Russia’s biggest oil company, Rosneft, has agreed to take control of Iraqi Kurdistan’s main oil pipeline, boosting its investment in the autonomous region to $3.5bn despite Baghdad’s military action sparked by a Kurdish vote for independence.
The move appears to be part of a strategy by President Vladimir Putin to boost Moscow’s Middle Eastern political and economic influence, which was weakened by the collapse of the Soviet Union.
Rosneft’s investment comes amid a crisis in Kurdistan’s relations with the central government in Baghdad since the region held an independence referendum last month, which angered neighbours Iran and Turkey.
The United States called the referendum a provocation but Moscow has effectively supported the vote, saying it understood Kurdish aspirations for independence.
Rosneft said it would own 60% of the pipeline, with current operator KAR Group retaining 40%. Sources familiar with the deal said Rosneft’s investment in the project was expected to total about $1.8bn.
That comes on top of $1.2bn that the Russian firm, which has struggled to raise Western loans due to US sanctions, lent Kurdistan earlier this year to help fill holes in its budget.
Rosneft also agreed to invest another $400mn in five exploration blocks.
“I plead with you not to forget Kurdistan,” the region’s resources minister Ashti Hawrami told an industry conference in Verona, Italy, on Thursday, hours before signing the pipeline deal with Rosneft boss Igor Sechin, one of Putin’s top allies.
Sechin called on Baghdad and Erbil to settle their differences.
But with Rosneft effectively becoming a controlling stakeholder in Kurdish oil infrastructure, the move should help shield Erbil from pressure from Baghdad and its neighbours.
“The calculation here is that the presence of Rosneft and the Kremlin will boost the sense of security,” one industry source close to Erbil said. “Having fought and defeated Islamic State, Erbil felt abandoned and threatened by Iran.”
The most prominent Iranian figure in Iraq, Major General Qassem Soleimani, the commander of foreign operations for Iran’s elite Revolutionary Guards, is believed to have helped coordinate Iraq’s military operation in Kurdistan in recent days.
Kurdish oil exports face the worst disruption in months and are running at only a third of capacity, threatening repayments to Rosneft and other major creditors, including top trading houses such as Glencore and Vitol.
Kurdistan has borrowed around $4bn from Rosneft, traders and Turkey, guaranteed by future oil sales.
As exports have dropped to around 200,000 barrels per day (bpd) this week from usual volumes of 600,000 bpd, traders have become jittery about the billions of dollars at stake.
“We are monitoring the situation as there could be payment delays,” Glencore chief executive Ivan Glasenberg said on Thursday.
Exports were disrupted after the Iraqi military took over the oil-rich Kirkuk area from Kurdish Peshmerga forces this week, resulting in production disruptions from local fields.
Baghdad has also threatened to re-route a big chunk of oil flows towards an old oil pipeline, which has been out of operation for several years since Kurdistan built its own infrastructure to the Turkish Mediterranean port of Ceyhan.
Industry experts have said the plan was unrealistic as the pipeline was old and rusty and needed major investments.
Baghdad also asked oil major BP to return to Kirkuk and help it revive production there, signalling it was determined to deprive Erbil of a big chunk of revenues.
It also cut off air and banking ties to Erbil with the help of Turkey and Iran.
Rosneft will be investing in expanding Erbil’s independent pipeline, which Baghdad has targeted, hoping to boost its capacity by a third to 950,000 bpd.
That is the equivalent of about 1% of global supply.
A view of the oil and gas separation facility at the Baba Gurgur oil field in the Arafa district of Kirkuk, northern Iraq (file). Exports were disrupted after the Iraqi military took over the oil-rich Kirkuk area from Kurdish Peshmerga forces this week, resulting in production disruptions from local fields.
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
Gas fracking to start in England again next week after 7-year halt
India is said to keep buying Iranian oil despite US sanctions
India’s central bank leaves key lending rate unchanged
Unilever drops Dutch HQ move after British investors rebel
World Bank to help Pakistan textile mills conserve energy
China’s new bank loans seen rising in September
European stocks extend their downturn after US jobs data
Startup nation? Entrepreneurs still toil in Macron’s France
Tesla’s Musk mocks SEC as judge demands they justify fraud settlement