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BAGHDAD, Dec. 12 (UPI) -- Amid growing security fears as U.S. forces withdraw from Iraq, the shaky coalition government in Baghdad is grappling with another problem: growing demands for autonomy by oil-rich regions. The issue is at its thorniest with the already semi-autonomous Kurdish enclave in the north -- a holdover from the 1991 Gulf War -- after the world's largest oil company, Exxon Mobil, signed an exploration agreement with it in October.
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By doing so, the U.S. oil giant defied the government, which insists that it's the only authority when to comes to awarding energy contracts.
Baghdad's ire is such that Oil Minister Aldul Karim al-Luaibi has warned the Kurdistan Regional Government that it must decide whether it wishes the three provinces that form the Kurdish zone to remain part of Iraq or become independent.
"It's up to the Kurdistan region to decide whether it has made a strategic decision to stay part of Iraq or whether it has made up its mind to establish an independent state," he declared Friday.
The ultimatum was remarkable in that Luaibi mentioned the prospect of Kurdish independence, a subject that's generally taboo.
The Kurds have long dreamed of -- and fought for -- an independent homeland. But the "i" word is rarely spoken aloud in political discourse as the country struggles to rebuild following the ousting of Saddam Hussein's grotesque regime in 2003.
But now, as other regions join the clamor for autonomy, the very mention of Kurdish independence causes political tremors in a state riven by deep sectarian and ethnic divisions that could erupt into open warfare once U.S. forces have departed.
The KRG has repeatedly challenged the central government's authority to award oil and gas contracts. Over the last three or four years the KRG has signed production-sharing deals with 42 foreign companies, most of mid-level or small outfits.
Its terms are far more generous than the Oil Ministry's 20-year agreements with international majors, which are paid a scant $2 for every barrel produced.
The Kurdish enclave sits on 45 billion barrels of oil, a substantial chunk of Iraq's national oil reserves of 143.1 billion barrels.
Exxon Mobil was the first oil major to openly defy Baghdad and sign with the KRG, boosting the Kurds' drive to develop an oil industry that would form the economic backbone of a future independent state.
In retaliation, Baghdad has removed Exxon from a list of companies prequalified to bid in a new auction of oil and gas fields scheduled for January. It has also threatened to scrap the company's 2009 deal to develop the giant West Qurna field in the south, where two-thirds of Iraq's oil reserves lie.
Since Exxon's committed to investing around $60 billion in West Qurna Phase 1 that could involve years of litigation that will only slow Baghdad's drive to quadruple production to 10 million barrels per day by 2017.
But Baghdad must do something to nullify the Exxon-KRG partnership, both to maintain its authority and to impede the Kurds developing a viable oil industry.
The Kurds also claim the Kirkuk oilfields in the north. Baghdad cannot afford to relinquish Kirkuk and tensions are high there.
Now the majority Shiites in Basra province in the south are threatening to push for autonomy. That would further threaten Baghdad's control over Iraq's oil wealth and encourage the fragmentation of a country that Saddam Hussein held together by force and repression.
Southern politicians are suing the central government because they weren't included in negotiations that resulted in a $17 billion gas deal between Baghdad and a consortium of Royal Dutch Shell and Mitsubishi of Japan.
Basrans have long complained of neglect by Baghdad even though the region produces two-thirds of Iraq's oil revenue.
Iraq's Sunni minority is pushing for semi-autonomy "within a unified Iraq" in Salahuddin province in the north. Diyala and Anbar provinces may not be far behind.
The Turkomen minority is demanding Baghdad create two new northern provinces for them and give the territory regional status.
All this doesn't bode well for the future, since autonomy for Shiites in the south and Kurds in the north would leave the disgruntled Sunnis, the pillar of Saddam's regime and now a virtual underclass, in the center, helpless, weak -- and with no oil.
