Analysis: Kirkuk elections and Iraqi oil

By JOHN C.K. DALY, UPI International Correspondent   |   June 2, 2009 at 9:43 AM

WASHINGTON, June 2 (UPI) -- While the United States prepares to draw down its forces in Iraq, an upcoming election in the north of the country threatens to destabilize the region's relative quiescence. As with so many conflicts in Iraq, the subtext is oil, and who will benefit from the vast deposits around Kirkuk.

Kirkuk, 150 miles north of the capital Baghdad, is Iraq's biggest oil-producing city and the epicenter of the country's northern oil industry. Historically an ethnically mixed city with Kurdish, Assyrian, Turkmen and Arabic populations, in the wake of the 1991 Gulf War Kirkuk suffered from ethnic cleansing as Saddam Hussein moved Sunni Arabs into the city, displacing Kurds.

The issue of who will control Kirkuk and its oil assets has been a contentious issue since the March 2003 U.S.-led invasion, with a referendum on the question deferred again and again. The Kurdistan Regional Government is keen to assert its authority over Kirkuk, a move that Baghdad is resisting. Now delayed provincial elections threaten to raise the temperature on the issue once again.

On Jan. 31 Iraq held provincial elections for new councils, but they were deferred in Kirkuk and Iraq's three Kurdish provinces. With U.N. support, the Iraqi Parliament established a commission to determine how to resolve the problems surrounding the elections. The commission's report was initially scheduled for mid-April, then deferred to the end of May, and has now been delayed by another week because of bickering among commission members, who were unable to reach a compromise consensus acceptable to Kirkuk's Kurdish, Turkmen and Arab communities. The core issue is that the Kurds maintain that, as they constitute the majority of city's population, their percentage of seats on the provincial council should reflect their dominance, a position opposed by Arab and Turkmen representatives, who want the positions on the provincial council to be apportioned into three equal blocs.

Provincial council seats translate into political power, with an impact on the eventual disposition of the region's greatest prize, its oil wealth.

The issue concerns Baghdad as much as Kirkuk's Kurdish population, as an estimated 20 percent of Iraq's oil reserves is in the north of the country around Kirkuk, Mosul and Khanaqin. Two-thirds of Iraqi production in the past has been produced by the country's southern fields, with the remainder coming from the north-central fields near Kirkuk. The majority of Iraqi oil production is currently produced by three giant fields: North and South Rumaila and Kirkuk. Kirkuk's oil fields, discovered in 1927, contain an estimated 8.7 billion barrels of remaining reserves.

In a classic example of bureaucratic understatement, the U.S. government's Energy Information Administration in its Iraq "Country Analysis Brief" noted about Kirkuk, "Control over rights to reserves is a source of controversy between the ethnic Kurds and other groups in the area."

Further complicating the resource picture is the fact that the 2003 invasion severely impacted production at Kirkuk and the northern fields, which prior to the conflict produced 680,000 barrels per day; current production has yet to recover to even half its pre-war level, but with foreign investment could rise quickly.

Nor is oil Kirkuk's only hydrocarbon asset. Iraq's proven gas reserves are the tenth largest in the world, with two-thirds of the country's natural gas resources associated with oil fields, including Kirkuk. The region's existing natural gas facilities are being repaired and upgraded. On May 31 a Ministry of Oil spokesman told journalists that ministry technical teams and engineers had finished repairs to pipelines from Kirkuk that were damaged by sabotage in 2003 in the wake of the war and have resumed the pumping of liquefied gas to al-Taji to supply Baghdad's local needs.

Baghdad's reliance on Kirkuk's natural gas epitomizes the thinly veiled strains between the KRG and the Shiite Arab-led government in Baghdad over the future of Kirkuk and other disputed territories, particularly over oil resources and independent contracts that the KRG has signed with private oil firms to exploit fields within its enclave. Kirkuk is the touchstone of a protracted struggle over power between Baghdad, anxious to reassert its authority over northern Iraq, and the KRG, eager to maintain the autonomy it established in the chaos following the 2003 invasion, when the United States tacitly turned a blind eye to such efforts in return for the KRG keeping the area under its control quiescent.

Nor are events in Kirkuk happening in a vacuum. Neighboring Turkey has long taken a close interest in the Kurdish regions of northern Iraq, with an interwoven agenda of neutralizing terrorist attacks emanating from there by the Kurdish PKK insurgents, protecting the interests of the region's ethnic Turkmen population and having a voice in the dispensation of the area's energy assets.

In negotiations with Baghdad Turkey has a powerful card -- the 600-mile, 40-inch Kirkuk-Ceyhan dual export pipeline. The pipeline terminates at Turkey's Dortyol port on the Turkish Mediterranean coast near Ceyhan, the terminus of the million bpd Baku-Tbilisi-Ceyhan pipeline. The Kirkuk-Ceyhan pipeline had a pre-invasion capacity of about 1.5 million to 1.6 million bpd but only operated at around 800,000 bpd. Kirkuk-Ceyhan is Iraq's largest operable crude export pipeline, which generates significant transit revenues for Ankara. There are some positive developments here, as on June 1 the KRG announced it would begin pumping up to 100,000 bpd from two northern oil fields to Turkey, with KRG adviser Khalid Salih stating that the administration hopes to raise exports to 250,000 bpd by mid-2010.

For Turkey, the Kirkuk-Ceyhan and BTC transit revenues are payback for supporting Western sanctions since 1991's Operation Desert Storm; following the invasion, Ankara estimated that in supporting sanctions against Saddam's regime it had lost $80 billion in transit fees. Any political turmoil that threatens the revenues, much less Turkey's political interests, will be closely followed in Ankara.

Even if the KRG and Baghdad manage to smooth over the provincial council elections, further storm clouds are on the horizon on the rocky road to democracy in the form of an oft-delayed Kirkuk referendum, a plebiscite to determine whether the Kurdish regions within Kirkuk, Diyala, Salah ad Din and Ninawa governorates will become part of Iraq's Kurdish regions. Originally scheduled for November 2007, the vote has yet to be held.

Oil, money and democracy are a volatile mix, and U.S. officials fear that the referendum, when finally held, could inflame Kurdish-Arab tensions and heighten violence just as the sectarian warfare and insurgency unleashed by the 2003 U.S.-led invasion are easing. Depending on what happens, the Kirkuk referendum may yet prove to be the sternest test of the previous U.S. administration's efforts to export democracy to areas with little experience of same.

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