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Iraq's northern Kurdish region stops oil exports

  • Article by: SINAN SALAHEDDIN
  • Associated Press
  • December 25, 2012 - 7:59 AM

BAGHDAD - An Iraqi Kurdish official said on Tuesday that the country's self-ruled northern Kurdish region has suspended oil exports over a payment row with Baghdad, a development that could add to already souring relations between the Kurds and the Arab-led central government.

Since the 2003 U.S.-led invasion, the Kurds have unilaterally struck more than 50 deals with foreign oil companies, even though Baghdad says they have no right to do so. In 2011, the two sides reached a tentative deal by which the Kurds send the oil to Baghdad, which sells it, and pays 50 percent of the revenues to the developers to reimburse the development costs.

In April, the Kurds halted exports of around 100,000 barrels a day, saying that Baghdad had made only two payments under the agreement and had failed to pay $1.5 billion they say they were owed.

Four months later, the Kurds agreed to restart exports as a goodwill gesture. That allowed the two sides to reach a new agreement under which Baghdad would pay 1 trillion Iraqi dinars (about $848 million) to the companies in September.

However, Ali Hussein Balo, the advisor of the Kurdish Ministry of Natural Resources, said Baghdad sent only 650 billion Iraqi dinars (about $550 million) and withheld the rest. That prompted the Kurds' latest move.

"The region has found itself forced to halt the oil exports as Baghdad didn't fulfill a commitment it made in the September agreement in regard to payment," Balo told The Associated Press over the phone from the self-ruled region's capital, Irbil.

He said the Kurdish region of Iraq was exporting around 180,000 barrels a day before recently starting to decrease the shipments. He didn't say when exactly exports were halted but said it was in the past few days.

Faisal Abdullah, the spokesman for Iraq's deputy prime minister for energy affairs, confirmed that the full amount wasn't paid. He said the payments were suspended because the Kurds were pumping less than the 200,000 barrels a day they had pledged. He wouldn't give more details.

The latest move could dash Iraq's hopes to pump 3.7 million barrels a day and to export 2.9 million barrels a day next year. Daily production last month averaged around 3.2 million barrels and daily exports averaged 2.62 million.

Iraq sits atop the world's fourth largest proven reserves of conventional crude, about 143.1 billion barrels, and oil revenues make up 95 percent of its budget.

In addition to the dispute over development oil resources, the Kurds and the central government in Baghdad have been in a long-running dispute over lands claimed by the Kurds and power-sharing. Along with Sunni Arabs, the Kurds accuse the country's Shiite Prime Minister Nouri al-Maliki of consolidating power in his hands and marginalizing political opponents.

Separately, Iraq and neighboring Jordan have agreed to speed efforts to build a pipeline to export Iraqi oil through the Jordanian Red Sea port of Aqaba, according to Jordan's Petra news agency.

The deal calls for an oil pipeline that would have a capacity to export one million barrels a day, according to the news agency and al-Maliki's office. The two sides signed an economic cooperation agreement that includes the pipeline project during a brief visit by al-Maliki to Jordan on Monday.

They also agreed to boost the capacity of a natural gas pipeline to supply Jordan with additional Iraqi gas. In addition, Iraq said it could raise the amount of crude oil it exports for Jordanian domestic use, and will double to 60,000 tons the amount of heavy fuel it exports to Jordan monthly, according to Petra.

Violent demonstrations broke out in Jordan last month after the government removed subsidies to offset $5 billion in losses from a rising fuel bill. Heating and cooking gas prices have jumped sharply since. To help, al-Maliki's Shiite-led government last month announced a one-time gift of 100,000 barrels of oil to Sunni Muslim Jordan.

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Associated Press writer Adam Schreck contributed to this report.

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