Oil diplomacy

Baghdad Snubs Biden over Oil 'Diplomacy'

Oil Price,

24 June, 2012

That Washington was willing to set Vice-President Joe Biden up to be snubbed by Baghdad demonstrates how serious the north-south war over Iraqi oil and gas is and how the country is being carved up into the Iranian-controlled south and the Western- and Turkish-controlled north.

Absorbing diplomatic snubs is perhaps largely what US vice-presidents are for, but nonetheless there is much to be read into this.

The White House will attempt to downplay the snub, but sources from the office of Iraqi Prime Minister Nouri al-Maliki told reporters on Tuesday (19 June) that they had cancelled Biden’s visit, which was to take place in the coming days, as Baghdad was not “ready” for him.

Biden was purportedly Iraq-bound largely to diffuse tensions between some aggressive big oil deals that have culminated in a game-changing standoff between the central authority in Baghdad and the Kurdish Regional Government (KRG) in Erbil, in northern Iraq.

Maliki has seen how this power struggle is playing out, and views Biden as the KRG’s henchman at this point. It did not help that Biden was scheduled to visit Erbil and meet with KRG head Massoud Barzani as well.

Parroting concerns structured by Iran, Maliki is accusing the US’ Arab partners, Saudi Arabia and Qatar, of scheming to topple the central authority in Baghdad, in a “Syria-like” plot. "Qatar and Saudi Arabia which are meddling to topple the Syrian government are now doing the same meddling to topple the Iraqi regime. Their goal is overthrowing the Iraqi ruling system and not overthrowing me," Maliki said in an interview with Lebanese-based al-Mayadeen satellite network, carried by Iranian state-run media.

While oil and gas are the underlying causes of the Biden snubbing, the standoff between the KRG’s Barzani and Baghdad has been broiling for months and involves a number of simultaneous political crises, not the least of which is the KRG’s refusal to hand over fugitive Iraqi vice-president Tariq al-Hashemi to Baghdad to stand trial for heading death squads that targeted Shi’ites. In December 2011, Hashemi fled Baghdad to seek shelter in northern Iraq. This situation is causing very serious sectarian tensions in Iraq and combined with other political crises of a sectarian nature, could help bring down the government. At the same time, Barzani is attempting to weaken the government by withdrawing support from Maliki and aligning himself with the Iraqi List and the Sadrists.

The US has spent over $1 trillion on the war in Iraq essentially to lay the foundation for Iran to wield the majority of influence over the central authority in Baghdad. Left to Washington is largely Turkish-influenced northern Iraq and a growing alliance with the KRG. This chunk of Iraq is still a gem, especially for international oil giants and Western gas pipeline ambitions that bypass Russia.

At the heart of Maliki’s ire is a sizable oil exploration deal the KRG unilaterally signed with ExxonMobil, cutting out the middle man (Baghdad). An issue extensively covered by Oilprice.com, ExxonMobil signed a deal in October last year for six exploration blocks, two of which lie outside the KRG’s region and infringe on “Baghdad’s territory”. Regardless, Baghdad says all oil deals must go through the central government and hence views the ExxonMobil deal as illegal. Baghdad’s response has been unequivocal: The US oil giant must choose between the KRG and Baghdad, but if it chooses the former there will be no more deals with Iraq’s central authority.

A key aspect in this power struggle is Ninevah, whose governor has recently indicated that he might come out in support of the KRG on the deal, despite the fact that Ninevah is in the south.

Last week, Maliki sent a letter to Barack Obama requesting that Washington intervene on behalf of Baghdad and thwart the KRG-ExxonMobil deal. Washington, of course, has not been forthcoming, hence the snubbing of Biden. Washington will not intervene. The ExxonMobil deal is part and parcel of the new geopolitical fault line running through Iraq.

The KRG is now doing everything in its power to convince ExxonMobil and other international oil giants that they’ve made the right choice and that while they might lose Baghdad, Erbil has more to offer in terms of pricing, profits, security and business atmosphere. This is behind the media flurry of stories about oil discoveries and increased output predictions in northern Iraq.

By. Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.