Iraq and Gulf Analysis

Hassani Goes after Hawrami in the DNO Dispute

Posted by Reidar Visser on Sunday, 27 September 2009 16:55

DNO, a relatively small Norwegian oil company, has hit the headlines again because of its investments in the Kurdistan region. This time, the focus of attention is a three-way quarrel involving DNO, the Oslo Stock Exchange and DNO’s Kurdish patron, the Kurdistan Regional Government (KRG), with accusations from the Norwegian bourse that the KRG minister for oil, Ashti Hawrami, has been involved in non-transparent trade with DNO shares in ways that might possibly suggest corruption – a charge vigorously denied by the Kurds, who in turn have penalised DNO by suspending its Kurdistan operations and demanding compensatory measures to address reputation damage allegedly suffered by the KRG.

The current media focus on the DNO operations has in other words been caused by changes to the relationship between KRG and DNO, which normally is a quite harmonious one. It is nevertheless interesting that Baghdad politicians have lost no time in weighing in on the affair. Yesterday, a leading member of the oil and gas committee in the Iraqi parliament, Abd al-Hadi al-Hassani from Basra, called for the formation of a parliamentary committee to investigate the possibility of unlawful involvement of a Kurdistan minister in the trading and ownership of shares in a foreign company operating on Iraqi soil. Hassani is a senior lawmaker with the Tanzim al-Iraq branch of the Daawa party, representing the wing of the party that still remains allied to Prime Minister Nuri al-Maliki in his efforts to establish a nationalist electoral ticket separate from the new Shiite-led alliance. Iraqi media, such as the Baghdadiya television channel, have also given ample coverage to the affair.

It is uncertain whether Hassani’s intervention will prompt any kind of serious follow-up once the Iraqi parliament reconvenes on Tuesday. The national assembly already has plenty on its plate to consider, including key pieces of legislation relating to the upcoming parliamentary elections, and indeed charges of corruption or misconduct against several high officials at the federal level of government.  Nevertheless, the remarks by Hassani serve as a useful reminder of the importance of the Baghdad–Arbil relationship to foreign investments in the Kurdistan region, such as that undertaken by DNO and other international companies like Addax. So far, the debate in the international media about these investments has been surprisingly insular and Arbil-centric, and apparently oblivious to the one macro driver that seems truly significant in the long term: the changing nature of the relationship between Arbil and Baghdad. With Iraqi nationalism on the rise since the last local elections it would be prudent of the Kurds to gradually climb down from the maximalist policies that brought DNO and other smaller foreign oil companies to Kurdistan in the first place. There may still be a role to play for foreign companies in the north, but it seems increasingly clear that any such project will need a green light from Baghdad in order to be sustainable.

8 Responses to “Hassani Goes after Hawrami in the DNO Dispute”

  1. Sam said

    For years I’ve been waiting for a chance to make the joke that Ashti Hawrami’s name inspires–Ashti HARAMI!

  2. Mustafa bin Mohammed said

    Sam: You and me both. The definition of Harami is theif for those people that do not understand arabic that might be reading this. The KRG is conspiring with the International Oil Companies (IOC’s)to defraud the rest of Iraq of its rightful share of oil production in the KRG administrated area. The central government should never give in to pressure to accept the terms of the forgeign PSA agreements. The US and KRG are in this together to manage Iraqi affairs in such a way that they get the oil law that favors the IOC’s. The strategy is to divide and conquer.

  3. Brent said

    Mustafa/ Sam, I find your grasp of the situation a bit of a worry. The PSA are very similar to the ones proposed for the 2nd bid round. The KRG according to the Constitution passed by some 80% of voters gives them the right to determine contracts. What is more disturbing is the current govt. willingness to bend that constitution in its favour. This has nothing to do with the USA. Its not them who are stoking the secterian violence. As far as the petty name calling goes grow up.

  4. Reidar Visser said

    I guess the jury is still out as far as Hawrami the person is considered, but with regard to the KRG I wanted to add some caveats to what Brent said about regional rights to oil under the 2005 constitution. All fields, wether “current” or “future” ones, are subject to “joint” formulation of strategic policies in which both central and regional authorities are supposed to take part. Whether signing contracts is part of this is not is open to interpretation; Shahristani is obviously advocating a robust role for Baghdad but it is hard to see how the Kurds can get away with their own interpretation which asks Baghdad to accept a fait accompli and thereby reduces its role to nothing, making the clause meaningless. At any rate, unless this is clarified in a future oil law it is really for the federal supreme court in Baghdad to make an authoritative interpretation.

    Also everything in the constitution is subject to a one-off review which has not yet been completed but where the tendency is towards a general strengthening of Baghdad when it comes to the oil industry. Additionally, the argument often used by DNO that their contract was automatically validated by the clause in the constitution that establishes legality for pre-2005 KRG laws and agreements fails to take notice of the requirement that such decisions must also be in conformity with the 2005 constitution itself, again bringing us back to the jurisdiction of the federal supreme court in Baghdad.

    Finally, it was my understanding that while PSAs were discussed with regard to the second licensing round, what is actually on offer is technical service contracts, no?

  5. Brent said

    I agree with some of your opinion but not all. There is provision for present fields to be jointly exercised. But for future and non producing fields there is no federal right to manage, but regional govt has to take into consideration strategic policy from the fed govt, together with regional govt.This can be found in article 112 and 112,second.
    With the greatest of respect, there is no TSC its now a 20 year development and production service contract (DPSC) and the KRG are using PSC’s not PSA’s. The bottom line that everyone will look at is how many $/boe they (IOC’s) will receive. So in that respect I think they will find common ground as they wont be far apart.
    Also, with great respect I read another artical by you about Kirkuk. I found it very interesting. But you seem to have omitted/glossed over the de arabisation/genocide carried out by the Baathist regime. I think the maximalist policies of the kurds are understandable given the past and presnt ie. article 140.

  6. Reidar Visser said

    Brent, my whole point was that exactly what constitutes “strategical planning/policy” is a moot point and that it is not for us but for the Federal Supreme Court in Baghdad to review and interpret. As for Kirkuk, I have never sought to deny the atrocities carried out by the former regime against Kurdish civilians. Much of this happened in Kurdistan proper and has no link to Kirkuk though. Families who were displaced from Kirkuk should of course have the right to move back or seek redress in one way or another; my whole point is that while this can be addressed at the level of individuals and families, it seems absurd to use the demographic ups and downs of the 1960s and the post-2003 period to change the status of an entire city which historically for centuries had its closest ties to Baghdad. If you review the historical litterature, you will find the whole idea of Kirkuk as a “Kurdish Jerusalem” to be an opportunistic, late-twentieth century concoction.

  7. Brent said

    Reidar, thanks for your great writing I am enjoying it. However,it seems a little bit absurd to expect the people of Kurdisatan/ Iraq to wait years for a review or court order. The people of Iraq need oil flowing and the money from it, not political posturing from the central govt. The Kurds are simply being singled out for being more organised in my opinion. And I agree with addressing it at the level of individuals and families. But I think the maximalist approach is a good way to enter a negotiation, they are hardly going to concede or take a minimalist approach and then enter into a negotiation. Also do you have any information/links on the proposed Unami report for resolving the Kirkuk issue as I would be very gratfull for it. Thanks for taking the time to set me straight.

  8. Reidar Visser said

    The UNAMI report is still not in the public domain as far as I know. I totally agree that Kurdistan needs development, but as I see it it is their own politicians that need to climb down from “political posturing”. Frankly I think the Kurds need to understand if they are to stay in a federation with Iraq, then there has to be more glue in the federation than monthly subsidies of oil money from Baghdad (most of which come from Basra originally). Without that, it’s not really a federation but a confederation. Iraqis will ultimately lose interest. This is already a growing sentiment south of Kurdistan.

    I do think the last local elections in Kurdistan seemed to signify a hopeful development towards greater realism among Kurdish voters on these issues and the wisdom of the PUK/KDP policies so far.

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