Surprise! Iraq’s Oil Law (HCL) and Russia’s Takeover of Kurdistan Oil

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.