Quarrels over oil between Kurdistan and the government in Baghdad are intensifying. The cause of this is clear and expected, and originated with the ambiguity of the 2005 constitution that was drafted hastily in order to serve an internal American agenda. This was without taking into consideration the contradictions in the terms of the document itself, which not only did not specify the nature of the relationship between the central government and the provinces, but also went beyond this to give ambivalent powers to both parties at the same time, possibly leading to conflicts and quarrels in the future, exactly what we are witnessing now. The problem started with the disagreement on who has the rights to negotiate with international groups to carry out exploration and drilling in Kurdistan. Iraqi Minister of Oil Mr. Hussein Al-Shahristani objected by insisting that the right to negotiate and sign agreements is exclusive to the federal government. However, this was quickly resolved when Baghdad, while still insisting on not recognizing the agreements signed by the government of Kurdistan, allowed the exportation of petroleum from Kurdistan through the Kirkuk – Ceyhan pipeline. The condition for this was that the oil should be marketed only through the Iraqi State Oil Marketing Company (SOMO), with the revenues being transferred to the Iraqi Ministry of Finance, and that the government in Kurdistan would itself bear the expenses of the oil companies working there. It is estimated that 85,000 barrels of crude oil will start being exported daily, broken down to 65,000 barrels exported daily by the Norwegian group DNO from the Tuka field, and 20,000 Barrels exported by the Swiss group ADAX, from the Taqtaq field. Meanwhile, more oil exports are expected to start in June, as soon as the pipeline connecting the Tuka field to the Iraqi-Turkish export line, rising the Iraqi production capacity to about 250 million barrels per day, and the export capacity to 20 million barrels a day. How was the agreement over oil exports reached despite the many disagreements? In truth, there were large interests at stake that pushed both parties to compromise, without sacrificing fundamentals. For Baghdad, there is an urgent need, following the drop in oil prices and the deficits in the state budget, to raise more oil revenues in light of low prices and the inability to increase production in the southern fields. This pushed Baghdad to agree on oil exports from Kurdistan without recognizing the agreements signed by the government there with the international oil exploration and drilling groups. At the same time, the government in Kurdistan in turn is in urgent need to meet the demands of the oil companies working there, i.e. to allow them to export the oil they had discovered in order for them to make some profit. However, we also find here that the government in Kurdistan maintained at the same time its right to continue negotiating and signing contracts with international conglomerates, without any modification to the previous contracts. It is clear of course that this agreement is provisional then, and will not solve the deep problems between these two parties and will be followed by other oil-related quarrels at some point. Indeed, another problem came up last week, when the federal government refused to allow the companies operating in Kurdistan to export natural gas through the Nabucco pipeline which will provide Europe with natural gas incoming from the Caspian Sea and the Middle East. The disagreement here is not only about negotiations and exploration and drilling contracts between Kurdistan and international companies, but also on whether or not the government in Kurdistan has the right to sign agreements with international groups over the exportation of oil without the approval or participation of the federal government. The agreements to export natural gas were signed between the Emirati Dana Gas and Al-Hilal, and the Austrian group OMV and the Hungarian MOL group. It is worth mentioning here that Iraq has been negotiating for a while now to export natural gas through the Nabucco pipeling from the A'kaz field in the western desert, to connect it to the Arab pipeline (Egyptian and Iraqi gas) in Syria, which will in turn connect to the Nabucco pipeline in Turkey. An agreement on this is expected to be signed next month. It is known that there are many differences between Baghdad and Arbil, including the issue of Kirkuk and disputed areas in the provinces of Nineveh and Diyala, as well as the dispute over the structure of the new federal state, and how to run this kind of Federal Government. This is in addition to the disparity between both parties over the oil and gas law, which is still lagging in Parliament since early 2007, because of opposition from Kurdish parties. The Government in Kurdistan signed about 15 agreements since the introduction of the bill to the parliament, while the Iraqi Ministry of Oil considers all of these agreements illegal. Mr. Khadduri is an energy expert
