Kurds Soft-Pedal on Oil Share

When the final draft of Iraq’s new constitution comes out next month, Kurds will be holding their breath to see what they get out of it – in financial as well as territorial terms.

But as members of parliament debate what should be included in the document, Kurdish officials are taking a soft line on one of their key demands, saying that while they want more revenue for their region, they are prepared to wait until the country gets back on its feet.

The Kurds’ central demand is that Baghdad should from now on deal with the whole Kurdish region as a federal entity, rather than with the three governorates that make it up. The 18 governorates of Iraq, inherited from Saddam Hussein, currently form the highest tier of sub-national government.

At the same time, Kurdish politicians want to be assured of a fair share of Iraq’s oil income so that a strengthened federal entity would be viable economically. During the discussions on forming a government in March, calls were heard for the 17 per cent cut of government revenue currently earmarked for Kurdistan to be increased to something like 25 per cent.

The Transitional Administrative Law, TAL, effectively Iraq’s interim constitution, says that revenues from all natural resources are to be shared out “in an equitable manner proportional to the distribution of population throughout the country”, also taking into account issues such as development needs and past injustices in particular regions.

The 17 per cent of national revenues - most of it from oil - is based on this TAL wording and a population estimate for the Kurdistan region. Given Iraq’s substantial role as an oil producer and high world prices, that translates into respectable figures - Kurdistan got about 850 million of the five billion US dollars the country earned from its oil in January-March 2005, according to Dhiya al-Bakir, director of Iraq’s State Oil Marketing Organisation.

According to Serdar Abdul-Karim of the Oil Institute of Kurdistan, the revenue issue will inevitably rear its head during the negotiations on federalism as part of the constitution-drafting process.

Since the Kurdish Alliance took second place in the January parliamentary election, after the Shia-led United Iraqi Alliance, it should be in a strong position to press its claim. Since turnout figures showed that Kurds accounted for 26 per cent of all voters, some have argued the revenue share should be adjusted accordingly – although this figure was skewed by the under-representation of Sunni Arabs at the polls.

Whatever negotiations go on in private, the official line in Kurdistan appears to be to avoid aggressive claims that might irritate other players such as the Shia of southern Iraq, who also sit on substantial oil reserves.

Othman Shwani, deputy finance minister in the Sulaimaniyah administration, one of two local governments which run Kurdistan, said 17 per cent was insufficient, but officials are prepared to hold back on asking for more for the moment.

“We are looking forward to getting more in the future,” said Shwani. “But the situation Iraq is in has forced us to agree to this.”

Frequent sabotage attacks have cost Iraq billions of dollars in export earnings, and the collapse of the refining industry has forced the government to import most petroleum products.

Abdul-Karim notes that the present situation is in any case an improvement on the days of the Saddam-era Oil-for-Food Programme under which the United Nations allocated just 13 per cent of Iraqi oil revenues to Kurdistan, which then enjoyed de facto autonomy from Baghdad.

“The 17 percent may be enough if we look at the damage done to other parts of Iraq, especially the south,” he said.

Samir Hasan of Baghdad’s Oil Institute took the same line, suggesting that funding at any level went further in the more stable, and more efficiently run, Kurdish areas.

“Right now, millions of dollars is being spent to control the security situation while the security situation in Kurdistan is stable,” he said. “So the Kurds can make use of their portion more easily than other parts of Iraq.”

Hasan said that - as set out in the TAL - it was fair for the revenue division to take into consideration the damage and repression done to particular regions by Saddam’s regime as well as simple demographics. But he said the Kurds must understand that all Iraqis were oppressed and Iraq’s treasury is already exhausted.

One reason for avoiding a fierce public debate over the percentages may be the still unresolved issue of Kirkuk. Many Kurds want a new federal version of their region to be expanded to take in Kirkuk and parts of Mosul. That would not only shift the demographics - giving them a bigger population on which to base any claims - but in practice it would provide considerable de facto control of natural resources on the ground, even though these will continue to be managed by the oil ministry in Baghdad.

Kirkuk represents something of a prize, with its substantial oil reserves, but the Kurds’ historical claim is hotly disputed by the Turkoman and Arab communities who live there, and who do not want to see it become part of a federal Kurdistan.

Massoud Barzani, the president of Iraqi Kurdistan, has joined other Kurdish politicians in calling for Kirkuk’s status to be set out clearly in the constitution. But Iraqi president Jalal Talabani - himself a Kurd - reaffirmed the official position, that the Kirkuk issue will not be resolved until after the constitution has been drafted.

Duraed Salman is an IWPR trainee in Baghdad.