Iraq and Gulf Analysis

Archive for February 17th, 2011

DNO Statement Sheds Light on the Maliki/Shahristani Controversy; Maliki Fudges It during Press Conference

Posted by Reidar Visser on Thursday, 17 February 2011 17:21

It seems perhaps somewhat unusual that the fourth quarterly report of a Norwegian oil company should provide relevant information for understanding the tectonics of centre–periphery relations in Iraq, but that’s exactly what it’s like in today’s Iraq. Thanks to a political situation in which both the secular Iraqiyya and the Shiite Islamist National Alliance are interested in obtaining Kurdish support, most of their political leaders are reluctant to talk publicly about the specifics of Baghdad–Arbil relations. As a result, we get situations like the apparent Maliki–Shahristani controversy over oil exports from Kurdistan, with intense speculation in the international financial press as to whether the oil contracts of the Kurdistan Regional Government (KRG) have been approved by Baghdad or not, and with a virtual media blackout on the same issue in Iraqi media leading to a confused situation.

DNO’s press release from its Q4 presentation contains two interesting pieces of information with respect to the controversy. Firstly, it says “DNO has been advised by the KRG that there will be an interim period until a federal petroleum law for Iraq has passed the Iraqi parliament later this year”. It goes on to add, “the commercial terms for the interim period are under evaluation and will be reported to the market in due course”.

What this seems to indicate is that when Maliki said the contracts of the foreign companies operating in Kurdistan would be “respected”, he probably went further than what the rest of his government had agreed to. Had there been full approval of the oil contracts, as Maliki clearly said in early February, there simply would have been no need for the “evaluation” of “commercial terms for the interim period”, or indeed for any “interim period” and a long wait for the oil and gas law at all. In this respect, it should be added that the oil minister, Abd al-Karim Luaybi, has since expressed a point of view that went in the same direction as Shahristani as regards the need for the oil ministry to consider the contracts, although Luaybi did not go as far as Shahristani did in calling for changes to them. Moreover, today, just after his return from Kuwait, Nuri al-Maliki was asked this very question by AFP during a televised press conference in Baghdad. Who was right, Maliki or Shahristani? Maliki fudged it in his answers. He answered that the basic agreement was that concluded between the ministry of oil and the Kurdistan natural resources ministry according to which the central government would cover the “expenses” (nafaqat) of the foreign companies. He then went on to say, “as for the legal aspect [of the contract], that is a different matter” and refused to say anything more, thus clearly making a distinction between paying expenses to the foreign companies and paying profits as per their contracts. In essence, he retreated somewhat from his sensational statement in early February, when one could get the impression that the contracts had been approved.

Maliki at today's press conference in Baghdad


It seems clear too, that the budgetary process, which will supposedly culminate with a political meeting tomorrow and a vote in parliament on Sunday, will not bring the clarity to this issue that some had been hoping for. It is interesting in this respect that Farhad Atrushi, a Kurdish deputy, today urged that parliament give the oil and gas committee a greater say in finalising the budget in the last-minute round of adjustments. The Kurds appear to be considering Adnan al-Jannabi, the head of the oil and gas committee and a member of Iraqiyya, as a potential ally in this game – which is remarkable given that Iraqiyya in principle shares Shahristani’s centralist position on oil issues. The reason is probably that some members of Iraqiyya keep courting the Kurds in order to obtain their good offices in their own fight for a national strategic council, and seem prepared to sacrifice other priorities to achieve that aim. In parliament, at least, there appears to be no one from the all-Shiite National Alliance that is following in the footsteps of Abd al-Hadi al-Hassani who used to state a position similar to Shahristani in the previous parliament, and with most deputies preoccupied with securing allocations for their own governorates there has not been much in the way of  discussion about the KRG oil deals in that forum so far.

Nonetheless, going back to the DNO report, it seems that the DNO management may be taking the assurances from their Kurdish paymasters perhaps a little too literally when they matter-of-factly predict the passage of an oil law “later this year”, as if the vote will happen automatically in accordance with the Kurdish demands presented to Maliki as basis for their joining his government. It would perhaps be prudent for DNO to at least take into consideration the possibility that there may conceivably be a somewhat longer “interim period”, since like many of the 18 other promises to the Kurds, Maliki is really powerless to do anything about them except wait for parliament to act. In the meanwhile, the Kurds will come under pressure from the operating companies to fix payments, and Maliki will come under pressure from nationalists who insist on a coordinating role for the oil ministry. It is still unclear, then, what makes the situation today really different from in 2007, when Maliki and the Kurds also failed to agree on an oil and gas law in the end. One potential avenue for compromise is perhaps the fact that in the previous interview with AFP that he effectively repudiated today, Maliki did at least articulate an argument for letting foreign companies who invest in Kurdistan earn more money than those operating in the south because of the risks they take. That argument probably still stands, and should in theory make it possible to reconcile the oil ministry in Bagdhad with Arbil if both sides show some flexibility.

*Originally written on basis of the live broadcast from Iraqiyya and later updated with some minor adjustments on the basis of the recorded version of the press conference, with better sound quality, published by Maliki’s office.

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