Report

Iraq's Oil War

By lashing out at Turkey and Kurdistan, Baghdad could make a tense situation worse.

A long-simmering controversy over control of Iraq's massive oil reserves flared into the open Friday as one of the country's most powerful ministers threatened to take legal action against Iraqi Kurdistan, Turkey and any foreign companies that helped the Kurds export oil without permission from Baghdad.

Iraqi Oil Minister Abdul Kareem Luaibi told reporters that Baghdad considered the Kurds to be trying to sell "smuggled" Iraqi oil and would sue both the Kurdish and Turkish governments if any planned export deals moved forward. Luaibi also threatened to blacklist Turkish companies from doing business in Iraq if they helped the Kurds move the oil out of their semi-autonomous region in northern Iraq.

"If Turkey allows the export of oil from the region, it is meddling in the division of Iraq, and this is a red line," Luaibi told reporters in Baghdad.

The harsh words from Luaibi come as the security environment in Iraq deteriorates, raising questions about the country's ability to meet its own long-term oil-production goals just as the relatively peaceful north looks more appealing to foreign companies by comparison.

His threats also highlight Baghdad's growing unease about the Kurds' ability to finally export oil through their own pipeline to Turkey, cutting the Iraqi central government out of the loop. That could allow Kurdistan to export as much as 400,000 barrels a day of oil to Turkey, rather than relying on smaller amounts of oil shipped across the border by truck.

Officials at oil companies operating in Kurdistan said the new pipeline is a "game changer" because it will allow larger volumes of crude to leave the country, and will make that crude more valuable by easing part of the price discount that truck-borne crude carries.

On January 14, Genel Energy PLC, an Anglo-Turkish oil and gas firm which is the biggest independent operator in Kurdistan, said it expects the pipeline exports to be up to speed by the second quarter of the year, fueled by two big oil fields Genel operates in northern Kurdistan.

"The energy agreement between the Kurdish Regional Government and Turkey and the completion of the KRI independent pipeline infrastructure has paved the way for steadily rising oil export volumes from Taq Taq and Tawke over the course of 2014," Genel chief executive Tony Hayward said in a statement.

Genel also signed a gas-export deal with Turkey that could eventually move large volumes of Kurdish gas north to its gas-hungry neighbor.

The new oil fight capped an acrimonious week. Kurdish politicians earlier protested Baghdad's draft budget, which would essentially cut the northern region off from billions of dollars in oil-revenue that the central government distributes. Under the constitution, Kurdistan receives about 17% of federal revenues, though in practice that is closer to 12%. The draft budget would have effectively trimmed Kurdish receipts even more.

Some observers see the threats, from the budget dispute to lawsuits, as nothing more than political skirmishing ahead of April elections. But the completion of the Kurdish pipeline, which should be operational by the end of the month, appears to have pushed the oil dispute over the tipping point - and has embroiled Turkey in the spat as well.

"The breach is real," said Steven Cook, a Middle East expert at the Council on Foreign Relations. He said that growing distrust between Ankara and the government of Iraqi Prime Minister Nouri al-Maliki has reinforced Turkey's decision to seek energy resources from Kurdistan.

The Turkish and Iraqi embassies in Washington did not respond to requests for comment by late Friday afternoon. Neither did the U.S. office of the Kurdistan Regional Government or the State Department.

For years, Iraq has been trying to finalize a national hydrocarbons law that would determine once and for all how to share oil revenues across the different regions and clarify legal issues regarding ownership and exports of natural resources. Baghdad says that under the constitution, the Iraqi central government has the sole right to export oil and distribute revenues. Kurds believe that under the constitution, they have the right to develop their natural resources, too.

As a result, the Kurds have for years been signing attractive contracts with foreign oil companies in the hope that, by tapping their underground riches, they can jumpstart economic development in their semi-state - and, they say, in the rest of the country.

Baghdad's push back against Kurdistan's energy-development plans date back years, and has included threats against foreign companies doing business with the regional government. The Kurds offer a different kind of oil contract, which gives foreign firms an equity stake in the resources, rather than paying a flat fee for each barrel produced. But the lingering uncertainty over the constitutionality of oil deals with the Kurdistan government has also slowed development of the region's oil and gas resources.

ExxonMobil, for instance, had a big stake in a massive oil field in southern Iraq, and was threatened by Baghdad when it inked deals for oil exploration in Kurdistan. Exxon continued in Kurdistan anyway. Chevron, Total, and a host of smaller oil companies have also poured into Kurdistan due to the better security environment, more appealing contracts, and potentially lucrative underground resources.

At the same time, some foreign oil majors, such as BP PLC, have preferred the security of stable, long-term oil contracts in the oil-rich southern part of Iraq, which involve less capital expenditure and a quicker payoff than looking for oil in the north.

Baghdad's latest counter-offensive, including threats of legal action against Turkey and threats to abrogate contracts with Turkish firms inside Iraq, could well backfire, said CFR's Cook.

"Threatening the Turks - especially (prime minister Recip Tayyip) Erdogan - usually produces the opposite of the desired result.  I'd say that Erdogan was wavering, but now that Maliki is going after Turkey, we might very well see Ankara move forward," he said. 

Emrah Yorulmaz - Anadolu Agency - Getty

National Security

NSA Surveillance Will Change. Just Not Very Much.

Seeking a middle ground on surveillance, Obama pleases few.

In an expansive speech on Friday that covered the history of American surveillance from the ride of Paul Revere to the leaks of Edward Snowden, President Barack Obama sought to assure critics and supporters of the National Security Agency that he'd heard their concerns and would make historic changes to way America spies. But at a fundamental level, Obama showed that he's unwilling to dismantle or significantly curtail an apparatus of global surveillance that, he insisted, keeps Americans safe from terrorists, weapons proliferators, spies, and emerging threats in cyberspace.

Notably, the president's speech on Friday was the most spirited defense of the NSA he has offered since the first classified documents exposing its operations appeared in the press last June. "Laboring in obscurity, often unable to discuss their work even with family and friends, they know that if another 9/11 or massive cyber-attack occurs, they will be asked, by Congress and the media, why they failed to connect the dots," Obama said. "What sustains those who work at NSA through all these pressures is the knowledge that their professionalism and dedication play a central role in the defense of our nation."

In proposing a way to move past the scandals of the past seven months, Obama tried to thread a tricky needle. With regards to the collection of Americans' phone records, by far the most controversial of the programs Snowden revealed, Obama said the NSA itself will no longer be allowed to retain the so-called metadata. But the agency will still be allowed to access the records, which will be stored with a yet-to-be-determined organization. The agency will have to get permission from a court every time it wants to search the records -- which, to be sure, was an outcome that intelligence officials wanted to avoid, and represents a defeat for the NSA. But that permission will come from the same court that has approved of the legality and constitutionality of the phone records program every six months for the past seven years.

In a similar vein, the president took the unprecedented step of extending the privacy protections afforded to Americans who have their personal information collected by the NSA to foreigners as well. From now on, U.S. intelligence agencies will have to follow the same safeguards when disseminating and storing foreigners' communications and using their names in reports as they do with American citizens. But those rules, spelled out in a new presidential policy directive, don't cover the collection and analysis of foreigners' personal information. And it's that practice that has so disturbed individuals, technology companies, and leaders around the world, who have criticized the NSA for casting a vast surveillance net that collects and analyze the data of millions of innocent people.

When it comes to monitoring foreign leaders, Obama reacted to outrage from U.S. allies that the NSA had monitored the private communications of heads of government around the world, including German chancellor Angela Merkel. From now on, they'll be off limits. But their aides won't be. In a briefing with reporters, a senior administration official said that the leaders of U.S. "friends and allies" would no longer be surveillance targets, arguably a fungible and subjective category.

The White House may have had no choice but to concede that spying on the leaders of Germany and other U.S. allies cannot continue. "2003 is generally seen as a lowpoint in German-American relations," Philipp Missfelder, the foreign policy spokesman for Merkel's Christian Democrats, told Reuters this week, referring to strained relations between Germany and the United States over the invasion of Iraq. "But if you look at the current situation the loss of trust is not smaller than it was then. Indeed it's probably bigger because this issue is preoccupying people longer and more intensively than the invasion of Iraq."

Reactions among privacy and civil liberties groups to the president's proposals -- which largely ignored the 43 recommendations of a group of advisers -- were mixed. Some saw a small victory in the relocation of phone data to a third-party, even though most advocates had called on the president to suspend the program entirely. Others were pleased to see the United States extend some privacy protections to foreigners, but regretted that the president didn't pare back the the scale of data collection.

Anthony Romero, the executive director of the American Civil Liberties Union, said Obama's speech "outlined several developments which we welcome," including the appointment of legal counsel to appear before secret proceedings of the Foreign Intelligence Surveillance Court and argue against the government's position on significant matters of law. "However, the president's decision not to end bulk collection and retention of all Americans' data remains highly troubling," Romero said. "The president outlined a process to study the issue further and appears open to alternatives. But the president should end -- not mend -- the government's collection and retention of all law-abiding Americans' data."

Sen. Richard Blumenthal, a Democrat from Connecticut and a leading backer of surveillance reforms, said Obama was "stronger on principle than prescription."

"The president's reform blueprint, while bold and courageous, is a first step -- leaving a lot of work to be done," he said in a statement.

Jan-Phillip Albrecht, a member of the European Parliament who has been pushing for stricter privacy rules on European personal data that's given to the Americans, called Obama's plan "not sufficient at all." Albrecht told the Guardian, "The collection of foreigners' data will go on. There is almost nothing here for the Europeans. I see no further limitations in scope. There is nothing here that leads to a change of the situation."

For the White House, the speech was a high-profile attempt to tamp down a controversy that has been raging at home and abroad for months. As he did when addressing the Snowden leaks in a press conference last August, Obama sought to make Americans comfortable with surveillance in an age of rapid technological change that always seems to outpace law and regulations. "My administration has spent countless hours considering how to approach intelligence in this era of diffuse threats and technological revolution," Obama said.

The president said that the national debate over surveillance, which Snowden ignited, had also led him to examine how the United States distinguishes itself from governments that use surveillance as a tool of oppression.

"It may seem sometimes that America is being held to a different standard, and the readiness of some to assume the worst motives by our government can be frustrating. No one expects China to have an open debate about their surveillance programs, or Russia to take the privacy concerns of citizens into account," he said. "But let us remember that we are held to a different standard precisely because we have been at the forefront in defending personal privacy and human dignity."

 

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