Daily Times

Iraq’s oil wealth is rekindling tensions between federal authorities and the autonomous Kurdish region, in a row that could compromise the lifeline industry and keep investors away, analysts say.

The long-simmering dispute came to a head in February — at a time of political deadlock in Baghdad — when the federal supreme court ordered Kurdistan to hand over oil extracted from its territories to the federal authorities. Then earlier this month, a commercial court in the Iraqi capital annulled contracts between the Kurds and foreign firms, after the oil ministry in Baghdad filed a judicial complaint.

Authorities in the Kurdistan capital Arbil have cried foul, accusing Baghdad of heaping “unjust pressure” on them and announcing their own legal action. Iraq, the second largest producer in the Organization of the Petroleum Exporting Countries, sits on enormous oil reserves, and revenues from the sector feed 90pc of the federal government budget.

It exports an average of 3.3m barrels of crude oil per day (bpd), while production in Kurdistan amounts to just over 450,000 bpd. The February ruling stated that a 2007 law adopted by Arbil to regulate oil and gas was unconstitutional.

But analysts say politics play a major role in the dispute in Iraq, whose political barons have failed to reach agreement on choosing a president and a prime minister since October legislative elections.

“When it comes to oil, each side uses their respective powers as carrots and sticks depending on the political atmosphere of the day,” said Bilal Wahab of The Washington Institute for Near East Policy.

“At times when there was political accord, the courts were rather quiet. When there was political discord, however, the reverse was true,” he told AFP.

The nullification of oil contracts between the Kurds and four international oil companies (IOCs) from Canada, Britain, Norway and the United States at the start of July has inflamed the row.