Winston Churchill’s map of Iraq ready to unravel over oil

Nearly 100 years after the Kurdish region was made part of Iraq because of oil, the cause has driven a rift between the two sides.

Winston Churchill, at the time Britain’s colonial secretary, is front and centre at the 1921 Cairo conference that set Iraq’s borders. Also in the picture are the Arabist Gertrude Bell (second from left, second row) and Lawrence of Arabia (fourth from right, second row). Getty Images
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Winston Churchill understood the significance of the black stuff seeping to the surface in the Kurdish plains of Mesopotamia when he included the region within Iraq as the British forged the country in the 1920s.

In doing so, Churchill, the colonial secretary at the time, set in train almost a century of bickering between the Iraqi government and its Kurdish enclave over the area’s estimated 45 billion barrels of crude.

While their latest dispute was temporarily resolved last month to help finance the struggle against ISIL, the accord has not addressed differences between administrations in Baghdad and Erbil that include the future of Kirkuk, northern Iraq’s main oil hub. The Iraqi government started pumping crude from Kirkuk through Kurdish pipes that bypass militant-held territory to Turkey, Iraq’s Almada newspaper reported on January 1.

“The need to finance military operations has brought together the Iraqi government and the Kurds,” said Hussein Allawi, a Baghdad-based oil analyst. “But this is a temporary agreement that does not resolve fundamental differences.”

Under the deal, the Kurdistan Regional Government will share revenue from the 250,000 barrels per day that it had been unilaterally shipping from its territory to the Turkish port of Ceyhan. Iraq says it intends to increase exports from Kirkuk, which Kurdish Peshmerga forces are defending from ISIL attacks, by 300,000 bpd this year. The central government in Baghdad has also resumed budget payments to Kurdish authorities, including a one-time payment of US$1 billion to cover expenses of the Peshmerga.

While the Iraqi central government is set to bank increased revenue, its oil exports to Turkey now depend on pipelines traversing the Kurdish region.

Should Baghdad try to withhold budget cash again, “we hold a key to their oil exports”, Nechirvan Barzani, the prime minister of the KRG, said on December 3, according to his government’s website. The agreement also gives the KRG’s oil sales through its pipelines tacit approval by Baghdad.

The shift in the balance of power explains why the pact may not last long.

“Independent oil sales from the KRG are not going to be tolerated by Baghdad in the long term and eventually this deal will collapse,” said Christian Sinclair, the assistant director of the Center for Middle Eastern Studies at the University of Arizona.

The accord does not resolve long-standing points of friction between Baghdad and Erbil, which also include the KRG’s ambitions for independence, Mr Sinclair said.

That discord stretches back to Churchill’s deliberations over how to divide lands the British had seized from the Ottoman empire during the First World War, juggling as he did so the economic viability of newly created states and British access to oil, according to published official correspondence between him and the top UK diplomat in the region, Percy Cox.

He ultimately bowed to Cox’s argument that Kurdish areas should be attached to Iraq, in part to ensure that its oil would fall under British control and not that of the new Turkish republic founded by Mustafa Kemal Ataturk.

Iraq’s Kurdish population only emerged from under the thumb of the central government in Baghdad in the 1990s, when a United States-backed no-fly zone allowed for the creation of a semi-autonomous region and a trucked-oil trade with Turkey.

The US-led invasion of 2003, and the removal of Saddam Hussein, enabled an agreement under which Iraq’s government allocated 17 per cent of the country’s oil revenue to the KRG without the sides resolving deeper questions over how to share Iraq’s untapped oil wealth.

In 2012, the Kurds stopped exporting crude through Iraq’s national pipeline system, and last year they began operating their own link to Turkey. The Kurds increased exports to more than 250,000 bpd, in defiance of Iraq’s oil ministry, which labeled the exports illegal and sought to stop them.

More than 32 million barrels of Kurdish oil worth $2.5bn were exported through Turkey and pumped on to 40 tankers, according to the country’s energy minister, Taner Yildiz.

In retaliation for the Kurdish sales, Iraq’s government stopped its contributions to the KRG budget in January of last year, five months before ISIL seized Mosul, Iraq’s biggest northern city.

“Neither party benefited from the previous deadlock, which played into the hands of the Islamic State,” said Anthony Skinner, the head of analysis for the Middle East and North Africa at the UK-based forecasting company Verisk Maplecroft, referring to ISIL by its alternative name. ISIL earned $2m a day from black market oil sales, powering its rapid expansion in Iraq and neighboring Syria.

US airstrikes targeting ISIL in Iraq since August have limited its oil revenue and allowed Kurdish and Iraqi forces to roll back some of the militant gains.

While the KRG and the Iraqi government are fighting together against a common enemy, the Kurds have not given up on their hope for full autonomy to go with their increasing financial clout, said Mr Skinner.

With Baghdad unlikely to grant further concessions and the KRG president, Massoud Barzani, calling for a referendum on Kurdish independence last year, the map of Iraq that Churchill approved may not last.

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