The Kurdistan referendum on self-determination of the Iraqi Kurdish people in the three provinces of Erbil, Sulaymaniyah and Dahuk, in addition to the disputed areas (Kirkuk and parts of the provinces of Nineveh , Salah al-Din and Diyala) is a historic step towards separation from Iraq and the attempt to establish a Kurdish state where it raises fears from the repercussions of that referendum, especially on the economic sectors, and on the forefront is the oil wealth noting that the Iraqi Oil Ministry issued a statement in which it confirmed that “the national oil wealth is a sovereign wealth and belongs to the Iraqi people of all its segments and components along its territory from north to south and from east to the west, including the Kurdistan region, “whose economic status is characterized by the following:
•Average annual per capita income of $ 2100.
• Its income from the tourism sector is 500 million annually
•its oil reserves of 45 billion barrels.
• Includes 57 oil fields.
• 40 oil companies from 30 countries.
• produces 600 thousand barrels of oil per day.
• Domastic use of 50,000 barrels per day.
• Signed 53 oil contracts with international companies, including Exxon Mobil and Gazprom.
• It exports through the Turkish port of Ceyhan 550 thousand barrels of oil per day.
• 5.7 billion cubic meters of natural gas, representing 3% of the global reserves.
The Kurdish forces face several challenges, including the size of oil reserves discovered so far, and ownership of the giant Kirkuk field discovered in 1927, which its reserves amounted about one billion barrels of crude oil. The production rates of the region during December 2016 about 500 thousand barrels per day, including the production of Kirkuk, and the Kurdish oil authorities exaggerated at first in the rate of reserves, as it indicated the possibility of rising reserves to about 45 billion barrels, which means that the reserves of the region is more than in Algeria. But gradually began showing actual field production which raised doubts about the reserve and whether it is the magnitude mentioned.
There are three major fields, other than the Kirkuk field (outside the three governorates of the region), the most important of which is the Taq Taq field, which is run by the Turkish-British Genel Company and Valaris, which has partnered with Turkey’s Genel Energy.
The production capacity of the Genel Company was expected to reach about 200,000 barrels per day, but its data on its website indicate that its production rate was 19,000 barrels per day at the end of March 2016. The average ranged between peak production in April, 2015 to 145 thousand per day and 36 thousand barrels per day at the end of 2016. The reason for the decline, according to the company, is the increase of the quantities of water that accompanied the production. This usually indicates to negative indicators.
This information has caused concerns among the oil companies operating in the region, where the production rates of one of the most important fields in the region have decreased significantly, especially the field of light oil compared to the heavy oil produced from the rest of the fields and the decrease of field reserve figures.
Since its discovery, the Kirkuk field has been the mainstay of the oil industry in central and northern Iraq. It was clear to Kurdish officials the importance of putting the hand on the field in order to support the amount of oil production in the region, as the Peshmerga forces were able to liberate the field from the occupation of a terrorist organization ISIS in the summer of 2014.
The region took advantage of the referendum in Kirkuk to put Baghdad in front of the “de facto” The head of the Kurdistan region stated in the expulsion of “terrorism” from Kirkuk that the lands liberated by the Peshmerga will not return to the federal government and will remain with the Kurds. There has been agreement since early 2003, that Kirkuk is a “disputed” area and has a special status that differs from the authority of the region in the three governorates. The field has been run for decades by the North Oil Company, which is part of the Iraqi National Oil Company.
It is worth to be noted that the “Kurdish state” which is intended to declare does not have a sea port to secure its international trade , this means according to economists and experts that the state intended to declare is threatened with total suffocation if Baghdad closes its ports and airspace with it, a measure likely to be taken by Turkey Which threatened to close the pipeline through which Erbil exports all its oil, as confirmed by Turkish President Recep Tayyip Erdogan, to impose sanctions, as the closure of the oil pipeline is one of the most important options available, to prevent the flow of crude oil exports that hits the Kurdish economy.
This matter creates negative steps that are not easy for Turkish officials to overlook, on one hand , closing the main source of the” new state” may lead to widespread hunger , deprivation , poverty and migration among its population, which will be met by international reactions. On the other hand, Turkey has huge investments In the Kurdistan region, including oil and other construction, estimated tens of billions of dollars, in addition to Turkish exports to the Kurdish markets, estimated by Turkish sources about $ 8 billion annually.
With the threat of Turkey to impose sanctions on the “Kurdish state” intended to announce, Iran has rushed to release its statements about the closure of its borders and airspace with Erbil at the request of the Iraqi government, which means that the “Kurdish state” will be completely cut off from the world, including the movement of people and all goods.
The independence of the Kurdistan region from Iraq raises the concerns of the countries surrounding it, such as Turkey and Iran, that it is possible to divide its country, such as Iraq, because there are a large number of Kurds in both countries, in addition to armed parties opposed to the ruling regimes. In Turkey, for example, »Since 1984 the PKK has been waging a guerrilla war against the regime in Ankara with periods of truce from time to time.
The same applies to Iran, which is salivating to control over the Kirkuk oil, which it is expected to face a military confrontation between the “Kurdish state” and Iran on the pretext that it protects its borders from the expansion of the Kurdish state and prevent the presence of an Israeli military force in cooperation with the region on its northwestern border, according to Iranian sources.
And here we wonder about the fate of 40 international oil companies operating in the region, and who will compensate for their losses, and pay fines for stopping the export of oil and paralyzing the sector? And what is the future of 53 oil contracts with giant companies.
There is ambiguity in the current negotiations for oil production and marketing between the regional authority and Russian state oil company Rosneft. The deal is estimated at billions of dollars and, of course, that the oil will be exported via Turkey, and blocking this project will affect Turkish-Russian relations.
The closure of the oil pipeline through Turkey is a pressing force on the young Kurdish state in case of secession and declaration of the Kurdistan states, but the international oil companies will take this sword imposed on the Kurdish oil exports to obtain additional concessions in their contracts or reluctance to work in the Kurdish areas due to fears over exports, and the possibility of its stop in case of worsening relations between the two parties.
We conclude from what the economic experts say that the fate of oil exports and the future of the referendum lies in the hands of Ankara, which can close the pipeline and finally stifle the economy of the region, which could lead to push the region to an understanding with Baghdad.
The reality is that the financial and economic crisis in the Kurdistan region is getting worse, so that the economic situation is catastrophic, especially that the region is steeped in debt and its coffers empty, and with all this , is the region able to stand and continue to secede to achieve a Kurdish state in northern Iraq even if it is a paralyzed state or to return to the origin to strengthen its economy and its population and enjoy with well-being and be in safe from those who lie and do evil to the region and Iraq to weaken it and loot its wealth.
Shatha Khalil
Researcher in Economic Unit
Rawabet Center for Research and Strategic Studies