Iraq and Gulf Analysis

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.

11 Responses to “DNO Statement Sheds Light on the Maliki/Shahristani Controversy; Maliki Fudges It during Press Conference”

  1. Santana said

    Damluji made all sorts of conciliatory remarks in Kirkuk in support of the Kurds….unfortunatly it was because Allawi asked her to….he wants the Kurds to back him up in his punch up with Maliki on the NCSP …if you ask me that is a heavy price to pay just to get a mysterious/questionable council going…..Especially if it has no real bite to it.

    What a mess !!

  2. Reidar Visser said

    That seems to be the dynamic at work. I wonder whether Allawi has changed his position from last autumn, when he lost the bid round for the Kurdish swing vote. That process has been nicely documented in a monumental piece by Anthony Shadid in the NYT recently, at

    It is interesting for what it says about Kurdish distrust of Maliki coupled with unwillingness by Allawi, then at least, to accede to their demands:
    I asked [Kamal Kirkuki] why the Kurds would back Maliki, whom they long disliked, over Allawi, with whom they have enjoyed a long relationship. I expected him to say something about some of Allawi’s allies — ardent Sunni Arabs and nationalists whose rhetoric often sounds anti-Kurdish and chauvinist. He didn’t. “If you have two people, and one of them is promising but lying to you and the other is refusing to promise anything,” he explained to me, “you will still prefer the first.”

    BTW the story also offers great insights into the way the Obama administration (and Hill in particular) chose to define Iraqiyya as a “Sunni” party unfit to produce the Iraqi premier based on their own sectarian calculus.

  3. Salah said

    Shahristani’s centralist position on oil issues

    I don’t think that Shahristani really hold central position with Iraq oil issue, neither him nor Maliki both they have their own agenda in regards to the Iraqi oil.

    strongly disagree that Shahristani working for Iraq and Iraqis when it comes to oil, referring to his behaviour from selling Iraqi oil fields with share contracts or buying Petrol from Iran while there were more oil from Iraqi oil fields if there is really will to get thing sort it out in right manner although huge amount of money spent or paid for oil infrastructure or importing fuel to Iraq.

  4. Reidar Visser said

    Well the Kurds are certainly unhappy with him and say he has been pushing Baghdad’s demands too hard and has been too orthodox in his demand for technical service contract-style arrangements (not PSCs) across the board. See also comments by Ahmed al-Shammari on previous posts.

    If Iraq’s production eventually multiplies in the way Shahristani claims it will, then Iran could be in deep trouble as volumes go up and the price of oil goes down.

  5. Salah said

    then Iran could be in deep trouble as volumes go up and the price of oil goes down.

    I don’t think the price of oil will ease in near future Reidar…the time were cheep oil US$10 -US$25, US$50 gone

  6. Reidar Visser said

    I’m not an economist but as I understand it anything below USD 70/barrel is going to be problematic for Iran due to the financial impact.

  7. I agree, Damaluji did not need to be so conciliatory with the Kurd because they should see their own interest in keeping Maliki’s word, but this is a minor psychological over-reaction. The fact is Maliki has a lot to lose if Allawi decides to be on the opposition side under the present wave of opposition sentiment in the streets of Baghdad. Allawi should ask for a final position on the Council of Policies before the 25th of Feb.
    Needless to say, if the Kurds don’t back Allawi then they will burn their own bridges.

  8. Reidar Visser said

    Faisal, why 25 February? The budget vote is today. Parliament just broke off the session for one hour to clear up some issues between the political leaderships. All the signs are that Iraqiyya will vote for the budget without getting anything specific in return with regard to the issues you mention.

  9. Reidar,
    The minister of finance is from Iraqiya, you can’t have a major budget confrontation over his head.
    Also, a budget agreement shows Maliki the ultimate good will from Iraqiya, if this is not enough and he insists on treating the council of policies like his own employees then I think Allawi should throw his full backing with the planned demonstrations on the 25th.

  10. Thaqalain said

    Reidar What Faisal means is on 25th Feb, there is a planned concurrent country wide demonstration which may proved to be a decisive date. Its to be noted that on this date Saddam attacked Kuwait.

    According to Adnan Al Janabi of OE Committe: 10 agreed documents, of which six are detailed, signed and agreed but none implemented until so far. The NCSP will have to find a way to implement them.

    I think it will be scraped and forgotten like Referendum for SOFA. To my wonder , even signed oil deals in the south are questionabale, too.

    In a reply to a question he said:

    I don’t think parliament wants to poke its finger into everything.

    In another reply he said:

    We want them (Ministers of Oil & Power) to brief us on what they are doing, what they intend to do and how they intend to do it. We need to try to understand them and help them if they are on the right path, and tell them what we think if there are differences between what we think. We appointed them very recently. So we should listen to them first.

    About Shahristan he says:

    Al-Shahristani is part of the problem not part of the solution with this presumption. Also, Ashti Hawrami is probably part of the problem not the solution.
    I don’t think so disputes, conflicts will cease after legislating Hydrocarbon Laws and creating another institution INOC to further deepened conflict of interests with MoO.

  11. Ahmed Al-Shammari said

    Very interesting post. I am more confused than ever now. My BA is in economics and political science and I am struggling to really understand much apart from the fact that there really seems to be division between all parties and within parties.

    Interesting that you have not written about the infighting going on with Al-Iraqiyah at the moment. The fact that two MP’s have been ‘kicked out’ (very conflicting reports) amid reports that the majority of Iraqiyah (two thirds) wanted Qutaiba Al-Jaboori as Vice President rather than Tariq Hashimi.

    Source: Sotaliraq via Sumaria News:

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