Iraq’s Kurds and Iran mull strategic oil pipeline

August 14, 2016
A view of the Bai Hassan oilfield north-west of Kirkuk, Iraq.

LONDON - An emerging agreement to build a pipeline that would ship up to 250,000 barrels per day of oil from autonomous Iraqi Kurdistan to refineries in Iran looks, on the face of it, like a win-win deal. Technical details of the agreement, which was first considered in 2014, were broadly concluded in April but implementation has been stalled by a familiar mix of interKurdish and regional politics.
From the perspective of the Kurdistan Regional Government (KRG) in Erbil the deal would reduce the Kurdish zone’s reliance on exporting via an existing pipeline to the Mediterranean port of Ceyhan in Turkey which has been subject to disruptions at a time when the region can ill afford to lose revenue.
It was the unreliability of the Turkish link, partly blamed on sabotage by Turkey’s outlawed Kurdistan Workers’ Party (PKK), that spurred interest in a pipeline to Iran.
From a political viewpoint, the current arrangements make Erbil overly dependent on the goodwill of Ankara to ensure its oil can reach international markets. Turkey, however, might be reluctant to lose its near-monopoly status as a conduit for Kurdish oil, a situation that gives
it major political clout with authorities in Erbil. Officially, at least, Turkey has raised no objections to the Iranian pipeline.
Under the proposed agreement, Kurdish crude would be piped to refineries in northern Iran and shipped from Gulf ports, predominantly to Asian markets. Acting as a conduit for Kurdish oil would enhance Tehran’s plan to make Iran a regional energy hub.
The problem is the two sides are not isolated or, indeed, equal players in the project. Iran, which enjoys a close relationship with the Shia-dominated Iraqi government in Baghdad, would want its formal approval before moving ahead.
Relations between Baghdad and the KRG, however, have been marked by chronic disputes over Kurdish oil exports. Oil production in Kurdish-controlled Kirkuk, which lies outside the formal boundaries of the KRG, has been locked in for much of this year as a result of a stand-off between Erbil and Baghdad.
It is as yet unclear whether a pipeline to Iran would carry oil from Kirkuk as well as from fields within KRG territory.
The prospective deal also comes at a time of increasingly fraught relations between the Kurdistan Democratic Party (KDP), which dominates the north-western zone of the region from Erbil, and its rival Patriotic Union of Kurdistan (PUK), which holds sway in the east from its headquarters in Sulaymaniyah.
The two parties theoretically share power but have been historically at odds, most recently over PUK opposition to the KDP’s Masoud Barzani extending his presidential term. The PUK, whose popularity had been waning even in its home region, has recently been boosted by a rapprochement with the breakaway Gorran movement.
Dlawer Ala’Aldeen, president of the Erbil-based think-tank Middle East Research Institute, has linked the pipeline plan to Iran’s stance on Kurdish internal politics.
“Iran’s policy has been well known for decades to favour preserving an equal balance of power between the KDP and PUK to prevent the emergence of a strong KRI [Kurdistan Region of Iraq],” he wrote on the institute’s website.
Noting that the proposed pipeline would stretch from PUK territory bordering Iran, he added: “There are also rumours that Iran is debating a possible strategic agreement with the [PUK] Green Zone, similar to the strategic political, economic and security agreement between Turkey and the [KDP] Yellow Zone.”
Tensions between the rival parties, and a perception that a deal with Iran might favour the PUK, prompted reports that Barzani was attempting to delay or block the pipeline agreement.
That drew a denial in May from the Erbil government, with KRG spokesman Safeen Dizayee insisting: “Discussions between the KRG and Iranian government about the energy cooperation will continue in a technical manner. KRG policy is to have good relations with all neighbouring countries in different fields, including the energy field, so concerning this policy, we have good relations with Iran.”
That said, political barriers might yet delay implementation of the pipeline plan. Kurdish oil will still reach Iranian refineries, via the laborious and expensive tanker route along which hundreds of trucks head eastward every day.
Elements of the KRG might prefer to drag their heels on a final deal but, at the end of the day, the KRG’s need to ensure a reliable revenue stream to prop up its ailing economy means that practical issues will probably decide the outcome.