Wednesday, March 22, 2017

Protecting Iraq’s Oil-Producing Areas

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The article “Protecting Iraq’s Oil-Producing Areas” has been initially published by Oilpro, a professional network for the oil and gas professionals

March 22, 2017

FLORENCE, Italy — The Islamic State (a.k.a. ISIS or ISIL) is in retreat in Iraq and Syria. It has lost approximately half the territory straddling between western Iraq and eastern Syria that it controlled after its 2014 expansion when it caught off guard the federal government in Baghdad. This outcome was not difficult to predict already in the summer of 2014, because the Islamic State was a poor and dysfunctional state in relation to the vast conquered territory and the administered population. Add to this that already in August 2014 the U.S. and some allies (Bahrain, Jordan, Qatar, Saudi Arabia and the United Arab Emirates) started launching surgical airstrikes against ISIS positions in Syria, precisely around the city of Raqqa and along the Syrian-Iraqi border. In practice, it was evident that, especially in Iraq, defusing the Islamic State military power was primarily a matter of time and of better organization.  

Last October Iraqi forces and the U.S.-led coalition started an offensive whose goal was the liberation of the city of Mosul, which is the capital of the Islamic State in Iraq. Mosul is the largest city under Islamic State control, with two million residents. At the time of this writing the Iraqi forces have retaken the eastern part of Mosul and around 30 percent of the western part of the city. On March 14, 2017, Prime Minister Hayder al-Abadi declared that the battle was in the final stages and that the cornered Islamic State fighters had to surrender if they didn’t want to be killed. Indeed, recapturing the whole Mosul won’t be easy — with a high probability of civilian casualties in the narrow streets of Mosul’s Old City — but a positive outcome for the Iraqi forces seems already taken for granted.

The Islamic State is losing ground in Syria as well. The Syrian Kurdish People’s Protection Units (Y.P.G.), which is the armed wing of Syria’s Democratic Union Party (P.Y.D., a left-wing Kurdish political party established in 2003 by Kurdish activists in Syria) recently revealed that the Kurdish-dominated Syrian Democratic Forces (S.D.F.) have plans to launch at the beginning of April 2017 the final offensive to retake Raqqa, the Islamic State’s capital in Syria. Last November, the Syrian Democratic Forces launched Euphrates Rage, an operation whose final goal in the long run was to free Raqqa. Also in this case, recapturing Raqqa won’t be immediate, because the city is likely fortified with a network of trenches, booby traps, and car bombs. But, in theory, with the right amount of forces and good military equipment (provided by the U.S.) retaking Raqqa should be only a matter of time.

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Areas Under the Islamic State Control as of March 5, 2017 — Source: Wikipedia

Apparently, the present conditions in relation to Mosul and Raqqa seem similar, but the events may take a different fold. Turkey has long complained about Iran’s increasing influence in Iraq and Syria, and consequently it intends to expand its participation in the two offensives against the Islamic State, the one in Iraq and the one in Syria. But while in Iraq the war against the Islamic State to retake Mosul is by now up and running and sees at the forefront Iraq’s government forces (Iraq’s official army) and the K.R.G. forces (the forces belonging to Iraqi Kurdistan, which is a semi-autonomous region recognized by Iraq’s Constitution) in Syria the present conditions are much more complicated and in flux. This means that Turkey has right now probably more room for maneuver in Syria. In specific, in Syria in the war against the Islamic State Ankara would like to consistently increase the role of the Free Syrian Army (F.S.A.), whose main target is to bring down the government of President Bashar al-Assad, and instead to reduce the role of Y.P.G./P.Y.D., which it considers a terrorist group linked to the Kurdistan’s Workers’ Party (P.K.K., a Kurdish left-wing organization based in Turkey). This Turkish desire of playing a major role in reconquering Raqqa has until now clashed with the U.S. and Russian targets in Syria. In fact, the U.S. has reduced its support to the F.S.A. and it now favors actions led by the Kurdish-dominated S.D.F. While Russia, since the beginning of the conflict, has backed the government of President Bashar al-Assad politically, with military aid, and since September 2015 through a direct military involvement as well.

In light of the above considerations, it’s evident that if the Syrian Civil War is far from being solved, the Islamic State, once expelled from its main strongholds in Iraq and Syria, will return to being what it was before, i.e., a guerrilla movement. And with the Islamic State transforming again into an insurgency movement, in Syria the civil war will continue, and the Islamic State fighters will blend with the host populations and join other more or less radicalized warring factions across the country (for instance Al Qaeda and the Jabhat Fateh al-Sham — the latter was previously known as the Nusra Front). In Iraq, the Islamic State fighters will retrench along the Syria-Iraq border, blend with the host populations, and continue a guerrilla fight against primarily the federal government. On top of this, it’s quite probable that the Islamic State might gradually increase its actions outside the Syrian-Iraqi theater.

Especially in Iraq, once the Islamic State has transformed again into a guerrilla group fighting against the central government, Iraqi civilians will be the primary targets. Suicide bombings and direct attacks against mosques, public squares, markets, festivals, political rallies, and infrastructure will increase. Now that the Islamic State is losing ground, this strategy is by now quite evident. The most striking example of this strategy has been the coordinated bomb attack of July 3, 2016, in Baghdad killing more than 300 people and injuring hundreds more. A few minutes after midnight local time a suicide truck targeted the mainly Shia district of Karrada, busy with late night shoppers for Ramadan. A second roadside bomb was detonated in the suburb of Sha'ab, killing at least five. 

Putting aside the complex relations between Iraq proper and the K.R.G. (this topic is only lightly considered in this article), if the Iraqi government intends to really first pacify and then consistently develop the country, it has to reach out to the Sunni disenfranchised communities, which have provided fertile ground to many radical extremists. It’s important not to repeat the same script that started in 2007, when after the U.S. troop surge, the jihadis moved into the remote frontier lands along the borders of Iraq, Syria, Lebanon, Jordan, and Turkey. There the movement rebuilt itself, and seven years later it attacked again in Syria and Iraq.

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Winning the war against the Islamic State on the field is one thing, pacifying Iraq is a completely different and complicated thing. And since the fall of Saddam Hussein, the Iraqi authorities have not been capable of finding a way to implement a real power sharing among all the sects and ethnicities present in Iraq—be it clear that it’s a very difficult task. So, it appears that a military victory over the Islamic State won’t represent a definitive stabilization of Iraq. Large swaths of Iraq, especially Anbar Governorate (Ramadi), Nineveh Governorate (Mosul) and Saladin Governorate (Tikrit) will not be safe areas because of the Islamic State guerrilla.

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Governorates of Iraq — Source: Wikipedia

Let’s now focus our attention on Iraq, which, with a production of almost 4.6 million bbl/d (600,000 bbl/d from Kurdish fields), is one of the world’s main oil producers. Earlier this month, at the CERAWeek 2017, Oil Minister Jabbar Al-Luaibi affirmed that Iraq would ramp up production capacity to 5 million bbl/d by 2017. This declaration is quite interesting because it shows that Iraq intends to increase its oil production despite this new target might clash with OPEC’s oil cuts.  

Iraq’s economy is almost completely dependent on oil revenues. In 2014, the revenue from crude oil export accounted for 93 percent of the country’s total government revenues and 80 percent of foreign exchange earnings. These numbers explain that a worsening oil sector in Iraq could easily translate into the event triggering the demise of the Iraqi state as we have known it until today. For the Iraqi coffers oil is everything. In 2015, because of the declining oil prices and despite a relevant increase in export volumes, Iraq proper (excluding the K.R.G.) through crude oil exports earned only slightly more than $49 billion, which was $35 billion less than in 2014. If, on the one hand, oil prices are a variable that Iraq cannot control, on the other hand, it might improve the security deficit present across Iraq so that the Iraqi oil industry (Iraq proper and the K.R.G.), could continue its oil production guaranteeing at least part of the revenue the country desperately needs.

Iraq’s oil industry relies on three main producing areas
  1. the southern fields in Basra Governorate (government control)
  2. the Kurdish fields in the K.R.G. (K.R.G. control)
  3. the Kirkuk fields (part under government control and part under K.R.G. control)

The first two areas are completely independent one from the other, while part of the Kirkuk fields oil production is exported through the Kurdish pipeline system, which is used by the Kurdish fields.

Increasing Iraq’s oil production implies having these three areas completely insulated from possible episodes of violence and sabotage. Protecting the southern fields should not be an impossible task. These fields are located in a Shia-dominated area and have been quite safe in the last years. Similarly, the K.R.G. has emerged as the safest territory within Iraq. Only sporadic episodes of violence have occurred in the last years within the K.R.G. And at the same time, despite fighting came close to the fields Khurmala Dome and Shaikan. the Kurdish forces have demonstrated to be capable of well shouldering the attacks of the Islamic State.

Instead, more complicated is the future of the Kirkuk fields. In fact, the oil-rich city of Kirkuk is claimed by both Iraq’s central government and the K.R.G. Erbil is seeking to integrate Kirkuk Province into the K.R.G. claiming it to be historically a Kurdish city, but Baghdad fiercely opposes this Kurdish design. The population is a mix of Kurds, Arabs, Christians and Turkmen. Kirkuk has seen a rise in ethnic tensions after the Islamic State group’s offensive across northern and western Iraq in 2014. Iraqi security forces largely withdrew from Kirkuk, and Kurdish Peshmerga forces took control of the city. Since then, Shiite militia fighters have also massed around the city.

Recently 120,000 bbl/d from Kirkuk oil fields under the control of the central government’s North Oil Company (N.O.C.) have been exported using the same pipeline that the Kurds use to independently export their oil to the port city of Ceyhan, Turkey. This Kurdish pipeline (nameplate capacity of 700,000 bbl/d) bypasses the Iraqi section of the Kirkuk-Ceyhan pipeline and merges into the latter in Fishkhabur at the border between the K.R.G. and Turkey. In the future, thinking of repairing also the Iraqi section of the Kirkuk-Ceyhan pipeline, which was heavily sabotaged in March 2014, seems not viable. First, miles of the pipeline have to be substituted, and second, it would still run through a territory—Saladin Governorate and Nineveh Governorate—that also in the future could be exposed to other acts of sabotage. 

Still with reference to Kirkuk oil fields, last February, Iraq and Iran signed a memorandum of understanding to evaluate the construction of a pipeline to export Kirkuk’s crude oil via Iran. This pipeline could help Iraq proper diversify the export routes of crude oil produced in Kirkuk and reduce Baghdad’s reliance on shipping this oil through the K.R.G. territory. Erbil doesn’t like this project because it could lose the leverage it currently has as for the export of N.O.C.’s oil via the Kurdish pipeline. Apart from the political games supporting this project, it’s important to underline that this pipeline from Kirkuk will go east through much safer zones. 




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