ExxonMobil: Choosing Between Iraq and a Hard Place

WASHINGTON DC – ExxonMobil’s decision to boost investment in oil fields in southern Iraq is a boon for the central government in Baghdad, but raises questions about the US oil giant’s commitments in the autonomous Kurdistan Region.

Iraqi Prime Minister Nuri al-Maliki has warned ExxonMobil, the major developer of the country’s West Qurna-1 oil fields in southern Basra province, that contracts it signed directly with the Kurdistan Regional Government (KRG) are illegal.

The US multinational had reportedly once considered selling its Basra stake. But with the company’s reported recent decision to raise spending in West Qurna-1 from $1.6 billion last year to $1.65 billion for 2013, it remains unclear whether the company will continue to keep working with the KRG, or choose to honor deals with Baghdad.

Many believe that the company’s decision will be a major factor in whether the Kurds decide to make good on their long-standing aspirations of independence.

“If Exxon chooses the Kurdistan region over Baghdad it will be the real blow to the central government in Iraq,” said Washington-based Kurdish journalist Balen Salih.

Salih notes that ExxonMobil decision could either further deepen complications between Baghdad and Erbil, or make the company an influential force to direct the political and social movements into a new direction.  Salih underscored that the only true concern for ExxonMobil is oil.

According to the Reuters news agency, ExxonMobil recently hired several prominent former US officials to advise on Iraq, including James Jeffrey, a notable diplomat who has served as an assistant to President George W. Bush, deputy national security advisor, and ambassador to both Iraq and Turkey.

Karwan Zebari, an official at the KRG’s representative office in the United States, said that ExxonMobil CEO Rex Tillerson had reiterated his company’s commitment to the Kurds in a meeting with Kurdistan Region President Massoud Barzani at Davos in late January.

“In that meeting Exxon reaffirmed its commitment to the contract it signed with the KRG last year to explore six fields in Kurdistan,” Zebari said.

Zebari believes that Kurdistan remains more lucrative to foreign oil companies than what Baghdad has to offer.

“Compared to Baghdad, the KRG has much to offer Exxon and other energy giants. First of all, KRG is more secure and less bureaucratic,” he said. “The KRG also offers the opportunity to share the stakes.  Companies own the stake and so they don’t have to leave and can continue to conduct business. Baghdad provides only fees for services. Once the service is completed, the companies leave.”

Zebari dismissed the widespread belief in Washington that ExxonMobil’s strong presence in the Kurdistan Region will lead to Kurdish independence.  “This is a baseless concern, and we are committed to a pluralistic, democratic and federal Iraq,” he said.

Washington is opposed to Kurdish independence, and has repeatedly advised the KRG against signing separate oil deals with foreign companies or countries.

Trusted sources tell Rudaw that Washington repeated its opposition to energy deals directly between Ankara and the KRG, fearing that closer energy ties threaten Iraqi unity, and will push Baghdad's Shiite-led government closer to Shiite Tehran.

In May 2012, Turkey and the KRG signed a deal to build three gas and oil pipelines directly from the Kurdistan Region to Turkey, much to Baghdad’s chagrin.

“It is no secret that Turkey is trying to be a regional power, and it needs energy,” Zebari said. “The KRG offers natural gas and oil to Ankara. It is a supply and demand issue: We need somewhere to sell our resources and Ankara needs energy.”