Oil for Soil: Crisis Group Proposes "Grand Bargain" on Iraq Oil Land Dispute

Oil for Soil: The International Crisis Group is proposing what its calling a "grand bargain" to head of escalation of conflicts between Iraq's Kurdistan Regional Government and the central government in Baghdad.

A summary follows this update:

Tensions between Baghdad and the KRG appear to be escalating, not only on the oil law that was rejected again Monday. An attempt to form non-Kurdish tribal councils in heavily Kurdish Kirkuk -- the northern oil capital -- and Kanaqin has been nixed by the Kurdish leadership there, Alissa J. Rubin reports for the New York Times.

These two cities and a large strip of land outside the official KRG territory has grown increasingly tense 10 months past a deadline for a referendum in these disputed territories and as local elections are only months away. The land was gerrymandered and ethnically cleansed by Saddam Hussein, and the Iraqi Kurdish leadership is vying for it to be attached to the KRG's semi-autonomous northern region. While all of the land is officially considered under the purview of the central government, portions have been under the security and administrative umbrella of the KRG. Kanaqin, for example, recently saw Iraqi troops move in to take over security from the Kurdish forces, called the Peshmerga.

And now in Mosul, where insurgents are being routed - and Iraqi Christians ethnically cleansed - Iraqi troops and Peshmerga may face off, Sam Dagher reports for the New York Times. The U.S. says if it comes to confrontation, it will officially support neither side, both of which are considered allies.

"Grand Bargain" summary: ICG believes "piecemeal approach" to the Kurdish-Arab dispute in Iraq is no good and the "grand bargain" will solve or put on ice issues like "Kirkuk and other disputed territories, revenue sharing and the hydrocarbons law, as well as federalism and constitutional revisions."

From the executive summary:
The main culprit is a dispute over territories claimed by the Kurds as historically belonging to Kurdistan - territories that contain as much as 13 per cent of Iraq's proven oil reserves. This conflict reflects a deep schism between Arabs and Kurds that began with the creation of modern Iraq after World War I; has simmered for decades, marked by intermittent conflict and accommodation; and was revitalised due to the vacuum and resulting opportunities generated by the Baath regime's demise in 2003. In its ethnically-driven intensity, ability to drag in regional players such as Turkey and Iran and potentially devastating impact on efforts to rebuild a fragmented state, it matches and arguably exceeds the Sunni-Shiite divide that spawned the 2005-2007 sectarian war.
Stymied in their quest to incorporate disputed territories into the Kurdistan region by constitutional means, Kurdish leaders have signaled their intent to hold politics in Baghdad hostage to their demands. At the same time, the Iraqi government's growing military assertiveness is challenging the Kurds' de facto control over these territories. Rising acrimony and frustration are jeopardizing the current relative peace, undermining prospects for national unity and, in the longer term, threatening Iraq's territorial integrity. Rather than items that can be individually and sequentially addressed, Iraq's principal conflicts -- concerning oil, disputed territories, federalism and constitutional revisions -- have become thoroughly interwoven. Federalism cannot be implemented without agreement on how the oil industry will be managed and revenues will be distributed. Progress on a federal hydrocarbons law and a companion revenue-sharing law is inconceivable without agreement on the disposition of disputed territories that boast major oil fields, such as Kirkuk. And the constitution review has faltered over failure to settle all those questions, the solutions to which will need to be reflected in amendments reached by consensus. …
A sober assessment of these requirements suggests a possible package deal revolving around a fundamental "oil-for-soil" trade-off: in exchange for at least deferring their exclusive claim on Kirkuk for ten years, the Kurds would obtain demarcation and security guarantees for their internal boundary with the rest of Iraq, as well as the right to manage and profit from their own mineral wealth. Such a deal would codify the significant gains the Kurds have made since they achieved limited autonomy in the wake of the 1991 Gulf War and especially after April 2003, while simultaneously respecting an Arab-Iraqi -- as well as neighbouring states' -- red line regarding Kirkuk.
Key Recommendations:

U.N. Assistance Mission for Iraq (UNAMI): facilitate negotiations; determine KRG-Iraq boundaries in the meantime.

Iraq government and KRG: OK UNAMI involvement; fast-track oil law and related laws (revenue sharing, Ministry of Oil, Iraq National Oil Co.) without signing any new oil and gas deals or developing fields in disputed territories (KRG only); reach deal on definition and administration of disputed territories.

Iraq government: Adopt UNAMI recommendation on boundaries; establish "stand-alone governorate or a uni-governorate federal region" of Kirkuk for 10 years; establish power-sharing in Kirkuk with a leadership mixed of Arabs, Turkomans, Kurd and Christians; approve a KRG-accepted oil law; accept the oil law of the KRG; and OK KRG's autonomy on development of oil and gas in the region, including exports; provincial elections by end-January 2009.

KRG: Take action against the PKK which Turkey wants.

Turkey: Formally recognize the KRG; assist KRG exports of oil and gas; stop military action inside Iraq.

U.S. Government: Back the "grand bargain"; formally oppose KRG annexation of Kirkuk but protect established boundaries.

Iraq will limit companies bidding in the first round of oil and gas tenders to taking the lead in only one project. The Middle East Economic Survey (MEES) reports companies can have a minority role in more than one project, though. The Oil Ministry has said it prefers consortium of companies to single firm bidders. The companies will "bid on three parameters: a per barrel fee for stabilizing current field capacity, a per-barrel fee (or, in the case of gas, per-million cubic feet) fee for incremental production, and finally an enhanced production target for a field's plateau production," MEES reports. The companies are vying for 20 year deals that will give them 49 percent stake in the Rumaila, Kirkuk, Zubair, W. Qurna-1, Bai Hassan and Maysan province fields and a 75 percent stake in the Akkaz and Mansouriya gas fields. The first round of the bidding was announced Oct. 13 in London. Deals are expected to be signed by the end of June.

Suggested Parameters For Development Of Oil And Gas Fields In Iraq, a list of recommendations for developing Iraq's oil sector by the immediate former head of the State Company for Oil Projects Falah al-Khawaja in the Middle East Economic Survey (MEES).

Selected recommendations:

- Ensure that the selection covers the demography of Iraq as a whole. Thus all Iraqis in all areas will be involved in the oil and gas development, assuaging fears that any particular Iraqi community is being potentially sidelined by oil development.

- Aim for the transfer of modern technology, especially in areas where we have little or no experience such as heavy oil, enhanced oil recovery and gas field operations.

- Maximize Iraqi direct execution of hydrocarbon fields development and, wherever possible, structure bidding rounds to allow as much national execution as is realistic, with reputed consultancies.

- Upgrade the civil infrastructure necessary for implementation of such huge projects (roads, bridges, hotels, housing schemes) as well as power, water supplies and so on. The state should take the lead in this developmental push, in tandem with the oil ministry, as part of an integrated national plan.

- Hasten the development of border fields. … Delineation of border fields and utilization agreements will not only bring development to these areas, but diffuse potential future conflicts.

- Introduce the idea of 'packaging', ie call for development of the fields together with gas treatment, oil refining and power generation facilities.

The U.S. is threatening to cut tens of billions of reconstruction and development aid to Iraq if politicians don't sign a deal keeping U.S. troops in the country,Leila Fadel reports for McClatchy Newspapers: "Army Gen. Ray Odierno, the top U.S. military commander in Iraq, informed Iraqi officials last week that if their country doesn't agree to a new agreement governing American forces in Iraq, it would lose $6.3 billion in aid for construction, security forces and economic activity and another $10 billion a year in foreign military sales. The warning was spelled out in a three-page list that was shown to McClatchy on Monday. Iraqi officials consider the threat serious and worry that the impasse over the so-called status of forces agreement could lead to a crisis in Iraq. Without a new agreement or a renewed United Nations mandate, the U.S. military presence would become an illegal occupation under international law."

Meanwhile, Iraqi leaders have sent to the U.S. negotiators proposed changes to the deal that will allow U.S. forces to remain in Iraq after a U.N. authorization of the occupation ends Dec. 31. Mariam Karouny and Waleed Ibrahim report for Reuters the changes are both content and legalese, clarifying interpretation of the pact. Voices of Iraq reports Foreign Minister Hoshyar Zebari and U.S. Ambassador to Iraq Ryan Crocker have been meeting about the SOFA as well.

Iraq's government spokesman said the U.S. raid on Syria, launched from bases in Iraq, violated the Iraq constitution, Mariam Karouny reports for Reuters. One of the expressed fears from Iraq (and its neighbors) is that the Status Of Forces Agreement will allow the U.S. to launch such attacks, most prominently on Iran.

In a related story, Voices of Iraq reports the British are also discussing a forces deal.

Turkish media is reporting candidates Obama and Biden want a peace summit between Turkey and Iraq's Kurdish leadership. Here's Hurriyet's take. While the two sides will need to work out their sometimes rocky relationship, especially with separatist Kurdish PKK attacks increasing of late, it will be hard for Turkey to sit down in an official government to government capacity. Turkey is wary of giving Iraqi Kurds too much recognition, as they fear it will strengthen them and lead to calls for greater autonomy, or even independence, and embolden Turkey's own Kurdish population.

Iraqi Kurds are protesting a new law by the KRG recognizing male polygamy. Voices of Iraq reports a new Personal Status law gives men more rights than women, including allowing multiple marriages.

Read what Iraqis read:the Iraq Press Roundup by UPI's Alaa Majeed.

Thousands of workers protested in Basra Monday, demanding the Ministry of Finance reverse a plan to cut salaries. U.S. Labor Against the War, posted on its website a message from Amjad Al-Jawhary of the General Federation of Workers Councils and Unions in Iraq that protesters included "steel, petrochemical, paper and other plants in Basra who were headed by Hassan Juma, head of Labor Unifying Bureau and Oil workers and Abuwatan, vice president of Labor unifying Bureau and GFWCUI in Basra."

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