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Kurdish struggle for Iraq's oil
03/01/2007

by Yo Takatsuki
Business reporter, BBC World Service, Irbil, Iraqi Kurdistan

One of the most common sights in Irbil is that of a mountain of jerry-cans stacked by a busy roadside.

 

As a car draws up, a young man will rush over to the window and be handed a bundle of Iraqi dinars by the driver. In return, a cherry-coloured liquid will be poured in to the car's petrol tank.

Welcome to a petrol station in Iraqi Kurdistan.

Despite sitting on huge reserves of oil, it is still difficult for people of this region to get access to petrol through formal means.

Instead, cars and trucks fill up at these illegal roadside operations.

19-year-old Mustafa, who works at one, says he has to smuggle fuel from Iran because the petrol from domestic refineries is too low grade.

"We buy the Iranian one, which has this red colour," he says.

"It's not legal, of course, and it's expensive. We don't make much profit. We wouldn't be doing this if the government distributed good petrol."

Slow progress

Iraqi Kurdistan suffered decades of repression by Saddam Hussein's regime during which more than 100,000 Kurds are believed to have perished.

After the 1991 Gulf War, it had autonomy but remained isolated. Now, though, it is finally beginning to prosper.

Since the fall of Saddam in 2003, investment has started to flow and the region has had greater access to central government revenue from Baghdad.

And while much of the country is engulfed in violence, life in the Kurdish-administered regions of northern Iraq goes on in relative peace.

However, the Kurds are yet to benefit from the oil reserves beneath their territory - an issue high on the agenda for the Kurdish Regional Government (KRG).

The KRG has tasked foreign experts such as Jerry Kiser, from Kansas in the US, with getting the oil out.

"We've identified lots of opportunities but there's no pipelines or access to market," he says.

"In a country that has vast amounts of reserves proven but none producing, the single highest line-item burden on the government is the importing of fuels.

Mr Kiser argues that progress has been slow because international oil companies are still reluctant to come and work in northern Iraq.

"Lots of people come to meet the minister but nobody is really doing anything," Mr Kiser says.

Currently, only two small foreign operators are working in Kurdistan.

Kirkuk question

Only an hour away from Irbil is the city of Kirkuk, a major oil centre with a majority Kurdish population which is nonetheless outside Iraqi Kurdistan and is therefore under the control of the central government in Baghdad.

 

Kirkuk's citizens are expected to hold a referendum in 2007 to decide whether to stay with Baghdad or to join the Kurdish-controlled areas.

Should the referendum be in favour of the KRG, then the Kurds should have direct access to one of the biggest oil fields in the country.

The prime minister of Iraqi Kurdistan, Nechirvan Barzani, says that the Kirkuk issue is not just about securing more oil.

"Kirkuk is Kurdish," he says. "No-one can dispute that, but we understand that oil does not belong to just the Kurds. It belongs to everybody in Iraq."

Under Saddam Hussein's regime, he argues, the proceeds of Kurdish oil bought weapons which were used against Kurds.

"For the first time in history the people of Kurdistan, they feel they are part of Iraq. If we are part of Iraq, then they have to give us a fair share of Iraq's oil," Mr Barzani says.

In fact, though, Kirkuk's position could be more difficult to settle.

The city has a large mix of ethnicities, including Arabs, Turkomen, and Assyrians living alongside the Kurds.

It is also extremely violent, with US forces engaged in daily gunfights with local militias.

 

Its oil installations are attacked regularly and it is costing millions of dollars to repair an oil pipeline that has been blown up.

But Mr Barzani is confident that if it came under Kurdish control, Kirkuk could be secured in a matter of months.

"After the referendum the situation will be totally different. We need some time, maybe one year. We are sure about that, we can bring back security to the area."

Great Game

The Kurds may have their eyes firmly on the oil in neighbouring regions, but there is also an increasing foreign interest in the future of Kurdistan's oil.

Almost every night, a fresh foreign trade mission can be found entertaining local officials in the bar of the city's top hotel.

As well as Americans, there are groups from Europe and the Far East.

But it is Iran and Turkey that seem keenest to gain a foothold.

For Jerry Kiser, it is Iran in particular which has increased its influence in the region in recent months.

The Iranians, he says, are already benefiting from 300,000 barrels a day flowing across the border from southern Iraq thanks to smuggling systems set up by Saddam and still operating.

But on a more long-term basis, he says the country is actively looking for projects and companies to recruit and fund.

"They advise me that they have $1bn to invest in the Iraqi oil sector," he says.

"They have their eyes on lots of cross-border fields. It's a reality that's hard for Americans to swallow. Americans may have been playing chequers, but Iranians are playing chess."


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