How Does the U.S. Have to Intervene in Syria?

September 24, 2014

BEIRUT, Lebanon — This article follows a conversation I had some days ago with a very good friend of mine who happens to be a U.S. expert of international affairs. My friend pointed out that given the fact that I live in the Middle East and that I speak Arabic I should try to convey my ideas about the current situation in relation to how the West has to deal with the Islamic State in Iraq and Syria (a.k.a. ISIS or ISIL). Who knows me knows that I am an energy analyst and that I normally write analyses related to the geopolitics of energy in the Middle East with a strong attention given to economic and legal issues. Notwithstanding my strong inclination toward the oil and gas sector, I have decided to convey my thoughts about the current events in Syria through the following paragraphs. 

       

At the time of my writing, the U.S. and some allies (Bahrain, Jordan, Qatar, Saudi Arabia and the United Arab Emirates — although the real role these five countries are playing is not clear) are launching airstrikes against ISIS positions in Syria, in specific around the city of Raqqa, in eastern Syria and along the Syrian-Iraqi border. For the past two weeks the Obama administration had looked for ways in order to expand its strategy against ISIS, which controls a good portion of central and western Iraq, and eastern Syria as well, while since August 7, the U.S. has carried out airstrikes against ISIS positions located within the territory of Iraq. Indeed, the airstrikes in Iraq have permitted some positive results: Erbil and Baghdad are not anymore under the direct threat of the Islamic fighters. The following two maps show the areas currently under control of ISIS in Iraq and Syria.  



The Areas Under the Control of ISIS
Source: Caerus Associates, Long War Journal, Institute for the Study of War

BBC's Recently Updated Map of ISIS Controlled Areas (as of Sept. 22, 2014)

In light of the current situation, extending American airstrikes against ISIS in Syria is probably the only viable option the West has within Syria without engendering excessive and uncontrollable political repercussions throughout the region. Western actions in Iraq and Syria need to be centered on meaningful and achievable targets and not on pure wishful thinking like regime change here and there. The clear and present danger in Iraq and Syria is ISIS, which is a terrorist organization, and this should be the primary target. Any other attempts at implementing a regime change supporting the so-called "moderate" opposition in Syria would risk replicating the foreign policy failure of the Obama administration in Libya, a failure which happened just three years ago. In Libya, Muammar al-Qaddafi 's long gone but the country is still in shambles and under the existent risk of fragmentation.

In general, for Western countries winning a war in a Middle Eastern country is an achievable goal, but lately pacifying that country is a complex task. Since 2003, the U.S. and the U.K. idea of toppling Saddam Hussein has not been able to create a stable Iraq; and after 11 years Iraq is now enduring a civil war and is practically fragmented in three macro areas, which reflect ethnic and religious differences. Instead, in 1991, George Bush Senior understood very well that, in addition to exceeding the U.N. mandate, taking out Saddam Hussein would have plunged Iraq into a never-ending tribal war. Lately in 1991, between March and April, Saddam Hussein crushed the Kurdish and Shia revolts that had started in Iraq's provinces. Tens of thousands of people died in just one month and approximately two million people were displaced. Were Western countries responsible for this bloodshed? It is difficult to say. The point is probably that in the Middle East every political action carries out, in terms of human costs, heavy consequences.   

The real and sad reality is that the Middle East has to find its way toward democracy by itself. Western countries are not able to create for Middle Eastern countries a fast path toward our concept of democracy for the simple reason that the Middle East does not have Western countries' democratic institutions. Middle East and North Africa in the last forty years have had very limited democratic governments. In specific, in Syria, the al-Assad family has held on power since 1971, while, in Iraq, Saddam Hussein had been president from 1979 to 2003.  Implementing a regime change without a viable alternative, i.e., a coalition capable of expressing the will of the majority of the involved population while guaranteeing the rights of the opposition, is a game lost even before starting to play. Moreover, creating such a coalition in Syria and Iraq is almost impossible given the history of the two countries, which, thanks to the Sykes-Picot Agreement, are the products of France and the U.K. during World War I when occurred the collapse of the Ottoman Empire.

Source: Wikipedia — Image Uploaded by McZusatz (Dec. 2011)

The huge problem in both countries is the structural division of their populations along sectarian and religious lines. Probably, this demographic division is more complex in Syria (and in neighboring Lebanon) because there the division is very patchy. In the last three years, in Syria, many journalists have been kidnapped exactly because they did not understand the patchy fragmentation of the Syrian territory. They have tried to move around in Syria without realizing that, just after few miles, the territory they were traveling through could be under control of a different warring faction, which then kidnapped them. Differently from Syria, in Iraq there are at least three macro areas: Iraqi Kurdistan under Kurdish control, central and western Iraq under ISIS control and southern Iraq and Baghdad under government control.

Some observers point out that fighting ISIS in Syria will reinforce the Syrian government, which has recently reduced its actions against ISIS in the eastern part of the country and which is unable to retake possession of the territories in the areas around the two cities of Raqqa and Deir al-Zour.  Definitely this will be the result. Attacking ISIS will reinforce President Assad. But what are the other real and viable alternatives? We do not have them. In Syria and in Iraq, Western countries should act like an E.R. doctor, who always prioritizes the interventions he has to carry out on patients. First red codes (ISIS) and then the other less problematic codes (the al-Assad family and the moderate opposition, both with all the related financing streams coming from the countries involved in this proxy war).

Raqqa: "Sunset Over the Rooftops in One of the Modern Quarters of the City" Source: Wikipedia — Image Uploaded by Magnus Manske on May 15, 2006

It is difficult to see an end to the current Syrian conflict. U.N. estimates put the death toll of the conflict at more than 200,000 casualties and, according to the United Nations Relief and Works Agency (Unrwa) the Syrian economy will take 30 years before returning to the level of 2010. These are scary and depressing numbers and the Syrian people are sustaining a huge burden. But meddling at the political level in Syria is quite a guarantee of an incoming failure for the West. A simple look at the Syrian map shows that in Syria apart from the coastline, which is under government control, and the northeastern part of the country, which is under ISIS control, no other area is completely under the control of only one of main the warring parties, i.e., the government, the opposition and ISIS. The area around Aleppo, which is Syria's largest city, sees now the contemporary presence of all the warring parties.  

Chances are high that the current divisions will continue in the future. So, according to political realism, choosing a side between the government and the "moderate" opposition — and it's not clear whether a moderate opposition exists today — would be nonsense. 

In general, a state may intervene in the internal affairs of another state under a juridical basis when:

• Previously the two states have signed a treaty of mutual defense or an alliance (NATO is a good example) and one of the two is under an attack of any external party. But in Syria, Western countries do not have any specific linkage with the Syrian government, nor of course with the opposition.
• When it is necessary to stop an ongoing genocide, war crimes or crimes against humanity. At this regard, it is difficult to choose between the Syrian government and the opposition because during the last three years both have implemented atrocities.
• It carries out a preemptive war (not a preventive war), i.e., a war commenced in an attempt to repel or defeat a perceived offensive or invasion, or to gain a strategic advantage in an impending (allegedly unavoidable) war before the attack materializes. Neither the Syrian government nor the opposition is a direct threat to the West. Different thing is ISIS, the Nusra Front and the Khorasan Group, all of which may be defined as terrorist groups operating at the international level.
• It acts under the system of collective defense as defined by Art. 51 of the the U.N. Charter. According to the Art. 51. "Nothing in the present Charter shall impair the inherent right of individual or collective self-defense if an armed attack occurs against a Member of the United Nations, until the Security Council has taken measures necessary to maintain international peace and security. ... " In this case the focus would on Iraq, which is under the attack of a terrorist organization that has its sanctuaries in Syria.        

The first two arguments mentioned above do not easy apply to the current situation in Syria and would force Western country to choose between the Syrian government and the opposition. And deciding to support one side or the other right now would be a very premature decision triggering many unknown consequences. Instead, the third and the fourth arguments could provide a sounder justification for the intervention in Syria in light of the danger that ISIS, a terrorist organization, represents respectively for Western countries (third point) and Iraq (fourth point).

Summing up, it would be illogical for Western countries to support (be it clear with no boots on the ground in light of the present reluctance to send ground troops to the Middle East) one of the two sides, which risk being enmeshed in a long-term and violent stalemate with no real winner. In such a case, the Syrian government could claim "legal sovereignty", i.e., ownership, on a part of the country and the opposition a "factual sovereignty", i.e., jurisdiction and control, on another part of the country.

Instead, for Western countries, fighting international terrorism, which is a menace at the world level, makes sense, notwithstanding the necessity of doing it without giving the idea of too overtly supporting President Assad of Syria, Iran and Hezbollah. Surely this is easier said than done. The ongoing attacks against Syria are occurring without the approval of President al-Assad, who skillfully has never requested the U.S. intervention against ISIS. The U.S., at least with its public declarations, is still demanding President al-Assad to step down and is supporting the Free Syrian Army, an opposition group fighting the Syrian government. But how much truth there is now in the U.S. declarations against Mr. Assad is difficult to say. What is sure is that the U.S. could not take on board of its fight against ISIS the Syrian government, lest Gulf countries not participate or help fighting ISIS.

But although fighting terrorism is the only action Western countries could reasonably carry out in Syria, this action includes an important caveat. In fact, we risk creating a "power vacuum" in eastern Syria. And, in general, in a power vacuum, which often occurs during or following a civil war, other forces tend immediately to rush in to fill the vacuum. Who will fill the power vacuum in eastern Syria? It is not easy to say although probably the al-Qaeda-affiliate Nusra Front will be in a better position to reclaim the lands of eastern Syria. The Nusra Front already controlled those territories before being evicted by ISIS.      

What is quite evident in today's Middle East is that Western countries have to reposition themselves with reference to the Shia groups present in Middle East. Policies centered exclusively on the interests of the Arab states of the Persian Gulf are anachronistic because they do not reflect anymore the current state of affairs in the area. Western countries need now to develop in the Middle East a policy balancing in a better way Sunni and Shia interests. Acting in Syria and Iraq under the aegis of contrasting international terrorism is the only tangible mechanism Western countries have in order to try to stabilize the area. And if Syrians and Iraqis do not want America or any other external actors to dictate their policy agenda, at the same time they strongly request the U.S. intervention in order to stop ISIS' irrational violence.

Iraqis, Lebanese, Syrians and Westerners living in the Levant understand very well the current dynamics in the Middle East. Now it is time for the U.S. administration and its counterparts in Europe to show that they are able to work in a complex and partially transformed Middle East. It's from these kinds of endeavors that we understand the greatness of an administration.     

The Emergence of the K.R.G. as an Oil-Exporting Area

August 22, 2014

LARNACA, Cyprus — This article tries to understand whether Iraqi Kurdistan is emerging as an oil-exporting area disconnected from the federal government in Baghdad. While Iraq is in complete turmoil under the attack of ISIS, the Islamic State in Iraq and Syria, there are also some indications that, despite the current legal confusion regarding the ownership of Kurdish oil, the Kurdistan Regional Government (the K.R.G.) is fully committed to getting ahead with its plan of exporting its oil and gas independently of the central government's authorization.  And now the K.R.G. is finding additional buyers for its crude oil. With reference to the data regarding the tracking of the tankers transporting Kurdish oil, the article is fully indebted with Reuters, which, thanks to its Live AIS ship tracking system, has been an invaluable source of information.      

   

The retaking of the Mosul Dam Showcases how a Coordinated American-Iraqi-Kurdish Strategy Is the Right Approach Against ISIS

When on August 7, 2014, militants of the Islamic State in Iraq and Syria, or ISIS, took control of the Mosul Dam, which is the largest dam in Iraq, many analysts thought that this action was a sign of the future fall of Erbil, the capital of Iraqi Kurdistan. The dam is located on the Tigris River in Ninawa Governorate, upstream the city of Mosul, which fell in ISIS hands on June 10, 2014.

The strategic importance of the dam is quite evident because it provides electricity to the 1.7 million residents of Mosul (there is a 750 MW power station). After the capture of the dam there was immediately fear that the jihadists could use the dam as a tool of destruction. In fact, according to a September 2006 report by the United States Army Corps of Engineers (Usace), this dam is one of the most dangerous in the world because of its internal erosion potential of the foundation. In practice, according to the report, there is a worst-case scenario consisting in the collapse of the dam and in the resulting flood of Mosul with 65 feet (20 meters) of water and Baghdad with 15 feet (five meters). Estimates put the death toll to at least 500,000 casualties. In practice, without a big effort, ISIS could destroy an already quite unstable dam. Moreover, if the Islamic fighters decided not to destroy the dam, they could also cut power supply or water flows to the population served by the basin. Now, all these scary scenarios seem to be ruled out. In fact, the current American airstrikes against ISIS militants have permitted Iraqi and Kurdish forces to reclaim the site thanks to a concerted action that lasted from last Sunday to Tuesday morning.

What until last Sunday had been missing in Iraq in the fight against ISIS was a coordinated military action against the Islamic militants. On August 7, the Obama administration decision to authorize airstrikes against the jihadist fighters changed the balance of the current confrontation in Iraq. Now that several external actors are supporting both the Peshmerga forces and the Iraqi army, it will be difficult for ISIS to conquer Erbil and/or Baghdad. Yet, on the government side, winning completely the battle against ISIS will not be easy because the militants could fall back to Iraq's Anbar Province and to the other eastern parts of Syrian territory under their control.    

Blocking ISIS in Anbar Province means that Iraq's two most important oil-producing regions, southern Iraq and Iraqi Kurdistan, would be out of ISIS control. Of course, for the southern oil fields, there will be some problems in relation to land transportation of oil through Iraq. Currently, of the three Iraqi export pipelines (from Iraq to a foreign country), none is able to transport oil.

In addition to this, the Strategic Pipeline, which theoretically could be used to transport oil from Iraq's southern fields to Kirkuk (from where oil might enter the I.T.P.), is working on reduced scale and would need several years of rehabilitation. But, notwithstanding this infrastructural pipeline malfunction, at least the control of the oil fields in northern Iraq and in southern Iraq will continue to be in Kurdish hands and government hands respectively. This will reduce ISIS economic resources, which derive from smuggling oil from the areas under ISIS control both in Syria as well as in Iraq. ISIS is currently controlling some oil fields in Iraq. Some reports suggest that ISIS could sell approximately 10,000 barrels per day to fund its activities. (For more information see: BACCI, A., Iraqi Kurdistan's Occupation of Kirkuk Oil Field Will Deeply Affect the Iraqi Oil Sector, June 2014)     

Notwithstanding the Iraqi Turmoil, International Oil Companies (I.O.C.s) Are Still Working in the K.R.G. — Upstream

After ISIS advance during the month of July the shares of the energy companies working in Iraqi Kurdistan experienced some losses. The assumption was that ISIS advance could disrupt their operations. Financial markets had probably an excessive reaction to the news coming from the K.R.G., although at the beginning of August ISIS was 40 kilometers southwest of Erbil. And the K.R.G. territory in its western and southern parts, the two sides from where ISIS could attack, is not as mountainous as in the east, where there is the Zagros mountain range. After the events of the last days, there is now the idea that Iraqi Kurdistan for the time being will continue to be a safe area especially now that Western countries will start supplying the Kurds with heavier weapons.

Some of the I.O.C.s working in the area are carrying out a buyback of their shares, which have decreased approximately 25 percent since early July. All the involved companies have confirmed in the last days that they are operating their oil fields in a safe and secure manner. The only exception is currently U.S. Hess Corp., which has temporarily suspended its oil-drilling operations. I.O.C.s have only implemented in the last two weeks as a precautionary measure, the withdrawal of non-essential staff — among them Chevron and ExxonMobil. Both the I.O.C.s and the K.R.G. authorities have confirmed that they will be able to increase production in the second part of the year as it was previously planned.

Already by the end of August, a joint venture of Genel Energy, an Anglo-Turkish company, and Sinopec's Addax Petroleum, a Chinese company, should increase production in the Taq Taq oilfield, which is the largest in the K.R.G., to 140,000 barrels per day. Recently, in an interview with Rudaw, a Kurdish media network, the K.R.G. natural resources minister, Ashti Hawrami said that the K.R.G. had a production capacity of 300,000 barrels per day (bbl/d) and that it is expected to increase it to 500,000 bbl/d by the end of 2014.

The K.R.G. Has Doubled the Export Capacity of the K.R.G. Oil Pipeline — Midstream (Pipeline)

After completion of upgrade work, the Iraqi Kurdistan oil pipeline, resumed working on August 21, 2014, at the increased rate of 200,000 barrels per day of Kurdish oil. Before this upgrade, the pipeline was transporting approximately 100,000 to 120,000 barrels of oil per day. According to local sources the pipeline should be upgraded to 220,000 barrels per day in the coming ten days and then to 250,000 barrels per day in a couple of months.

Until now, around 7.8 million barrels of crude have transited through the pipeline and have arrived at Ceyhan, Turkey, where 6.5 million barrels (83 percent of the shipped quantity) have been loaded onto tankers for export. At the date of this writing a seventh tanker is being loaded at the terminal in Ceyhan. According to a Reuters analysis of satellite data, around $350 million in oil sales have been concluded or are currently in the process of being finalized. And, during his interview with Rudaw, Mr. Hawrami affirmed that except for two rounds of Kurdish oil sales all of the revenues have been deposited in a Kurdish bank.

   

The K.R.G. Is now Finding More Customers for Its Oil — Midstream (Oil Tankers)

So far it is has not been easy for Erbil to find customers for its oil. In fact, Baghdad's continued and strong efforts aimed at blocking Kurdish sales have deterred some possible buyers.  And, in general, until now it has been quite difficult to have disclosure of the buyers of K.R.G. oil. Something is now changing and the K.R.G. is finding more buyers for its cargoes.   

   

Last January upon completion of the Kurdish pipeline between the Taq Taq oil field and Fishkhabur, a small city at the border with Turkey, Baghdad started to protest vehemently against the K.R.G. ability to sell oil independently of the central government authorization. In addition to this, Baghdad:

• Threatened to sue the companies that were lifting oil via the K.R.G. pipeline.
• Initiated legal action against Turkey, taking the case to the International Chamber of Commerce (I.C.C.) in Paris.
• Cut the K.R.G. budget allocations.

During the last months Baghdad has said plainly that Erbil has been plundering Iraq's national wealth. (For more information see: BACCI, A., Iraqi Kurdistan's Occupation of Kirkuk Oil Field Will Deeply Affect the Iraqi Oil Sector, June 2014)      

Only on May 22, the United Leadership, which was the first tanker loaded with Kurdish oil (1 million barrels oil) left Ceyhan.  This tanker with its $100 million cargo has been anchored off Morocco for more than two months without unloading.

Since May, six tankers have already left the harbor and a seventh is being loaded in these days. At the end of June, the tanker United Emblem did a ship-to-ship transfer of its 1 million barrels to the tanker SCF Altai, which then delivered the cargo to the Israeli port of Ashkelon. The buyer is unknown. This was the first successful delivery of Kurdish oil. Another cargo, again carried by the United Emblem, was transferred to a second vessel off the coast of Malaysia late July. The purchaser is unknown.   

Instead, since late July, the tanker United Kalavrvta has been sitting off the coast of Texas after Iraq requested a U.S. court to seize the tanker. At the moment the oil tanker, a Suezmax carrying 1,032,212, barrels of crude of worth over $100 million of oil, is in international waters in a sort of institutional limbo. In fact, the Iraqi Oil Ministry filed a suit in the Southern Texas District Court. Without delay Erbil countered the case writing a letter to the American court. In the letter it explained why the K.R.G. had the right to sell Kurdish oil. In specific, the K.R.G. clarified that: 

• the American court did not have jurisdiction in order to determine whether the owner of the oil was the K.R.G. or proper Iraq. The American court seemed to agree on this point. Already in mid-July State Department spokesman Eddie Vasquez said that how to share Iraq's national oil resources was a matter that had to be solved by the Iraqis. 
• Iraq's Supreme Court already rendered void the Oil Ministry's attempts to stop Kurdish oil sales through a temporary injunction until the Iraqi political environment were settled. At this regard, it has to be noted that it was not clear whether the Supreme Court rejected the Oil Ministry's attempts on the basis of the content and/or the form.    

On August 11, the tanker, Minerva Joy, which transported 300,000 barrels of Kurdish oil, was due to arrive at Paulsboro, New Jersey, where it should have unloaded its cargo to U.S. refiner, Axeon Specialty Products. For the moment, the buyer has not bought or accepted the cargo; and the justification has been the unclear legal ownership of the crude oil. The tanker has now been stopped approximately a few dozen miles from Ocean City, Maryland. Axeon had received in June a separate cargo of Kurdish Shaikan crude. Similarly, the chemical firm, LyondellBasel had bought in May two cargoes of Kurdish crude (respectively 266,000 and 267,000 barrels). And, already in April, a shipment of crude oil probably from Iraqi Kurdistan had arrived at Marathon Petroleum Corp's Galveston Bay refinery in Texas.         

    

Mr. Hawrami is confident that soon there will be a positive solution and that the K.R.G. will be able to sell its oil to the United States. Washington did not banned U.S. companies from purchasing Kurdish oil, but it clearly expressed that the companies might have to face legal disputes with Baghdad. Indeed, the Obama administration direct support for the sales of Kurdish oil would be of paramount importance for Erbil. Buyers would no longer be scared by Baghdad's possible legal lawsuits. 

    

Moving to Israel, it seems that, notwithstanding a lack of confirmation from Kurdish authorities, there is an ongoing trade between the K.R.G. and Israel. The Tanker Kamari plays an interesting role at this regard.

The Tanker Kamari, until three days ago was approximately 30 kilometers off the coast of Israel. But already at the beginning of August this tanker had been in the area, exactly a little less than 125 miles off the coasts of Israel and Egypt. According to Reuters:

Reuters AIS Live ship tracking showed the ship was fully loaded, based on its draft in the water. After turning its satellite tracking off on Aug. 1, the ship reappeared four days later sitting far higher in the water - indicating it had unloaded its cargo of disputed oil.

It was not possible to determine which port the oil aboard the Kamari had been delivered to or who the buyer was.

Then last week, this tanker, which had been loaded again at Ceyhan around August 8, carried out close to Malta a ship-to-ship transfer to a vessel called the United Carrier. The transfer involved 80,000 cubic meters of Kurdish crude, i.e., 600,000 barrels. Later, the United Carrier offloaded the oil at the port of Omisaly in Croatia. The buyer was the Hungarian energy company MOL. More recently, according to Reuters:

The tanker Kamari was partly laden north of Egypt's Sinai on Aug. 17, tracking showed, before it turned off its satellite transponder until early on Aug. 19. It was not possible to determine where the oil had been delivered to or who the buyer was.

A spokesman for the Kurdistan Regional Government (the K.R.G.) Ministry of Natural Resources did not immediately respond to phone calls and emails seeking comment on Wednesday. The K.R.G. has previously denied selling oil to Israel "directly or indirectly".

A Gloomy Event

During the chaotic Iraqi developments of the last three months one event that partially in its significance passed unnoticed was, on July 11, 2014, the takeover by the Peshmerga forces of the oil fields of Bai Hassan, which is the country's fourth-largest field, and the Makhmour area. According to the official statement released by the K.R.G., on July 11, the decision of the takeover was carried out "after learning of orders by officials in the federal Ministry of Oil in Baghdad to sabotage the recent mutually agreed pipeline infrastructure linking the Avana dome with the Khurmala field." The damage should have consisted of dismantling or rendering inoperable the valves of the new pipeline. In fact, in the last months as a consequence of the difficulties of exporting the oil of the area around Kirkuk through the Kirkuk-Ceyhan Pipeline (a.k.a. Iraq-Turkey Pipeline, I.T.P.), which has not been working since last March as a result of the attacks of the ISIS insurgents, it has been constructed a new pipeline linking Khurmala, in the K.R.G., with Kirkuk's Avana dome. In practice, the new infrastructure, the Avana-Khurmala Pipeline, serves to move crude oil from the Makhmour, Avana and Kirkuk area fields to the K.R.G. From Khurmala crude oil could be also exported to Turkey through the new Kurdish infrastructure (300,000 bbl/d) which bypasses the territory controlled by the insurgents and is linked to the I.P.T. at the border between the K.R.G. and Turkey. At the time of the takeover, the Avana and Makhmour fields were producing 110,000 bbl/d of oil while the associated gas was used for the L.P.G. bottling plant at Kirkuk. But the operator of the fields, the North Oil Company, which is linked to the Iraqi Ministry of Oil, instead of using the new infrastructure to ship oil was reinjecting it back in a small disused field. The main result of this operation was a permanent loss of most of the oil.

This episode tells us a lot of the difficult relations between Erbil and Baghdad also during times when they should have a common enemy, which is ISIS. Sabotaging oil fields reminds us of at least two famous episodes:

• Rumania 1916 — During World War I when German and Austrian troops were advancing on Rumania in September 1916, the British Cabinet War Committee deemed necessary to avoid the takeover by Germany and Austria of the Romanian oil fields and refineries and recruited Colonel John Northon-Griffiths "Empire Jack" with the task of destroying the Rumanian oil industry.
• British East Indies 1942 — In mid-January 1942 when the Japanese were approaching the Balikpapan refinery and the surrounding oil fields (in today's Borneo, Indonesia), a crew of workers of Dutch/Shell Group, which was the company operating the complex, destroyed the wells and the refinery complex in order to impede Japan from having access to important oil reserves, which were of paramount importance for the continuation of the war.    

From the two examples above, it emerges that the saboteurs were obliged to act in order to avoid that Germany and Austria, in the first case, and Japan, in the second case, had access to intact oil resources. It was only a matter of time, but it was sure that in both cases the oil resources would have been conquered by the enemy forces. The saboteurs and the future owners of the resources were enemies fighting a world war. Instead, in the area of Kirkuk the two involved parties, the K.R.G. and Iraq, should absolutely be on the same side. Trust is what is missing between Erbil and Baghdad. It is difficult to imagine a positive cooperation between Erbil and Baghdad if these two sides are not able to collaborate in order to fight ISIS, which is today's common enemy. And indeed, some of ISIS recent victories are linked to the current lack of organization between the K.R.G. and the federal government. During World War II at least until the Yalta Conference in February 1944 — when it was clear that the Allies would win the war and it was only a matter of time — the U.S., the U.K. and the Soviet Union had been able to wage the war in a unified manner. In Iraq a similar commonality of intents has not been reached yet.



      

Iraqi Kurdistan's Occupation of Kirkuk Oil Field Will Deeply Affect the Iraqi Oil Sector

 June 30, 2014

BEIRUT, Lebanon — Iraq is in complete turmoil under the current insurgency of the fighters from the Islamic State of Iraq and the Levant (ISIS). In late 2013 violence sparked in al-Anbar Governorate, which is the largest Iraqi governorate and encompasses much of the country's western territory along the border with Syria. From al-Anbar Governorate, ISIS and some other local groups (Naqshbandis, Sunni tribes and ex-Ba'athists) during the last three weeks have occupied the city of Mosul (June 10), which is Iraq's second largest, and other large parts of central Iraq.

On June 12, Peshmerga troops, the troops of the Kurdistan Regional Government (the K.R.G.), occupied the disputed city of Kirkuk, which straddles between the Arab and Kurdish parts of Iraq, and which is home to one of the most important oil field of northern Iraq. In practice, the K.R.G. troops have been able to block a potential northern advance of ISIS. At the time of this writing, ISIS and the Iraqi Army are fighting each other approximately 50 miles north of Baghdad and, after a couple of weeks when the Iraqi Army has been forced to give ground, it seems that now that the army is able to launch a counteroffensive.

It is very difficult to imagine whether Iraq will continue to exist as a single state or there will be three new independent states emerging from the current turmoil (for instance: the K.R.G. in the north, a Sunni state in central and western Iraq and a Shia state in southeastern Iraq including Baghdad). But if, on the one hand, it is problematic to have an idea about the future borders and the future institutional framework of Iraq, which could also continue to exist under the present frontiers, on the other hand, it is quite possible that the current insurgency may produce momentous consequences for Kirkuk Governorate and Kirkuk oil field.

Who Should Control Kirkuk? 

ISIS attack against the Iraqi government and the Iraqi Army could start a process that could permit the K.R.G. to exit from the current stalemate with reference to the three governorates it has been disputing with Baghdad during the last years. In fact, with the arrival of the U.S. Army in 2003, the Kurds started to move south regaining part of that land that intrinsically they consider of theirs. The three governorates, which are Nineveh, Kirkuk and Diyala, are all split into two parts: one controlled by Erbil and one by Baghdad. Of these three governorates the most important is Kirkuk because of the presence of the giant Kirkuk oil field. Last year, British Petroleum (BP) showed a certain interest for this oil field.

Both the K.R.G. and Iraq would like to have full control of the three governorates, but for the moment, there has been no envisaged solution. As a consequence of ISIS threat, Erbil has sent its Peshmerga troops to occupy Kirkuk. This a very important step in light of a possible – although for the moment not easy, given Iraqi prime minister, Nuri Kamal al-Maliki's previous declarations accusing both Sunnis and Kurds of mining the foundations of Iraq – collaboration between Erbil and Baghdad in fighting ISIS insurgents. In other words, in the future, it is quite plausible that Erbil will use its Kirkuk occupation as a bargaining chip in its relations with Baghdad.

In consideration of Kirkuk's northern position, it could make sense from an economic point of view to have this city and its governorate linked to the K.R.G., but the city owns a mixed population, which has experienced dramatic demographic changes during the last hundred years. Kirkuk is claimed at the same time by Kurds, Turkmen and Arabs — and all, to a certain extent, buttress their claims according to different historical accounts. In an attempt to "Arabize" the area of Kirkuk in the 1970s, the regime of President Saddam Hussein forced over 250,000 Kurdish residents to relinquish their homes to Arab people. No one knows today the city's current ethnic breakdown. The most reliable census dates back to 1957 when the city was 40 percent Iraqi-Turkmen, 35 percent Kurdish and less than 25 percent Arab. But after several forced deportations, the Arab percentage should be higher while the Kurdish percentage should be lower, but data are not clear at all. The Constitution of 2005 (Article 140, Second) had required that a census and a referendum be held before December 31, 2007, but they were never held. At this regard, after the arrival of the Peshmerga troops, some within the Arab and Turkmen populations immediately raised concerns at the prospect of the presence of only Peshmerga forces in the area — Arabs and Turkmen would prefer a mixed force. (For more information see: BACCI, A., The Kurdistan Regional Government's O&G Riches Play a Significant Role in the K.R.G.—Iraq Fault Line Conflict, Jan. 2014)   

Kirkuk Oil Field

Kurdish occupation of Kirkuk is very relevant from an economic point of view because it brings under the tutelage of Iraqi Kurdistan the giant Kirkuk oil field, which as of 1998 owned around 10 billion barrels of oil. As recently as last September, BP signed a letter of intent with the Iraqi government with reference to consulting services in order to revive Kirkuk oil field.  BP's consulting services were related to two main goals:

A) Stopping the decline of the field. Kirkuk field produces around 280,000 barrels per day (bbl/d) while in 2001 the production was approximately 900,000 bbl/d. The production has slumped by 70 percent and Baghdad wanted to increase it to 600,000 bbl/d in a five-year time frame. 

B) Obtaining a clear assessment of the field's potential. Some engineers believe that bad reservoir management — like injecting water and dumping unwanted crude and chemicals into the field — since Saddam Hussein's years, could have seriously, if not permanently, damaged the field. In specific, as a consequence of fuel oil reinjection, a big problem is oil viscosity, which complicates extraction and of course increases the costs.

The letter of intent between the Iraqi government and BP was quite rational. In order to revive the Kirkuk oil field, Baghdad wanted to utilize a company that was already working in Iraq proper and not in Iraqi Kurdistan; in specific BP has under contract the development of the super-giant Rumaila oil field, which is in southern Iraq. (For more information see: BACCI, A., BP Continues Investing in Iraq. With T.S.C.s the Devil Is Always in the Detail(s), Oct. 2013)     

The Impossibility of Using the I.T.P. and the Construction of a New Infrastructure between Kirkuk and the K.R.G.

Apart from the activity of reviving the Kirkuk oil field, another relevant problem lies in relation to the field's exports lanes. In fact, its oil has to be exported through the Kirkuk-Ceyhan Pipeline (a.k.a. Iraq-Turkey Pipeline (I.T.P.); capacity of 600,000 bbl/d), which has not been working since last March as a result of the attacks of the insurgents. Also repair teams sent out to fix the damaged pipeline have been the target of attacks. Sources report that only during 2013 the pipeline had been attacked 50 times. Current estimates speak of a period of 6 to 12 months to repair the Kirkuk-Ceyhan Pipeline, of course provided that the area is secured. For this reason, the three domes at Kirkuk and the other adjacent fields are in the process of being linked to the K.R.G. export infrastructure (300,000 bbl/d) at the Khurmala dome, bypassing the territory controlled by the insurgents. As the K.R.G. natural resources minister, Ashti Hawrami has recently affirmed:

We agreed with the North Oil Company [Iraqi Ministry of Oil] and Baghdad to link the three domes at Kirkuk and other adjacent fields to our export pipeline about three months ago, and the construction of the pipeline is already completed. It needs to be tested and commissioned, but it should not take much time.    

The Kurdish export pipeline has a capacity of 300,000 bbl/d, but it could be expanded with some improvements and additional pumping stations. Presently, the  K.R.G. oil exports range between 100,000 and 125,000 bbl/d and at this time the regional government is planning to double them to around 250,000 bbl/d in approximately a month and then to reach 400,000 bbl/d by the end of 2014.    

Iraqi Kurds Pipe Oil to Turkey — Map by Lindsey Burrows
The American Interest (Dec. 2013)

Will ISIS Control Central and Western Iraq?

Already three months ago, it was quite evident that Kirkuk's oil could no longer be exported through the I.T.P. If the Peshmerga forces had not occupied Kirkuk, Kirkuk's oil would probably now serve only the basic needs of ISIS. In fact, it is not clear whether the Iraqi forces will be capable in the next months to pacify Iraq or there will be a fragmentation of Iraq in three states. (For more information see: BACCI, A., Will Oil in the End Divide Iraq? March, 2013). The vast expanse of territory under ISIS control could of course be recaptured by the Iraqi Army, which has more powerful combat means than those of ISIS, especially if Baghdad receives a consistent Iranian and Russian assistance (as well as from the U.S. from next fall according to recent declarations). But, in general, an outcome that it is impossible to rule out by now is a continued and protracted instability within Iraq. Sunni discontent against the Shiite-oriented central government is widespread. A simple consideration stands out: If ISIS had not have received support from other non-fundamentalist components of Sunni society, it would not have been able to win so many cities in central Iraq. All this said, in addition to the gap related to the combat means, it is evident that it will not be easy for ISIS to enter Baghdad and southern Iraq for at least two other "societal" reasons:

A) Demographics. Sunnis are only about 25 percent of the Iraqi population. They are a majority only in some specific areas of the west and the north. Their presence in Baghdad is minuscule with around 12 percent of the city's population.

B) The temporary alliance that brought forward the insurgence. The huge discontent toward Mr. al-Maliki created a commonality of interests between ISIS and other components of Iraq's Sunni galaxy, like for instance Naqshbandis, Sunni tribes and ex-Ba'athists. But this commonality will be only temporary, because the other Sunni components do not wish to restore a medieval-style state under puritanical Islamic laws.   

In view of these two societal points and the gap related to the combat means, ISIS could draw back from the current positions and locate itself in western and central Iraq, mainly in al-Anbar Governorate. From there it could carry out terrorist actions with reference both to the deserts of eastern Syria and western Iraq — there is an uncontrolled frontier between the two countries. Central and western Iraq do not present, at the time being, an "immediate" interest for the energy business. In fact, while it is true that geologists have always known that there are oil formations in Anbar Governorate, these lands have never been explored thoroughly (only some exploratory wells). Only in the last ten years some more specific data, which confirmed the positive expectations, have been added, but the government has always had different priorities linked to both political and economic factors. Now, it would be difficult for ISIS to develop oil and gas resources in al-Anbar Governorate and the other areas under its control. In fact, ISIS does not have the required technology and it may be ruled out the possibility that international oil companies (I.O.C.s) decide to do business with a terrorist group. For an IOC one thing is to deal with a corrupt and/or authoritarian government, other thing is to deal with a terrorist organization. As a further proof of these difficulties, immediately after ISIS incursion, Korea's state-run Kogas delayed the development of a relevant gas field in western al-Anbar Governorate along the border with Syria.   

What Does ISIS Presence in Central and Western Iraq Mean with Reference to Oil Transportation Across Iraq?   

The real problem that ISIS occupation of central and western Iraq will create to the current Iraqi oil business, which is mainly centered on northern Iraq (Kurdish area) and southern Iraq (Shiite area), is in relation to land transportation of oil through Iraq. This problem will affect oil transportation from the Kirkuk oil field and from the southern oil fields to Kirkuk (of course, from southern Iraq oil may also be shipped through the Persian Gulf — actually, this has always been Iraq's preferred export lane). Currently, of the three Iraqi export pipelines, none is able to transport oil. See the slide below for additional information. 

In addition to this, the Strategic Pipeline, which theoretically could be used to transport oil from Iraq's southern fields to Kirkuk (from where oil may enter the I.T.P.), is working on reduced scale and would need several years of rehabilitation.

In other words, had not been for the intervention of the Peshmerga troops, Kirkuk would now have been under ISIS control. Instead, putting aside the legality of Peshmerga troops' occupation, the Kirkuk oil field has now been brought under the sphere of influence of the K.R.G., which is the most stable area in Iraq. (For more information see: BACCI, A., Chevron and Total Continue Investing in the K.R.G. A Brief Analysis of Baghdad's T.S.C.s vs. Erbil's P.S.C.s, June 2013) Moreover, eventually through the newly built pipeline, which will run between Kirkuk and the K.R.G., Kirkuk's oil will have an export channel through a territory secured from insurgents' attacks. The alternative to the K.R.G. occupation would have been to have under ISIS control another important city in addition to Mosul, which has relevant oil fields as well. Instead, the problem of the transportation of Iraq's southern oil to Kirkuk still persists because central Iraq is under the attack of the insurgents.  

   

The K.R.G. Occupation of Kirkuk May Not Be Acceptable on a Legal Basis, but It Is Important from an Economic Point of View 

It is difficult to strike a balance between what is legal and what is illegal. When we think of Iraq we have to understand that there is an ongoing terrorist insurgence, which de facto is controlling a large chunk of Iraqi territory, approximately the size of Indiana. At the same time, Iraq has been witnessing in the last years an ever increasing ethnic tension between the different components of Iraqi society. And the government has not been the government of all Iraqis.

One of the simplest definitions of "law" is a system of rules that are enforced through social institutions. It goes by itself that a terrorist insurgence is absolutely against law. But in Iraq, also the confrontation between Erbil and Baghdad concerning the possibility for the K.R.G. to sign, without prior government authorization, production sharing contracts (P.S.C.s) with I.O.C.s in relation to new Kurdish oil fields and then to export the oil through a newly built oil pipeline to the border with Turkey from where oil enter the Kirkuk-Ceyhan Pipeline, is completely beyond a normal legal dispute.      

In fact, both Erbil and Baghdad have a different legal basis to support their positions. On the one hand, the K.R.G. affirms that Article 112 and Article 115 of the Constitution give regions and the governorates the authority to develop new oil and gas fields, i.e., fields that were not under exploration or development when the Constitution was enacted in 2005. On the other hand, the authority of Baghdad to control oil exports could be rightly based on Article 5 of the Organization of the Oil Ministry Law No. 101 of 1976. This law granted to the Oil Ministry the exclusive right to manage the Iraqi oil sector. In addition to this law, still in 1976, Order No. 1075 of the Iraqi Revolutionary Command Council gave the right to supervise and carry out marketing with the related activities to the vice president and Iraq's State Oil Marketing Organization (SOMO). Without any doubt, it's difficult to support completely the validity of a law and an order of almost forty years ago, especially in a country like Iraq that in the last forty years has undergone a long series of nefarious events like the Iran-Iraq War, the Gulf War, the repressions against Shiites and Kurds, the Iraq War and the current ISIS insurgency.    

Moreover, the plain description of the relations between Erbil and Baghdad since last January may help understand why any legal considerations could be based on shaky assumptions. Only a few months ago, before the attacks that put out of service the I.T.P., it would have been impossible to think about the construction of an oil infrastructure from Kirkuk to the K.R.G. in order to export Iraq's oil. In fact, upon completion of the K.R.G. pipeline to the border with Turkey, last January Erbil started to ship oil to Ceyhan where this was stored in 12 tanks (about 2.3 million barrels of oil are stored in these tanks). Immediately after, Baghdad responded threatening to sue the companies that were lifting oil via the K.R.G. pipeline and initiated legal action against Turkey, taking the case to the International Chamber of Commerce (ICC) in Paris. Besides, according to law, the K.R.G. should receive a 17 percent allocation of the Iraqi federal budget, which is primarily funded by revenues from oil and gas exports. But, Baghdad has since January cut off the Iraqi Kurdistan’s allocation of this year’s Iraqi budget — around 17 billion dollars — as well as froze or delayed the payment of all public sector wages in Iraqi Kurdistan. Only on May 22, the first tanker loaded  with Kurdish oil (1 million barrels) left Ceyhan. Since then two more tankers have already left the harbor and a fourth is being loaded in these days, but because of possible legal actions against buyers only the second tanker delivered its oil around one week ago to the Israeli port of Ashkelon.

In addition to protecting Iraqi Kurdistan from ISIS insurgence, the occupation of Kirkuk makes perfect sense for Erbil also from a business point of view. In fact, an important oil field is now in the hands of the more stable region within Iraq. The risk was that this field ended up under the control of ISIS, a terrorist organization. Surely, I.O.C.s prefer to have Kirkuk under Erbil's tutelage than ISIS'. Many times business actors understand current events faster than politicians, or maybe business actors are free to act according just to pros and cons while politicians are not. Iraqi Kurdistan offers more security and a safer business environment (for instance: a modern and open investment law and a progressive hydrocarbons law for the Kurdistan Region) than those available currently in Iraq and for this reason, in the last three years, U.S. ExxonMobil and Chevron, and France's Total have decided to invest in the K.R.G.