(EnergyAsia, July 15 2014, Tuesday) — Iraq is losing hundreds of millions of dollars in revenue as warring factions led by ethnic Kurds and Sunni revolutionaries cash in on sales of crude and oil products seized from producing fields and refineries previously controlled by Baghdad.
Last week, Kurdish troops took over two oilfields in northern Iraq and a local state-owned oil company while Kurdish politicians withdrew from Prime Minister Nuri al-Maliki’s government which recently also lost the Ujil oilfield in the northern province of Salah al-Din to extremist Sunni forces. As it loses the political support of the West, Al-Maliki’s Shia-dominated government has watched helplessly at Iraq’s dismemberment while allies China and Russia have been unable to provide any effective support.
The Kurdistan Regional Government (KRG) said it has taken control of the Northern Oil Company after its troops seized the Bai Hassan and Kirkuk oilfields near Kirkuk city which have a combined production capacity of 450,000 b/d of light crude. KRG justified the seizure by blaming Iraq’s military for failing to protect oil-rich northern and western parts of the country from the advancing forces of the Sunni-led Islamic State, previously known as ISIS.
But KRG is unlikely to fully profit from the two fields yet unless the warring parties agree to repair and protect the damaged pipeline linking the Kirkuk fields to Turkey’s Ceyhan port that has been operating for years at a fraction of its 1.6 million b/d capacity.
Al-Maliki, who has been Prime Minister since 2006, has been accused of failing to build an inclusive government to sufficiently represent the interests of Iraq’s powerful Kurd and Sunni minorities. His foreign policy has alienated the US and the West with its sharp and decisive shift to Asia, marked particularly by his government’s award of lucrative oil, gas and engineering contracts to Chinese and South Korean companies.
The US has refused to help Baghdad when Islamic State forces began its uprising from early June to conquer large parts of the country’s northern oil-rich region that includes the major cities of Mosul, Tikrit and Baiji. The Islamic State, an Al Qaeda-inspired breakaway group, has also seized control of Iraq’s largest oil refinery of 300,000 b/d capacity.
Instead, President Obama has asked Congress to approve a US$500 million package to train and equip elements fighting the Syrian government who are also supporters of IS.
While al-Maliki has been silent about the US links to IS, he and Shia-dominated Iran have openly accused the Sunni-backed Saudi government and its royal family of funding the Islamic State military, which the Saudis have swiftly denied.
IS leader Abu Bakr Al-Baghdadi, who was detained at the US-operated Bucca prison in Iraq for four years until 2009, has appointed himself the Caliph of the Muslim world to outrank other Muslim leaders around the world. By some estimates, IS has already amassed wealth of more than US$2 billion along with a large cache of modern weapons and oil reserves seized from the Iraqi government during its short rise to power.
His invitation to Muslims, especially skilled and educated youth living in the West, appears to have resonated across the world amid reports that many are joining IS to help achieve Al-Baghdadi’s vision for a global unified Islamic community. However, terrorism experts are withholding judgment for now as it remains to be seen if Muslims will believe that him and his message.
IS’s quick and indiscriminate sale of crude and oil products to international traders and brutal methods have already evoked cynicism that the 43-year-old “Caliph” is little more than a smash-and-grab thug who ruthlessly murders fellow Muslims to achieve his personal rise to power.
For now, Iraq’s southern region which accounts for 90% of the country’s 3 to 3.5 million b/d production, are safe from IS’s reach. However, the spreading civil war and continued political discord between Baghdad and the KRG mean that Iraq is unlikely to achieve its oil production target of four million barrels a day by end-2014.