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Assessing the Impact of Shifting Iran-KRG Relations

By Bijan Khajehpour, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iran and the Kurdistan Regional Government (KRG) in Iraq have historically been on good terms. During the Saddam Hussein years, Iran was one of the main countries to host Kurdish leaders. In the post-Saddam era, Tehran and Erbil have enjoyed good neighborly relations.

This relationship manifested itself in Iranian forces coming to the rescue of the Kurdish regions in their fight against the Islamic State (IS) in the summer of 2014. However, the recent independence referendum in the KRG has angered Tehran, and it is clear that the Kurdish moves will impact on both bilateral ties and wider regional alignments.

One important aspect to consider when assessing the fallout between Iran and the KRG following the independence vote is the economic dimension of their relationship in the geostrategic context of Iranian concerns.

Iran and the KRG have a multilayered relationship; most importantly, it is not all driven by the government. On the one hand, there are various trade links between the two sides, starting from very active border markets up to cross-border trade and investment.

There are five border markets between Iran and Iraqi Kurdistan. Prior to the recent events, there were plans to expand such entities to create jobs and also shift the unofficial trade toward official channels. In fact, the KRG is an important market for Iranian exporters. The trade volume between the two sides amounted to $8 billion in 2014, which made Iran the KRG’s second-largest trading partner, after Turkey.

In recent years, Iranian exports to the Kurdistan Region have dropped due to the conflict against IS. Yet, according to Kurdish sources, the trade volume between Iran and the KRG stood at $4 billion in 2016. This means that approximately 40% of the Iran-Iraq trade goes through the KRG.

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Baghdad warns Erbil not to Shut Down Kirkuk Oil

By John Lee.

Iraq is reportedly considering using security forces to prevent Kurdistan from blocking oil output from Kirkuk.

A spokesman for the North Oil Company (NOC) told Reuters that Kurdish officials indicated that they would shut down production at the Kirkuk oilfield, ostensibly for security reasons, but as a means of putting pressure on Baghdad.

Kirkuk produces around 200,000 barrels per day, out of total Kurdish production of over 600,000 bpd.

More from Reuters here.

(Source: Reuters)

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Federal Forces in Control of Large Areas of Kirkuk City

Federal forces in control of large areas of Kirkuk city; further Kurdish withdrawals in Nineveh/Diyala

Over the course of October 16, Iraqi federal forces advanced into many parts of Kirkuk city and adjacent military and energy facilities. The Counter-Terrorism Service (CTS), supported by the Iraqi Army and Federal Police took control of the K1 military base, the governor’s palace, the Kirkuk Provincial Council headquarters, the North Oil Company and North Gas Company headquarters, the Kirkuk Regional Air Base, and key areas of Kirkuk city and road junctions.

While Popular Mobilization Units (PMU) took part in operations in rural areas, they were not deployed into the Kirkuk city area.  Local Kurdish forces aligned with the Patriotic Union of Kurdistan (PUK) offered minimal resistance as federal forces moved into the area, many media reports have focused on an agreement in place between the PUK leadership and Baghdad for an orderly transfer of the facilities listed.

As a result, Baghdad is now in control of the portions of PUK-controlled Kirkuk that it held prior to the 2014 military collapse.   Government forces were also reported to have moved into the oil fields of Dibis district that have been held by forces loyal to the Kurdistan Democratic Party (KDP) since 2014. These fields produce 275,000 barrels of oil per day, or nearly half the 620,000-barrel output of the Kurdistan Regional Government (KRG).

Some media reports claimed that thousands of Kurdish civilians have fled Kirkuk city and its surrounding area.  Other reports claimed that crowds of ethnic Turkmen who opposed Kurdish control of the city celebrated on the streets of Kirkuk.  The US has not opposed Baghdad’s return to Kirkuk in part because the move was framed in terms of restoring the status quo before the Islamic State (IS) crisis.  This theme has been echoed by the majority of the international community.

Separate unconfirmed reporting has indicated that Sinjar, 100km west of Mosul in Nineveh province, is now under the control of ISF/PMU forces following the withdrawal of Peshmerga forces from the town. Reporting on October 16 had indicated a build-up of government forces to the south and east of Sinjar.

Reporting last night indicated that talks were underway for a peaceful handover. Yazidi elements of the region’s majority Shia PMU forces had apparently stated their unwillingness to confront Peshmerga owing to the close ties between the groups.  Reports from Diyala province have also claimed that Kurdish forces have withdrawn from positions in the Mandali district northeast of Baquba as Iraqi federal forces entered Khanaqin district to the south of Mandali.

(Source: GardaWorld)

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Iraqi Forces Capture North Oil Company

By John Lee.

Iraqi armed forces have reportedly captured the headquarters for the North Oil Company (NOC), northwest of Kirkuk, from Kurdish forces, without fighting.

A Kirkuk-based official told Reuters that the Baghdad’s forces had also taken control of the K1 airbase and were deploying in the Baba Gurgur field and the North Oil refinery.

Read more here.

(Source: Reuters)

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DNO: First Payment under Kurdistan Receivables Settlement

DNO ASA, the Norwegian oil and gas operator, today reported the first payment from the Kurdistan Regional Government under the recently concluded agreement covering outstanding receivables for past crude oil deliveries.

Under the agreement effective 1 August 2017, the Company was assigned the Government’s 20 percent interest in the Tawke license as well as three percent of gross Tawke license revenues payable monthly over a five-year period.

The payment of USD 4.02 million to DNO represents three percent of gross Tawke license revenues during August.

An entitlement invoice for that month’s export deliveries has been issued separately and will be shared pro-rata with Genel Energy plc upon receipt.

Following the receivables settlement, DNO’s stake in the Tawke license stands at 75 percent with Genel holding the balance.

(Source: DNO)

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Federal Forces Advance on Kirkuk City

Iraqi Security Forces (ISF), Counterterrorism Services (CTS), Federal Police (FP), and Popular Mobilization Units (PMU) launched a combined offensive with intent to seize the K1 military base, Kirkuk airport, and Kirkuk’s oilfields at around 0200hrs (local) on October 16.

The offensive followed two days of failed negotiations after the government of Iraq demanded Kurdish forces withdraw from the disputed areas around Kirkuk and cede control to Iraqi federal forces.

Crisis talks on October 15 failed to resolve the standoff as Kurdish leaders refused Iraqi government demands to reject the referendum result.

Clashes were subsequently reported to have broken out between Iraqi and Kurdish forces south of the city of Kirkuk.

Iraqi state media said that federal troops had entered disputed territories occupied by the Kurds, saying they had taken control of ‘vast areas’ without opposition from the Kurdish Peshmerga.

Kurdish officials, however, denied that the Iraqi forces had been able to get close to Kirkuk city and said that the oil fields west of the city were still under Kurdish control.

The Kurdistan Region Security Council (KRSC) said in a statement that federal forces were advancing along two routes along the Taza-Kirkuk intersection and Maryam Bag Bridge, both South of Kirkuk.

Separate reports claimed artillery fire could be heard to the south of Kirkuk city in the early hours.  An initial statement by the US state department said it was ‘very concerned’ about reports of a confrontation and was ‘monitoring the situation in Kirkuk closely’.

Oil prices reported to have jumped early on October 16 amid reports of the clashes in Kirkuk.

(Source: GardaWorld)

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IBBC Delegation meets Basrah Governor

On Thursday 12th October a delegation of IBBC Members, led by Baroness Nicholson, Honorary President, met with H. E. Mr Asaad A., the recently appointed Governor of Basrah. The meeting took place in the Governor’s office, included a Lunch and lasted until the early evening.

The Governor presented his plans for Basrah and asked the company representatives how they could contribute to help achieve his ambitious objectives. IBBC members used the opportunity to introduce their companies and their services to the Governor and to participate in a wide ranging discussion with him.

Mr Rasmi Al Jabri, Deputy Chairman of IBBC, who facilitated the meeting was delighted with its many outcomes. He said that with Mr Edani at the helm of the Governorate the Province had a real chance to develop and modernise. He further commented that IBBC and all of its members stood ready to support Governor in his crucial work.

The IBBC delegation included representatives of the following companies: Basrah Engineering Group, Basrah Chamber of Commerce, Dar Al-Handasah, Ernst & Young, Garda World, Gulftainer, International Islamic Bank, Khudairi Group, Pell Frischmann, Penspen, Petrofac, Raatba Contracting Company, Restrata, Rumaila Operating Organisation (ROO) and Solar Turbines.

The meeting was also attended by Dr Ali Nasir and Phil Sherwood of the AMAR foundation.

(Source: IBBC)

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OMV Pockets $107m from KRG Settlement

By John Lee.

Austria’s OMV has said its third-quarter clean operating result “was positively impacted” by about 90 million euro ($107 million) following a settlement over a dispute relating to the Khor Mor and Chemchemal fields in Iraqi Kurdistan.

On August 30, 2017, the Kurdistan Regional Government (KRG) and Dana Gas , Crescent Petroleum and Pearl Petroleum Company Limited reached a settlement under which the KRG agreed to immediately pay $1 billion to the consortium to settle the long-running legal dispute.

Of the EUR 90 million, OMV received approximately 60 percent as dividend from Pearl while around 40 percent was put into a dedicated accountfor future investments in Khor Mor.

(Source: OMV)

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Genel Energy gets New COO

Genel Energy has announced that Paul Schofield is stepping down from the role of Chief Operating Officer and will leave the Company on 16 October 2017.

Dr. William (Bill) Higgs will succeed him in the role and will join the Company on 6 November 2017.

Dr. Higgs has nearly 30 years of global exploration, development and operations experience, including over five years in executive roles for independent Exploration and Production companies.

He is a qualified geologist with extensive expertise in all engineering and other technical and commercial aspects of hydrocarbon development and production. Most recently, as Chief Operating Officer for Ophir Energy plc, he was responsible for managing the global asset portfolio.

Prior to joining Ophir he was Chief Executive Officer of Mediterranean Oil and Gas, overseeing the successful sale of the company in 2014. He previously spent 23 years at Chevron across a number of global roles, including responsibility for reservoir management of the giant Tengiz oil and sour gas field in Kazakhstan.

Murat Özgül, Chief Executive of Genel, said:

“I would like to thank Paul for his efforts at Genel and wish him all the best for the future. I look forward to working with Bill as we continue to maximise the value of our assets in the Kurdistan Region of Iraq.”

(Source: Genel Energy)

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EU Steps Up Assistance for Stabilisation of Iraq

The European Commission has adopted a €60.4 million stabilisation package to support Iraq after the liberation of areas held by Da’esh, with the country still facing humanitarian, security, stabilisation and reconciliation challenges.

This new funding comes in addition to EU humanitarian aid in the country and other forms of financial assistance that now total €608.4 million since the beginning of the crisis.

High Representative/Vice-President Federica Mogherini (pictured) said:

“At this important juncture in Iraq history, we stand at the side of the Iraqi people and authorities who have shown courage and resilience in their fight against Da’esh. Today more than ever, the EU is present to assist them in building their post-Da’esh future.

“We are and will continue to be active on the political, humanitarian, security and development sides to help stabilising the liberated areas. This is a pre-condition for reconciliation, for the return of the many internally displaced who are eager to come back and for the longer term stability in Iraq.”

Commissioner for International Cooperation and Development Neven Mimica said:

“The liberation of Mosul and other areas previously occupied by Da’esh is a first step towards peace. The EU has been supporting the needs of millions of Iraqis and will not stop there. They can also count on EU assistance for the further stabilisation and development efforts of their country.”

The stabilisation package includes €50.4 million help to restore basic services, repair essential public infrastructure, as well as to reactivate economic activity through grants to small businesses. This will be done through the UNDP Funding Facility for Stabilisation, which is working in newly retaken areas in Anbar, Salah al-Din, Kirkuk, Ninewah and Diyala Governorates. Thanks to more than 1,200 projects, over 2.2 million people have been able to return to their homes.

A further €10 million will continue to facilitate the clearance of lands previously contaminated by explosives, by supporting the United Nations Mine Action Service (UNMAS). This will also help creating the conditions for a safe, voluntary and dignified return of more than 3 million internally displaced persons (IDPs).

In the past year and a half, with the EU playing a key role in coordination, UNMAS has surveyed and cleared more than 1.8 million m² of land in and around Fallujah and around 160 thousand m² in al Anbar Province.

(Source: European Commission)