Iran and the Kurdistan Regional Government in Iraq (KRG) have agreed on the technical details of a plan to build a pipeline that could transfer 250,000 barrels a day of Kurdish oil to Iran, but signing off the deal has yet to happen, according to Kurdish officials.
“We [the KRG and Iran] have an understanding on how to do this [exporting KRG oil and gas to Iran]. The technical aspects have been talked about and are clear to both sides. What remains is the political and commercial side of it,” Taha Zangana, the KRG’s deputy minister of natural resources, who led the talks from the KRG side, said.
Zangana added that a high-level Kurdish delegation is expected to visit Tehran – after the Muslim holy month of Ramadan – to finalise and sign the deal. He, however, declined to say whether or not a specific date had been set.
If a formal deal eventually emerges, observers say, it could have long-term geopolitical ramifications by possibly bringing Tehran and the KRG closer together.
New oil pipelines
Since 2014, discussions about building a pipeline between Iran and the Kurdish region had been continuing between senior Kurdish and Iranian officials. However, serious talks kicked off in March this year, according to Kurdish official sources.
If finalised, the energy export scheme will include both oil and natural gas since – according to KRG data – Iraqi Kurdistan is believed to have some of the world’s largest gas reserves amounting to as much as 5.6 trillion cubic metres.
The KRG already exports around half a million barrels of oil a day to world markets through its sole pipeline that ends in the Turkish port of Ceyhan, on the Mediterranean. “It’s important for us to have an alternative route for exporting oil by building [another] physical oil pipeline to transport Kurdistan oil to international market,” Zanagana said.
On April 4, Kurdish and Iranian officials reached an understanding on the technical aspects of the energy export project, but the KRG has yet to convey “its readiness” to its Iranian counterparts regarding a date to sign the deal, Nazim Dabagh, the KRG’s permanent representative to Tehran said.
Dabagh said some disagreements still persist as to the price and volume of the KRG oil delivered to Iran, however, the agreement so far is to pump a maximum of 250,000 barrels a day.
Iraq’s government approval
Another possible challenge to signing a final deal is whether Iraq’s federal government would support such a plan.The government in Baghdad has cut off the KRG’s share of the Iraqi national budget since early 2014 after the Kurds exported oil directly via neighbouring Turkey.
“There is no agreement between Baghdad and Tehran over this issue [exporting KRG oil to Iran],” said a high-ranking official within the Iraqi National Alliance (INA) parliamentary bloc, who spoke on condition of anonymity due to the sensitivity of the subject.
The source, however, added that Iranian officials had briefed the Iraqi authorities about such a scheme as early as 2014 and that Baghdad has not made official objections to the matter.
The INA is the major Shia parliamentary bloc and many of its members are viewed as supportive of Prime Minister Haider al-Abadi. Zangana of the KRG says that although official approval from Iraqi authorities has yet to come, they have privately “expressed their happiness over it”.
However, an Iranian diplomat in the Kurdish capital, Erbil, said that his country will not sign an energy export deal with the KRG without Baghdad’s approval.
“Within the framework of the larger package of disputes between Erbil and Baghdad, if these issues are settled, then this [KRG-Iran energy deal] will be resolved too,” said Mohsen Bavafa, Iran’s deputy general consul in Erbil.
According to the current understanding between Iranian and Kurdish officials, the KRG will export oil to refineries near the Iraqi border such as the western province of Kermanshah or northwestern province of Tabriz and possibly Arak as well as Tehran, two KRG officials said.
In return, the KRG will receive crude oil from the Iranian ports in the Gulf to sell it in international markets.