The evolution of Iraq’s new Oil Law will forever alter Middle Eastern geopolitics and global energy markets, particularly of interest are Russia’s strategic moves to enhance its influence in the Kurdistan oil region.
Iraq is considering a new oil and gas law that may be approved after local elections in December 2023.
The oil law, under discussion for over 15 years, would allow foreign companies to share in Iraq’s oil production.
If ratified, the law would enable production-sharing agreements between the government and foreign oil firms.
Additionally, oil export earnings would be distributed among governorates based on their GDP per capita, and each governorate could independently grant oil concessions and exploration contracts.
Iraq, a key OPEC member, possesses significant crude oil reserves, and the proposed law aims to manage resource sharing and exploration agreements with foreign entities.
The new unified oil law in Iraq, set to govern oil and gas production, highlights a shift in influence favoring Russia and China over the Western Alliance.
The long journey toward a new unified oil law in Iraq, expected to govern oil and gas production, underscores a notable geopolitical shift favoring Russia and China over the USA and its Western Alliance.
The start of what’s happening today began back in September 2017, following a non-binding vote on independence for the semi-autonomous Kurdistan region in northern Iraq.
The U.S. and its Western allies had promised full independence to the Kurds in exchange for their support against ISIS.
However, the promise was not fulfilled, as Iran and Turkey intervened to prevent the Kurds from gaining independence, and the U.S. did not intervene.
Russia, adhering to its longstanding foreign policy of projecting influence in regions of chaos, sought to expand its presence in the Middle East, particularly in Iraq.
Hindered by the U.S. presence in the south, Russia turned its attention to the semi-autonomous Kurdistan region.
Russia effectively assumed control of Kurdistan’s oil sector through a multifaceted approach.
- First, it provided the Kurdistan Regional Government (KRG) with $1.5 billion in financing through forward oil sales payable over the next three to five years.
- Second, Russia secured an 80 percent working interest in five potentially significant oil blocks in the region, accompanied by investments and technical support.
- Third, Russia obtained a 60 percent ownership stake in the crucial KRG pipeline, committing to invest $1.8 billion to increase its capacity to one million barrels per day.
The second phase of Russia’s strategy involved sowing discord between northern and southern Iraq.
By acting as a mediator and encouraging the Kurds to demand higher payments from the south while independently selling oil, primarily through its ally Turkey, Russia fueled tensions.
The resulting chaos played into Russia’s goal of extending its influence into southern Iraq.
The geopolitical landscape further shifted with the U.S. downsizing its presence in the Middle East and Russia and China making inroads through initiatives like the Belt and Road Initiative.
Consequently, southern Iraq moved into the sphere of influence of Russia and China, while northern Kurdish Iraq found itself increasingly isolated.
On August 3 of the current year, Iraq’s new Prime Minister, Mohammed Al-Sudani, declared that the unified oil law, centrally administered from Baghdad, would govern all oil and gas production and investments in both Iraq and its semi-autonomous Kurdistan region, constituting “a strong factor for Iraq’s unity.”
A senior Kremlin official later emphasized that by excluding the West from energy deals in Iraq, the end of Western hegemony in the Middle East would represent a decisive chapter in the West’s decline.
Overall, the timeline of events and Russia’s multifaceted intervention illustrate a significant geopolitical realignment, signaling enhanced influence for Russia and China at the expense of the Western Alliance.
Details and Timeline for IQD Nerds
In essence, Russia’s involvement in Kurdistan’s oil region was a strategic response to geopolitical opportunities, exploiting regional tensions and economic vulnerabilities to establish a significant and influential presence in the Kurdish oil economy.
1) Background (September 2017)
It all began with a non-binding vote on independence for the semi-autonomous Kurdistan region in September 2017. The U.S. and its Western allies had pledged support for Kurdish independence in exchange for assistance against ISIS. However, the promise was not fulfilled, leading to disillusionment among the Kurds.
2) Russian Expansion into Kurdistan (Post-2017)
Russia, with a historical foreign policy of projecting influence in regions of chaos, saw an opportunity to expand its presence in the Middle East. The presence of the U.S. in southern Iraq prevented Russia from establishing a foothold there. Instead, Russia turned its attention to the semi-autonomous Kurdistan region, where the Kurds, feeling abandoned by the West, were in need of support and financial assistance.
3) Russia executed a multifaceted strategy to gain control over Kurdistan’s oil economy.
- Russia provided the Kurdish Regional Government (KRG) with $1.5 billion in financing through forward oil sales payable over the next three to five years. This financial support was crucial for the KRG, which was facing economic challenges due to the political dispute with southern Iraq.
- Russia secured an 80 percent working interest in five potentially significant oil blocks in the region. This not only provided Russia with access to valuable oil reserves but also established a significant presence in Kurdistan’s oil exploration and production sector.
- Russia acquired a 60 percent ownership stake in the vital KRG pipeline, committing to invest $1.8 billion to increase its capacity to one million barrels per day. This move gave Russia control over the infrastructure essential for transporting oil from Kurdistan to external markets.
4) Russia exploited existing tensions between northern and southern Iraq to further its agenda.
- Russia acted as a mediator, encouraging the Kurds to demand higher payments from the southern government. This tactic aimed to create financial disputes and dissatisfaction between the two regions.
- Russia supported the Kurds in quietly selling oil independent of Baghdad, primarily through Turkey, with which Russia had close ties. This move not only provided economic benefits to the Kurds but also heightened tensions with the southern government.
5) Changing Geopolitical Landscape
- The broader geopolitical context played a crucial role.
- The U.S.’s downsizing of its presence in the Middle East and the growing influence of Russia and China in the region created an environment where southern Iraq moved into the sphere of influence of Russia and China.
6) Unified Oil Law Framework Announced (August 2023)
- The recent developments culminate in Iraq’s new Prime Minister, Mohammed Al-Sudani, announcing that the unified oil law, centrally administered from Baghdad, will govern all oil and gas production and investments in both Iraq and its semi-autonomous Kurdistan region.
- This pronouncement solidifies central control and signifies a significant shift in power dynamics.
The new Oil Law, as outlined by the Prime Minister, further cements central control and aligns with Russia’s broader objectives in the Middle East.
Supporting articles:
- https://www.zawya.com/en/projects/oil-and-gas/new-iraqi-oil-law-to-allow-production-sharing-with-foreign-firms-vhwjw8mu
- https://oilprice.com/Geopolitics/Africa/Iraqs-New-Oil-Law-Highlights-The-Wests-Fading-Influence-In-The-Middle-East.html
