limits of coalition support for the KRG. As always, the U.S. administration in 2022 has expressed their support at various levels for the oil and gas sector of the KRI, for instance, during the visit of the U.S. Assistant Secretary of State for Near Eastern Affairs "Barbara A. Leaf" to Baghdad and Erbil on September 5 to 8, 2022, she has openly reaffirmed their support to the KRG' s energy sector.
The top priorities of the Biden administration.
The two main agendas that have preoccupied the White House and decision-making centers in the United States are the U.S. strategy to deter China and Russia's economic and military hegemony in the Middle East and maintain global energy security. Iran and Russia enjoy high oil and gas prices and unprecedented inflation in the West. Tens of thousands of bakeries and restaurants have shut down, and European banks are buying generators.
Therefore, Russia and Iran are working hard to convince Iraq and other neighboring countries not to help facilitate the U.S. and Europe, for this they do not want either the Kurdistan Region to go on the map of natural gas in the Mediterranean or Iraq to Pour it into putting more oil on the market.
In the first week of August 2022, journalists asked U.S. State Department spokesman Ned Price several times: "Are you aware that the Iraqi Oil Ministry is selectively targeting U.S. companies operating in Iraq and the Kurdistan Region? The Minister of Finance is implementing the decisions of the Supreme Court. Here (preferential meaning that several companies in a list of companies close to the Western United States are deliberately targeted). Ned Price had almost no answer!. The same week, the Senate and the Foreign Affairs Committee sent a letter to U.S. Secretary of State Antony Blinken. On the same day, Iraqi Finance Minister Ali Allawi suddenly resigned!
China has quietly exploited energy market instability
In Iraq, the Chinese have received a license to develop a $7 billion FAO refinery in Basra. By 2022, China has decided to build 1,000,000 schools in Iraq. The atmosphere has paved the way for China to play its horse in Iraq on two fronts:
First, from 2018 to 2022, Western companies such as Exxon Mobil, British Petroleum, and Shell left Iraqi oil fields. It is due to changes in the domestic policies of the companies themselves, as well as falling oil prices, low profits, and the instability of the working environment in Iraq due to terrorism. To this end, Chinese companies have replaced Western companies. By 2022, the Chinese will operate in 14 primary and medium oil fields in Iraq, accounting for more than 50% of Iraq's oil. In addition, China regularly purchases a million barrels of Iraqi oil daily.
The second factor is that from 2003 to 2022, U.S. policies toward Iraq were not successful. As a result, Iran, Russia, and China have each had their influence on Iraq.
Globally, China is also taking advantage of these opportunities in Europe. For example, because of the energy crisis, thousands of factories were closed, a European citizen may be able to buy shampoo if it costs 2 to 4 euros, but if it costs 7 to 10 euros, people will buy Chinese shampoo for one. So, Chinese goods are cheap and easy to get anywhere worldwide. In addition, the euro lost value due to European economic inflations and high energy prices in 2022.
The United States supports the Kurdistan Region's oil and natural gas.
From August to November 2022, the State Department and the U.S. Embassy in Iraq twice reaffirmed direct and indirect support for the Kurdistan Region's energy sector:
According to reports, multinational oil companies have been intensively lobbying since July 2022 to clarify the U.S. administration's position on the decisions of the Iraqi Federal Court and the movements of the Iraqi Oil Ministry. The federal authorities targeted four of the largest U.S. and Western companies: Schlumberger, Halliburton Energy Service, Beker Hughes Company, and then UAE's Dana Gas, which operates in the Chamchamal and Kor Mor fields.
In the first, second, and third attempts by the Iraqi central government, the U.S. companies viewed the decision of the Iraqi Oil Ministry as a legal and constitutional entity of the host country and complied with it. The U.S. administration's understanding changed when it was Dana Gas' turn, and the field was shelled three times since June 2022.
Kor Mor gas field; U.S. support and Iranian threats
Kormor, located in the Qadir Karam district, was a meeting point between Kurds and successive Iraqi governments in the past century and has suffered from ethnographic changes and the Anfal campaigns.
According to Gaffney, Cline & Associate, a global audit firm founded in 1962 in South America, the Kormor field has 4.4 trillion cubic feet of proven gas reserves. It takes 25 minutes to reach the Tuz Khurmatu district from this field. It is 15 to 20 kilometers from the Popular Mobilization forces (Hashdi Shaabi ) and the Iraqi army.
Iran generally considers the area its hegemonic zone, but Turkey and the UAE are operating on it, and the U.S. administration is supporting it. According to Dana gas, revenue and production will increase by more than 50%. It produces 500 million cubic feet of gas daily and is transported to the gas city in Chamchamal through a 24-inch pipeline of 172 kilometers, which supplies electricity to the Sulaimani region. From there, it will deliver gas to the Pirdawd area of Erbil through a 120-kilometer pipeline. In addition, the field produces liquefied petroleum gas (LPG) and has been awarded to several companies by tankers and tenders to deliver liquefied petroleum gas to households. It also produces 15,000 to 20,000 barrels of oil, depending on the gas density. So this is one of the significant nerves of Kurdistan's economy, and dozens of local, UAE, Turkish, and American companies benefit from it.
The field covers an area of 250 km2. Moreover, the two U.S. companies: Exterran and Havantec, are also involved in the logistics expansion of the stations.
Iraq (Baghdad and the southern provinces) needs 30,000 megawatts of electricity but has yet to be able to produce more than 20,000 megawatts. Iraq, including Baghdad, relies on Iran for a third of its electricity, importing gas from Iran at three times the market price.
In such a situation, it is as if the natural gas of the Kurdistan Region, especially the Kormor field, because of its proximity to the same country, has been sent to Baghdad and become a cause of economic recovery and political and security rapprochement. However, Iran does not accept that the Kurdistan Region's gas replaces its gas for Iraq, nor does it want Iraq and the Kurdistan Region to be on a stable oil coin to help Europe and the United States in this global crisis caused by hydrocarbons. Therefore, the U.S. administration has officially understood that the decisions of the Federal Court and the Ministry of Oil have other purposes. Therefore, Deputy Foreign Minister Barbara Leaf visited the United Arab Emirates after visiting Baghdad and the Kurdistan Region. "We have spoken openly and secretly," she said during the visit.
Will the decisions of the Federal Court be ignored?
Within the Kurdistan Region, further rapprochement between the Kurdistan Democratic Party (KDP) and the Kurdistan National Union (KNU) as two ruling parties is inevitable. Second, it wasn't easy to form Mohammed Shaia Sudani's cabinet without the KDP and Sunnis. The Kurds, Sunnis, and Shiite coordination parties took significant steps to form a new government in Baghdad a year after the early elections. The Kurdistan Region's achievement in this act will likely reduce tensions over the oil and gas issue. These tensions peaked after the February 15, 2022, decision of the Federal Court, which described the oil processes in the Kurdistan Region as illegal and unconstitutional, causing concern among multinational companies, the region, the European Union, and the United States. The Sudanese cabinet needs to avoid tensions among the parties involved in the government. Because there is a massive gap between the people and the authorities, the Sadrist movement is ambushed and will not be a spectator outside the stadium until the end.
Conclusion
The only solution to the oil and gas issue between Baghdad and the Kurdistan Region is to enact the Iraqi Oil and Gas Law. It is in the Kurdistan Region's interest that the future Iraqi oil and gas law will allow it to establish Kurdish national, domestic, and energy services companies. When the Kurdistan Region becomes the owner of a large oil company, the human resources will be available for management, and the high costs of foreign companies in the Kurdistan Region will gradually decrease, which will help the Kurdistan Region to solve better its financial crisis The banks and the national tax system are gradually developing and so on.
The oil and gas sector of the Kurdistan Region faced domestic, Iraqi, regional, and global threats, while there are great domestic, Iraqi, and global opportunities. The opportunity is that as long as oil prices remain high, the KRG will move towards building a substantial and diversified economic infrastructure.
The bitter conflict between the two main political parties (KDK vs. PUK) in the Kurdistan Region has completely annoyed the western allies and the U.S. administration. The internal political problems of the KRG must be resolved quickly, and the Peshmerga and defense forces must be integrated soon; they should be prepared for any untoward eventuality in the region.
Bahrooz Jaafar. Founder and head of the Mediterranean Institute for Regional Studies, he is carrying a Ph.D. in international political economy.