Iraq: Bitter-sweet developments for KRG as US Judge rules that US$100 million oil dispute should be settled in Iraq

On 29 July we reported that a US judge, in response to a lawsuit filed by the Baghdad government, had signed an order to seize the US$100 million crude oil cargo from the United Kalavrvta tanker anchored off the Texan coast. It now appears that there have been some bitter-sweet developments for the KRG.

While US Magistrate Nancy Johnson issued an order to seize the tanker’s cargo, she also told lawyers for Iraq that the dispute should be resolved through the Iraqi court system. As the tanker is anchored 60 miles offshore, 50 miles outside of federal jurisdiction, the cargo cannot be seized.

Although the inability to seize the tanker’s US$100 million cargo is an obvious plus for the KRG it has come at a heavy price. Prior to the seizure order the KRG had managed to keep the end-buyers of its oil anonymous. However, the main US customer for the cargo has now been named as Lyondell Basell, who has subsequently stated that it would not take it, or any subsequent shipments, until the matter had been resolved by Erbil and Baghdad.  

The filing in federal court, Houston, stated that Iraq's central government has asked Iraq's Federal Supreme Court to block the Kurdistan Regional Government from exporting any crude until its ownership can be determined. The central government contends that the oil is not the sole property of the Kurdistan region of Iraq but belongs to the country as a whole. The KRG, however, asserts that its independent oil sales are their efforts to recoup the funds allocated to it, which the Iraqi central government has failed to supply them with.

The latest legal challenge follows Iraq’s bringing of criminal charges against the Kurdistan government in May, alleging theft of oil revenues. However, Kurdistan has failed to appear in court to address the charges and this "failure to comply with the summonses has effectively blocked the Federal Supreme Court from hearing the merits of the case." Harold Watson, a Houston lawyer representing Kurdistan, did not have an immediate comment on the filing when contacted by Reuters.

The U.S. government has expressed fears that independent oil sales from Kurdistan could contribute to the breakup of Iraq as the government in Baghdad struggles to contain the ultra-hardline Islamic State, a group of Sunni Islamist insurgents who have captured vast areas of the country.

Washington has pressured companies and governments not to buy crude from the KRG, but it has stopped short of banning U.S. firms from buying it outright.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

Iraq: US court order halts US$100 million sale of Kurdish oil

There have been new developments in the tit-for-tat struggle between Baghdad and Erbil over independent oil sales oil sales by the KRG. The Kurds have suffered a fresh blow to their attempts to sell the oil that they have been exporting via Turkey. It has been reported that an US judge, in response to a lawsuit filed by the Baghdad government, has signed an order to seize the US$100 million crude oil cargo from a tanker anchored off the Texan coast.

It was reported at the end of July that the United Kalavrvta, which left the Turkish port of Ceyhan in June, had sailed to the US and was planning to discharge at the Texan port of Galveston. The tanker informed the authorities that it was intending to discharge its cargo at sea into smaller vessels that would then deliver the crude to the port. On 27 July the US Coast Guard in Houston inspected the Marshall Islands-flagged tanker and cleared it for unloading which seemingly opened the way for the delivery to take place.

However, in its filing in the US District Court for the Southern District of Texas, Iraq asked for an order allowing the cargo to be seized by the US Marshals Service, arguing that independent Kurdish oil sales amounted to “smuggling”. Court filings showed on 29 July that the order had been granted by Judge Nancy Johnson. 

AET Offshore Services, an intermediary hired to unload the tanker, had previously asked in a separate court filing on 28 July if Iraq’s claims were valid. It is still not known who has purchased the crude oil and the court filings took no steps towards remedying this, by refusing to name the end-buyer. Companies have so far proved reticent about purchasing crude exported to Turkey from the Kurdish region because Baghdad has threatened legal action against all buyers of non-approved oil exports.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2014 Menas Associates

IN DEPTH: Can Al-Maliki survive?

Despite his characteristic resilience, can Prime Minister Nouri Al-Maliki survive the unfolding crisis in Iraq? In the first week of the crisis Al-Maliki appeared lost and unable to comprehend the political ramifications of ISIS's advances and seemed to have been written off by almost every side. It therefore seemed all but inevitable that the beleaguered premier would have to concede defeat and step down.

In typical style, however, he pulled himself together quickly enough and since then has been on the offensive. Al-Maliki is fighting back hard, something that will have won him further support and respect among some Iraqi Shi’as, many of whom believe that, rather than being the root of the problem, Al-Maliki is the man to protect them from what they see as a sectarian onslaught by the Sunnis and by terrorist forces. 

One should not forget that Al-Maliki still has the support of large swathes of the Shi’a population. His State of Law Alliance took the largest number of votes in the last elections and Al-Maliki himself won 720,000 votes, the largest share of any single candidate. For all that he may be despised and accused of being authoritarian and sectarian, Al-Maliki is still the strongman of the Iraqi political scene. 

All this makes it very difficult for the other political players to force him out. This includes his Shi’a rivals. That is not to say that they haven’t been trying. The Sadrists and to a slightly lesser degree the Islamic Supreme Council of Iraq (ISCI), are insisting on Al-Maliki’s departure, even going so far as to nominate alternative candidates for the premiership. At the end of June both blocs proposed Adel Abdulmehdi, the current deputy president, as their chosen candidate. 

Yet their efforts alone are unlikely to unseat Al-Maliki, who is not relying on either the Sadrists or ISCI for his third term. Aware that they were not going to give him a chance, he left both behind weeks ago, deciding instead to focus on forging alliances with other factions, including some Sunnis. It was through such alliances that Al-Maliki succeeded in getting the support of 165 MPs from a range of parties and currents outside the National Alliance. 

Thus for all that these big Shi’a players may be pushing for Al-Maliki’s departure they have little real influence over whether he stays or goes. 

Instead, Al-Maliki’s survival depends more on whether the State of Law Alliance and those smaller political forces that have thrown their weight behind him will continue to back him. There has been a lot of talk that key components inside the State of Law Alliance are ready to drop Al-Maliki. There have also been reports that the alliance is considering putting forward alternative candidates for the prime minister’s post. 

Among the names being circulated are Al-Maliki’s adviser Tariq Najm; deputy prime minister with responsibility for energy affairs Hussain Al-Shahrastani; deputy president Khodeir Khozei; transport minister and head of the Al-Badr Organisation, Hadi Al-Ameri; and national security adviser Faleh Al-Fayed. Notably, none of these individuals are from Al-Maliki’s Al-Dawa party, which had a weaker showing in the elections than many other components of the State of Law Alliance. 

Despite this talk, however, as yet there are no concrete signs that the alliance is about to crack or that it has any intention of withdrawing its support for Al-Maliki. This is perhaps unsurprising. State of Law is Al-Maliki’s creation and was built around him. Although there are other important figures within it, he is still the glue that holds it together and that enables it to attract so much public support. Thus abandoning Al-Maliki will not be that easy. That does not mean that they won’t do it. Much will depend on how much pressure the alliance comes under from other Shi’a parties, from other parts of the political establishment and from external forces, including Iran and the US – Washington clearly doesn’t want Al-Maliki to continue. 

As to whether those MPs from outside his alliance that Al-Maliki managed to win over will stick by him now this crisis has erupted, this is a more questionable matter. This is especially the case for those Sunni elements that Al-Maliki managed to pick off and bring over to his side, who may be persuaded to retract if they see that things are not going the prime minister’s way. Some of these elements might well falter if they see that the tide has turned against Al-Maliki and that the only way forward is to force him out of power. 

Al-Maliki’s days may well be numbered and without such support he will have no chance of holding on.

For more news and expert analysis about Iraq, please see Iraq Focus.

Baku interested in Iraqi natural gas

Azerbaijan has offered Iraq access to the Southern Gas Corridor, in a bid to help the war-torn country to export its gas to Western markets. Azerbaijani foreign minister Elmar Mammadyarov visited Baghdad on 10 February for talks with high-ranking Iraqi officials on deepening bilateral ties. 

“It is a huge project […] and it is open if Iraq has an interest in delivering its own natural gas,” Mammadyarov said during a joint press conference with his Iraqi counterpart Hoshyar Zebari. He added that other countries had already signalled to Baku their interest in contributing gas to the Southern Gas Corridor, although no details were revealed. 

Iraq produces limited quantities of natural gas, most of which is used for domestic consumption. Considerable volumes of associated gas is still flared due to the lack of facilities to use it more productively. But the government is increasingly focused on stepping production for export. 

During his meeting with Iraqi prime minister Nouri al-Maliki, Mammadyarov said that Azerbaijan was planning to open a full-fledged embassy in Baghdad in the near future. A permanent diplomatic mission in the Iraqi capital has already been authorised by the Azerbaijani parliament. “Our companies want to work and invest in Iraq, especially in its energy sector,” he added. 

Azerbaijan is not the only country interested in Iraq’s natural gas resources. Earlier this month, an Istanbul-based newspaper  quoted Turkish energy minister Taner Yildiz as saying that Ankara might prefer gas imports from Iraq to its current gas supplies from Russia, Azerbaijan and Iran. He said the price of Iraqi gas might prove much lower, because it would not have to cross foreign territory and would travel a shorter distance. 

Last June, Ashti Hawrami, minister of natural resources in Iraq’s Kurdistan Regional Government, told the press that his government envisaged the start of natural gas supplies to Turkey as early as 2016. At the initial stage, around 10 billion cubic metres of gas is planned to be supplied across the border. Iraqi Kurdistan is set to begin oil deliveries to Turkey this September.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2014 Menas Associates

Iran to export gas to Iraq

Iran and Iraq have signed a high-profile agreement according to which Iran will supply 25 mcm/day of natural gas to the Al-Baghdad, Al-Mansouriyah, and Sadr power plants in Iraq.

 

The deal was signed by Petroleum Minister Rostam Qasemi and his Iraqi counterpart, Abdul Kareem Luaibi, in Baghdad. Iran will earn $3.7 billion a year from the deal.

 

In related news, the United States has announced that it is concerned about a $14.8 billion gas deal between Iran and Iraq and has asked Baghdad to explain it. The US State Department said that it plans to inform Baghdad about the implications with respect to sanctions.

 

In response, Mussab al-Mudaris, a spokesperson for the Iraqi Ministry of Electricity, emphasised that the natural gas supplies from Iran would help to ease electricity shortages by feeding two power plants in a Baghdad suburb.

 

For more news and expert analysis about Iran, please see Iran Strategic Focus.

 

© 2013 Menas Associates

 

Iraq: Licensing round awards approved

Despite the difficulties that are engulfing its energy sector, Baghdad had some reason to feel good this month. At the end of September, the cabinet approved three of the oil and gas contracts that were awarded to foreign firms in the May licensing round. According to government spokesman Ali Al-Dabbagh, the cabinet approved a gas exploration contract with Pakistan Petroleum to develop gas block 8, a 6,000 sq km block in the east central part of Iraq, about 40km east of Baquba. Pakistan Petroleum won the tender with a remuneration fee of $5.38/barrel oil equivalent.

 

Also approved was the contract with the consortium led by Russia's Lukoil to develop block 10, a 5,500 sq km site, 120km west of Basra. The cabinet also approved an initial deal with Russia's Bashneft to develop block 12 in the western desert. Bashneft had originally bid on this block as part of a consortium with PetroVietnam as operator. However, the $9.85/barrel remuneration fee bid in the round was too high and the bid rejected. Bashneft has since entered into an agreement with Baghdad for the block.

 

The cabinet was also expected to approve the contact signed with a consortium led by Kuwait Energy in partnership with TPAO and Dragon Oil for block 9 in Basra. However, according to Al-Dabbagh, the cabinet decided to delay approval until the “oil ministry completes some of its procedures”.

 

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2012 Menas Associates
 

Bomb blasts in Baghdad kill three

On Thursday 11th August, two bomb blasts killed three people in western Iraq. Meanwhile a succession of four explosions in Baghdad wounded 10 others. It is estimated that around 39 people were wounded in violence on Thursday.

In Baghdad, two bombs went off near alcohol shops in the commercial district of Karrada wounding four civilians. Another bomb targeted an army patrol in Dura in the south of the capital, injuring three soldiers, while a fourth exploded in the Al-Amil neighbourhood in south Baghdad, wounding three civilians.

In the western predominantly Sunni city of Ramadi, meanwhile, two explosions against the home of a police officer killed three and wounded 24 others.

Anbar province, of which Ramadi is the capital, was a key Sunni insurgent base in the years after the US-led invasion of 2003, but since 2006 local tribes have sided with the American military and day-to-day violence has dropped dramatically.

The city has been the target of several attacks in recent months, however.

In June, at least three explosions near provincial government offices in Ramadi killed 10 and wounded 15. In January, a suicide bomber blew up an explosives-packed car in a convoy carrying Anbar governor Qassim Mohammed Abid, wounding three bodyguards and six policemen but leaving Abid unharmed.

Violence in Iraq has declined from its peak in 2006 and 2007, but attacks remain common. A total of 259 Iraqis were killed in attacks in July, the second-highest figure for 2011.

Sources: AFP, The Associated Press, China Daily

For more news and expert analysis about Iraq, please see Iraq Focus .