A New Oil Deal

September 17, 2012

A recent agreement between Kurdistan Region’s minister of natural resources and key ministers in Baghdad over the oil problem is an important step in the right direction.

But it remains an agreement prone to collapsing if it is not quickly followed by other steps that capitalize on this progress and move the issue a step closer to settlement by agreeing on the oil and gas law.

The success of the agreement is tied to three conditions: the agreement of Baghdad’s Council of Ministers, the agreement of Erbil’s Council of Ministers and the implementation of the totality of the agreement.

It will eventually fail if it is not treated as an interim measure with a view to reaching a final settlement within the framework of the law and the constitution.

Some important breakthroughs were achieved with this agreement. Baghdad’s willingness to pay the companies working in Kurdistan is an important recognition of the legality of the contracts the KRG signed. Pending the agreement of Baghdad’s Council of Ministers, this is an important change in Baghdad’s position towards Erbil on the oil and gas portfolio.

The proposed payment, however, is made as a loan to Erbil. The agreement does not state how this loan will be settled.

On the other hand, the parties agreed to establish a committee to verify the amount of oil produced and the funds owed to the producing companies. This could prove problematic if the proper procedures are not put in place to ensure a transparent and coherent flow of information to the committee and, more importantly, to the public.

On the whole, the agreement has achieved some very important steps in the direction that proves the Kurdish oil policy was the correct one to follow to make best use out of the areas and their geographic limitations.

But like many agreements of the past, this one could collapse if any of the conditions are breached and it is only a matter of time before that happens. The key difference between previous agreements and this one is the positive nature of this agreement and the tone of the talks, based on the statement from the Ministry of Natural Resources.

Aside from trying to implement the points mentioned in the agreement, the two sides should move right away into working on an agreement about the hydrocarbon law. The positivity and spirit of cooperation that came with this agreement should be capitalized on and turned into continued discussion to finalize other outstanding pieces.

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    farouk younis says:

    كل ما استطيع قوله هو احترام التخصصات العلمية والقانونية وغيرهما من التخصصات انا اتحدى الكثير من العلماءفى الكيمياءمثلا ان كانوا يعرفون التزامات سائق التاكسى على وفق القانون العراقى

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