Session 2: Focus on the Kurdistan Region of Iraq: Connections, Opportunities, Issues
Director, European Centre for Energy and Resource Security (EUCERS)
His Excellency Ashti Hawrami,
Minister of Natural Resources, Kurdistan Region, Republic of Iraq
Tony Hayward, President and CEO, Genel Energy
Chairman of the Board of Directors, MOL Group
Deput Program Director, Middle East and North Africa Program, International Crisis Group (ICG)
The Honorable James Jeffrey,
Visiting Fellow, Washington Institute for Near East Policy, Former U.S., Ambassador to Republic of Iraq
Swissôtel, The Bosphorus
12:15 – 1:35 p.m.
Thursday, November 15, 2012
Federal News Service
FRIEDBERT PFLUGER: We would like to start our session today. I welcome all of you and ask you once more to – especially here in the first rows – to take your seat for our session two about the Kurdistan region of Iraq – "Connections, Opportunities and Issues." We have a great panel. Let me make a few remarks. We will get very brief statements at the beginning – five to 10 minutes. I will look for discipline concerning this so that we have enough time for a discussion later on.
And we have a great subject. I don’t know if you have seen the article in ICS (sic) Heren – just a few days ago, a promising gas future for the KRI. The same, of course, is true for the oil future. It is sad that there are 45 billion barrels, resources of oil, just in the Kurdistan region and 5 (trillion) to 6 trillion cubic meters of gas. So it’s a small part of the world but blessed with an enormous richness of hydrocarbons. And that points to a promising future for that region, which has suffered a lot in the past.
And if you go to Erbil or Dohuk or Sulaymaniyah today, you’ll see a lot of construction being – you see great growth, security, a promising degree of democracy. So you have the feeling it’s a positive development, as this article also points out.
But of course there are a lot of risks and problems as well. Well, there is, of course, the difficulties with a central government in Baghdad, the difficulties between Baghdad and Erbil, about the question how to share the oil revenues. There is no accepted hydrocarbon law yet. There’s the disputed area of Kirkuk. And there is the KRG’s unilateral decision to award production licenses to energy companies. And not only small ones but also huge ones like Exxon Mobil have made use of that.
And then there is, of course, the question how Turkey fits into that whole game. Turkey needs a lot of gas and oil, so Turkey has a clear interest to make use of these enormous resources. And Turkey has problems with – obviously with the Maliki government in Baghdad, so this has stirred up a lot of discussions about a closer relationship between Turkey and the Kurdistan region. And it has many-faceted and a lot of cooperation – a lot of Turkish companies, which are actively engaged in the Kurdish region.
So it’s a lot of chances but also a lot of problems, and we have a great panel to discuss it. I would like to introduce the first speaker of today’s panel, and that is Dr. Joost Hiltermann. Mr. Hiltermann wrote a great articles in last Foreign Affairs edition about the Kurdistan region, and he is with the International Crisis Group. He is director of the Middle East and North Africa Program of the International Crisis Group, which has issued a report in April this year with comprehensive policy recommendations to all the players. So I think Joost is most probably – they never issue who is the author – but he is most probably one of the authors if not the main author of that important study. So we give him the floor to give us an overview.
Joost, please, if you would like to start.
JOOST HILTERMANN: Well, thank you very much, Dr. Pfluger, and thank you to the Atlantic Council for inviting me and for arranging this fantastic event. I’m very honored to be here and to meet you all. Hello to all my old friends and colleagues who are here on the panel and in the audience.
Since we’re in Turkey, I will not focus on the Kurdish issue as such, as I did in the Foreign Affairs piece today, but I will focus in Turkey instead and its relations with Iraq, a country that I have studied really for the last two decades and have come to know very well.
As we speak, relations between Turkey and the government in Baghdad are deteriorating. Every day there is another development that shows that things are going backward not forward in that relationship.
Now, as I say that, at the same time, relations between the Turkish government and the Kurdish regional government (in ?) Iraq are continuing to improve at an amazing pace. When first conceived in 2007, I remember talking to Dr. Farad Hussein (sp) before it even started, and he was alerting me to the new development that was going to take place, and he was totally vindicated on this score. The – we – what Turkey has done is to unlock what is essentially a landlocked region in the world and open it up to economic development and to pursue the policy or strategy of a complete economic integration of the Kurdish region and Turkey.
So this has been a major, major development. Now, when originally conceived, at least from the Turkish perspective, this was meant to be a balanced policy, where Turkey would improve its relations with both the government in Baghdad, which was at the time emerging from a sectarian war, and the Kurdish regional government.
The Turkish – or Turkey’s interests in Iraq historically have been to (dampen ?) Iranian influence. That has been the number-one priority throughout, and I would argue it is – continues to be so today. It has been to also ensure that the Kurds in the region, in the larger region, remain divided, because Turkey, of course, has its own challenge – let’s put it that way. And for that reason, it has pursued the territorial integrity of Iraq both to (dampen ?) Iranian influence and to keep the Kurds of Iraq safely, from the Turkish perspective, ensconced in Iraq.
And another interest of Turkey, which has developed really after 2003 when opportunities were created, was to turn Iraq into a major source for oil and gas for the Turkish market and Turkey playing a transit route to markets (in the world ?).
Now, these objectives have been compatible, or were compatible for a period of time, but now they are no longer so, and they have become contradictory. And why is that? Well, from 2007 onward, because Turkey did not have a good relationship with Iraq from – between 2003 and 2007 – also, as I said, there was a sectarian war and there was a lot of instability, and it wasn’t really a good time to have strong relations with an Iraqi government, which was deeply internally divided, but from 2007 onward, Turkey pursued a policy in Iraq as being equidistant to all political actors.
And this lasted until 2009. And then in the run-up to the 2010 parliamentary elections in Iraq, Turkey switched and began supporting one side in these elections, and this was the secular Iraqi List headed by Iyad Allawi. That might have been a wise choice, but in hindsight it wasn’t, because even though that List won the majority of votes, in the end it was Mr. Maliki who returned as prime minister because he managed to gather enough seats in parliament to propel him back in that position. And so Turkey ended up being on the losing side of this particular political battle.
That, of course, did not go over well with Mr. Maliki, who has after that started to take revenge of sorts. It hasn’t affected trade between Turkey and Iraq, but there were a number of signs that Maliki was deeply displeased with Turkey after this. That was still one-sided. This became mutual over time.
The next big change was something that was under nobody’s control but was the eruption of the Arab Spring throughout the Middle East and North Africa and then especially the conflict in Syria, that the Arab Spring turned into a civil war, with Turkey – probably rightly – choosing the sides of the rebels, as a result of which it was seen from Shiite quarters as acting as a Sunni power. And I know Turkey did not mean to act as a Sunni power, but the perception is there all the same, and it is very difficult to dispel. So from that moment on, Iraq had another gripe – grievance against Turkey.
Then came the Hashimi affair at the end of 2011, when the Iraqi vice president was issued an arrest order. He managed to leave Baghdad at that time, and he has found shelter in Turkey. He has since been sentenced to death not once, not twice but three times. We have to doubt the Iraqi judicial process, but in any case, the fact that he was being sheltered in Turkey has rankled, of course, the powers that be in Iraq.
And finally, in this year, Turkey sided with an anti-Maliki coalition that was trying to unseat the prime minister through a parliamentary no-confidence vote earlier this year. And that effort has failed. It may be revived, or there may be other ways in which this battle is being fought, but that also was a net loss to Turkey. All of this meant a sharply deteriorating relationship between Iraq and Turkey, even as truly it has continued at an even keel.
Now, the – Turkey’s critique of Mr. Maliki is threefold. It is, one, that he is an autocratic leader; and two, that he is sectarian; and three, that he is an Iranian proxy. Well, on each of these three, there are issues to be made.
I think when it comes to being an autocratic leader, Turkey has a point. Mr. Maliki is clearly tending towards being an autocratic leader if he can get away with it. And so far, even though there are no real checks and balances in the Iraqi political system, there are still a lot of – (inaudible) – diversified political scene, a very pluralistic scene, and there is a strong opposition to Mr. Maliki, not enough to unseat him but very significant nonetheless. And so Mr. Maliki cannot have it his way, but if given the chance, he probably would take it.
On the sectarian front, there is no question that Mr. Maliki is sectarian, but I would argue that any leader in Iraq today, if he is not sectarian himself, he would not survive politically if he didn’t use sectarian rhetoric and sectarian policies, because majority support among the political class – not among the population but among the political class – remains deeply sectarian, unfortunately. And so Mr. Maliki – you can single him out, but that would be unfair to him in that sense. We would wish, though, for a better leaders, who would transcend these kinds of deep subnational divisions.
Is he an Iranian proxy? This – here I deeply disagree with those in the Turkish establishment who think so. I think Mr. Maliki has been balancing the various neighbors and United States, and he is far from an Iranian proxy. And to argue so is, I think, to make a fundamental error in analysis.
Regardless, it is OK to criticize the leader of a neighboring country. But I would question whether that should equate an effort to actually oust him as long as he is an elected leader and remains a democratically elected leader. Moreover, I argue that it is OK to give up on the leader of a neighboring country if you don’t get along with him. But do you have to give up on the country itself? Well, that’s a good question, and this is how I want to end.
The consequences of the current deteriorating relationship could be one, that the Iranians will win in Iraq and will extend influence, because Turkey until now has played an effective buffer against Iranian influence. And by withdrawing from Baghdad and the south, it basically leaves the door open to spreading Iranian influence.
It could lead to consequences in the oil and gas sector. Turkey, of course, has access to Kurdish oil and gas. That is great. Will it still have access in the future to oil and gas in the south? I mean, that would be a major loss since the major fields in Iraq are in the south.
And thirdly, could this eventually lead to the partitioning of Iraq? Could Turkish policy contribute to the breakup of Iraq by cutting a bilateral deal with the Kurdish regional government at the expense and by exclusion of the Baghdad – the government in Baghdad? And the way that would happen is by the construction of independent pipelines – which in the south is not a bad idea, I think – but then the subsequent decision to allow the Kurdish government to export oil and gas directly to Turkey without the approval of Baghdad. This is not what is happening today. It could happen tomorrow. Maybe that is a decision to make. The question – the question is – (inaudible) – consequences, could it be – could it lead to the breakup of Iraq?
Finally, this means that Turkey faces today a stark and a critical strategic choice, either – maybe as a result of these crises in Syria, the consequences of which we don’t yet know – either to redraw the map of this part of the Middle East and then live with the consequences, come what may – they are hard to predict, and it might be the right choice; I’m not saying it isn’t – or to try to make Iraq work, despite the enmity that exists between Mr. – the prime minister, Mr. Erdogan, and Mr. Maliki; and to try to bring some kind of reconciliation between Baghdad and Erbil and to help effect a new federal hydrocarbons law and a new arrangement in which the Kurdish rights in Iraq are fully protected.
Thank you very much.
MR. PFLUGER: Mr. Hernadi is a banker by education and is now the CEO of the largest independent gas and oil company in Central and Eastern Europe, MOL, from Hungary. And it is a company which is engaged in upstream, midstream and downstream business. And the mere fact that we have him, of course, raises the question of whether MOL wants to become active on a larger scale in Kurdistan. And I would be very curious to see your perspectives from Europe.
ZSOLT HERNADI: Thank you very much. It’s definitely not a common practice that a company from Central Europe is investing in Middle East and investing in sizable projects.
Our story with the Kurdistan region of Iraq started in 2005. And since that, we have acquired, and we have invested in significant blocks. We have invested in Akri Bijeel, which is 80 percent undiluted shares we have in the – (inaudible) – of that block. Then we have invested in Shaikan. We have 20 percent undiluted oil shares, non-operating; and in – (inaudible) – where we have 10 percent non-operating shares.
You can imagine that these are real sizable projects and are really – (inaudible) – investment already. And we are committed to invest even more. The reason is definitely, coming from a country, coming from a region, which 22 years ago had a totally different system, we have learned that in certain cases we need more patience, because the efforts are coming if the leaders are committed to make efforts.
Central Europe needs these kind of investments. This region is definitely one of the last regions in the world where there are such onshore opportunities like in the Kurdistan region of Iraq; not only opportunities we are talking about – which is in our business really a relevant issue – we are talking about an environment which is – (inaudible) – to the other chances – to the other challenges is definitely a – (inaudible) – and transparent environment.
So our committed approach to the Kurdistan region of Iraq means that in the next five years, one-sixth of our total CAPEX will be reinvested in this region, and we are committed to do that because we strongly believe that the – (inaudible) – here is very promising. The commitment from the leaders of the country is there. The transparency is already existing. And these are the most important factors.
Definitely Kurdistan region of Iraq wants to increase by 10 times the already existing production by the end of this decade. And we all know the hydrocarbon is there. We all know it is a target that we can achieve. We all know for that we have to invest a lot.
Probably the next time we need to invest far more in the midstream part of the business. We need to invest in that. And for this, we need a common understanding between the leaders of the entire region, not only Kurdistan – we are talking about the federal government, we are talking about Turkey, we are talking about the neighboring countries – because it’s not enough just to produce the hydrocarbon. We need to have an access to the market. And this needs stability and common understanding.
So we are committed. We have patience. We know that we need more and more well-trained local people. We have that. We have agreements to educate people in Hungary and the other Central European countries. We will do that, because we believe and we are committed in the future of the Kurdistan region of Iraq.
MR. PFLUGER: I think it’s very important and very welcome that there is not only U.S. and Turkish engagement in the Kurdistan region but also European interest, as has been shown very strongly by our next speaker already, Tony Hayward. He is the CEO of Genel Energy. Most of you will know that he was the group chief executive of BP from 2007 till 2010, having started his career in 1982 as a geologist in that company and having worked up all of his way to the very top.
In 2011, he founded Vallares, and then there was this merger, this Turkish-British merger. And Tony is with his company on the forefront in Kurdistan, doing upstream business. And we, of course, are very curious to hear from you what are the perspectives, your experiences from a practical point of view of the businessman who wants to make money and get out the oil that it produces.
TONY HAYWARD: Thank you – thank you very much, and a great introduction to what I wanted to talk about really, which is the business perspective in all of this and why is the Kurdistan region of Iraq such a focus of the oil and gas industry today. And of course it begins with the oil and gas potentially. It is arguably the last great onshore oil and gas province anywhere in the world to be fully explored. The United States Geological Survey estimate 45 billion barrels of oil and between 50 (trillion cubic feet) and 100 trillion cubic feet of gas to be discovered in this region. So there’s a lot of oil and gas.
But I would argue there’s a great deal more than that. It is about the secure and stable operating environment that’s been created in the Kurdistan region of Iraq. It’s about the rule of law and sanctity of contract that prevails. It is about the minimal government bureaucracy and an administration that has embraced wholeheartedly the private sector. And it’s about oil and gas contracts that are well-judged in the balance between risk and reward, having curried significant investment over the last five to seven years whilst at the same time retaining 90 percent or more of the value of that investment for the people of Iraq.
So the overall environment is very attractive from a private sector investment perspective. And the past five years have seen remarkable investment and exploration success delivered as a consequence of that. And based on that activity and the investment and the exploration success, the Kurdistan region of Iraq stands on the threshold of becoming a major contributor to global oil and gas supplies.
Their oil production capacity is around 200 (thousand), 250,000 barrels a day. It will rise to 500,000 barrels a day by 2014, probably a million barrels a day by 2015, with the potential of 2 million barrels a day by the end of the decade.
And in gas, the story is as exciting. Certainly before the end of the decade, there is the prospects of the Kurdistan region of Iraq providing 10 BCMA, 10 billion cubic meters a year, to the Turkish gas market. That is 20 percent of Turkey’s current gas demand.
Genel is absolutely intent on being at the heart of all that. We are the biggest investor to date in the Kurdistan region of Iraq. We’ve invested a total of $3 billion. Our Taq Taq field is today producing 100,000 barrels a day. It’ll be at 200,000 barrels a day by the end of next year. The Turkey field, where – (inaudible) – will be at 100,000 barrels a day at the end of this year and 200,000 barrels a day in 2014. And with our new-end gas development, we’re aiming to have first gas into the Turkish market by the winter of 2015. And today we can see potentially 4 BCMA, 4 billion cubic meters a year, of gas into the Turkish market by around 2016.
So I think to summarize, despite the complexity of the politics of this region, there has been through the leadership on the ground an enormous amount of activity that has taken place that has created in some senses a wall of oil. And that wall of oil is going to grow over the coming years, and I have tremendous confidence that it will find its way to the market. I’m not going to speculate on the politics that will prevail in the intervening period that would allow that to happen, but there’s nowhere in the world where that volume of oil remains stuck because politicians can’t come to an agreement.
I think the same is true for gas. And as far as the businesspeople on the ground in the Kurdistan region are concerned, our purpose is to get on, do activity, put in place infrastructure in the belief that that will create the breakthrough that we are all looking for.
I’m going to stop there. Thank you very much.
MR. PFLUGER: Thank you, Tony. Thank you, Tony.
I’m now turning to James Franklin Jeffrey, who is a great American diplomat, having served as U.S. ambassador to Albania; to Turkey, three years in Turkey; he was deputy national security adviser; and then he was in a very decisive period U.S. ambassador to Iraq in 2010 to 2012. So there is hardly anybody who knows more about the region, has a great perspective on the issues that we have discussed here, has talked about them in panels and published.
So, James, we’re happy to have you, and the floor is yours.
AMBASSADOR JAMES JEFFREY: Thank you. Am I OK with this?
MR. PFLUGER: With the mic, please.
AMB. JEFFREY: Thank you, Dr. Pfluger.
Fellow panelists, ladies and gentlemen, it’s a delight to be here. It’s a delight because this subject is so important and so near to many of us. I’ll be speaking today as actually a former U.S. government official, but I’ll try to reflect as best I can the U.S. position when I was in government, which I think is still the position today, and well-salted, I hope, with some of my own views or on everybody else’s positions.
I agree with everything that Tony Hayward said about the potential of Kurdistan. It’s very important that this oil and gas be developed. It’s in the interest of the people of Kurdistan, the people of Iraq, the security of the region; and it’s in the interest of the U.S., Turkey, and other countries; and not least the international oil companies, who are taking the risks and investing in it.
So we might ask ourselves then why we’re all here; this is self-evident. The reason is – and we’ve alluded to this already – to go back to what we heard this morning. Two of our Turkish introductory speakers, Minister Yildiz and Ali Babacan, talked about the intertwined relationship between economics, energy, and politics. That’s true throughout this region and throughout the world. But this region especially – and again, we can turn to one of our introductory speakers, Zbig Brzezinski, who talked about how volatile this region is. As one who’s spent about 20 years in the region, nowhere is it more volatile than in and around Iraq, particularly right now. So therefore, it’s important to look at the political, geostrategic and even military and diplomatic aspects of what should be and what can be – I want to underline "can be" – a very promising energy and economic development.
The basic problem that we’re dealing with here is a disagreement between the Kurdistan regional government authorities and the central government in Baghdad about how to develop hydrocarbons in Iraq. There are many aspects to this thing, some of them technical and legal in nature, but basically they come down to two: first of all, to what degree should, based upon the Iraqi constitution, which is quite forward-leaning on regional cooperation and participation and even leading in some new fields, regions and provinces take the lead in developing hydrocarbons.
The second question is one of to what degree in line with the Iraqi constitution – (inaudible) sovereign right and ownership of the Iraqi people, can various contracts allow more flexibility in bringing in foreign firms. There’s been debates about this at least since 2007, but it goes back to the constitution in 2005.
But underlining this debate about hydrocarbons are even more basic concerns that anyone who’s lived and worked in Iraq is familiar with. First of all – and the representatives of the Kurdish regional government here today can talk eloquently about this – there is a great concern, even fear, that the bad times that have passed could return, times when Baghdad committed aggression and oppressed the Kurds, where America had to intervene with Operation Northern Watch, and eventually this was one of the major reasons that we intervened in 2003.
On the other hand, Iraqi Arabs are very concerned that the very unity of the country might eventually be placed at risk if you have a contiguous territory with its own military forces, some 190,000 active and reserve Peshmerga; its own export industry; and powerful friends in Ankara and Washington. So there is a tremendous political strain that goes to the very essence of the new Iraq that we’re dealing with.
In terms of Turkey, many of you in this hall know the situation in terms of Turkey and Iraq better than I, and Joost summed it up very well, and I agree with him. Let me just say a little bit about where this puts the United States in the middle of this. The U.S., as I said, is very supportive of developing hydrocarbons in Kurdistan, as it is in the rest of Iraq. Our first concern with Iraq since 2003 has been to maintain a unified, peaceful, and stable Iraq that is a contributor to, not a problem for regional security.
A second important goal is the development of hydrocarbons throughout the country. The IEA has recently estimated that Iraq could reach 6 million barrels a day by the end of this decade. And much of that will come from the south, some from the north, based upon what we’ve heard today.
In addition, over the next decade or so, Iraqi oil could account for perhaps 45 percent of all new oil developed anywhere in the world. So the potential for Iraq as a whole is extraordinary. And thus, it is a very important player in international security as well as international economic and (oil fora ?).
The concern we have is that there must be a way to find a win-win-win situation whereby Erbil, Ankara and Baghdad all find a way to cooperate to get hydrocarbons out of the north as well as the south, mostly through Turkey. This, again, will be beneficial to everybody. There are alternative scenarios. Our fear is that the alternative scenarios, particularly one that might exclude Baghdad, could lead to one or another political, legal, or even military conflict between the central government and the north. That would not be good for investment. That would not be good for oil development in the north in particular but also in the country as a whole.
There are various scenarios that could produce this. First, if there were continued disagreements between the two, Baghdad could cut off the 17 percent of oil earnings money to Kurdistan, which is roughly $10 billion a day – rather, a year. Secondly, there could be, as we heard earlier, conflict in the disputed areas, where there are mixed populations. There could be more Iranian involvement. We’re very concerned about this. And there could be legal challenges to oil that is shipped out without permission – or gas, for that matter – without the permission of the central government.
So these are issues that we think it is best to avoid. Because of this, the United States along with all of the other actors have been involved, particularly since the summer, in an effort to try to get the various sides to find a way to cooperate. And this led to an agreement in September between Erbil and Baghdad, allowing right now some 200,000 barrels a day to be exported by the Kirkuk-Ceyhan Pipeline. There are many steps that need to occur So this preliminary agreement, to be made permanent and, in particular, for ways to be found to document and then to fund the costs of the oil that is being exported from Kurdistan – this is a very important and encouraging development, but it needs a lot of help, it needs a lot of support from all sides involved. And that’s something that I believe that the U.S. government will continue to put a great deal of effort into.
In the end, everybody has to cooperate. In the end, there cannot be a situation where Baghdad denies the Kurdistan regional government a hydrocarbons future. But also, before we get to the point, it is very, very important that all sides try and try again to find a way to bridge their differences and come up with a way that everybody benefits.
MR. PFLUGER: Thank you so much for your statement. I would like now to turn to Dr. Ashti Hawrami, who is the minister of natural resources of the Kurdistan region of Iraq. He has this position since 2006. He kept going after the parliamentary elections in 2003 and was just reappointed this April the 7th cabinet. And if you have followed Dr. Ashti’s career, coming from the private business side, having been born in Sulaymaniyah and then becoming Iraqi oilman and then an international oil businessman in London, and then if you see what he has achieved in only a very few years in Iraq, in the northern part of that country, raising the interest of international oil companies from Genel to Exxon Mobil and many others, who have engaged there, who got production-sharing agreements – he did that with great skills, and he is one of the major architects of that success story over the last years.
And we would like to hear from you and how you react to those challenges, dangers that in particular we have just heard from James Jeffrey, and what’s your perspective on this – well, doing – (inaudible) – business, as some people believe the Kurds would like to embark upon in the next years.
MINISTER ASHTI HAWRAMI: Mr. Chairman, thank you for that introduction and kind words. It’s been a team effort, what we have done, with the backing of my president and prime minister – (inaudible) – me individually alone.
Distinguished panel, ladies and gentlemen, good morning to all of you. I’ve tried to – I’ve been following the – like everybody else the flow of discussion. It’s very positive to highlight the issues from experts, people who know Iraq well, from Mr. Hiltermann, who’s been – (inaudible) – many years; and, of course, my good friend, the Ambassador – (inaudible) – has served in Iraq for many years.
I cannot disagree with some of the issues being discussed. The only thing I want to start with – (inaudible) – before I say a few other words, I think this issue of the fear of partition and Iraq breaking up, which came through some of – (name inaudible) – remark but particularly more strongly through Mr. Hiltermann’s, and an accusation – or at least pointing finger at Turkey to do that – I’m afraid we disagree with that. The reason for that – there is nothing – (39:58) – any party involved, because I’ve been discussing with the government of Turkey for three, four years – every time, unity of Iraq has been at the centerpiece of our discussion.
Turkey is not breaking up Iraq. But people breaking up Iraq are the Ba’ath Iraqi people who want to take us back to a dictatorship. But policies of Iraq will take us back to breakup of Iraq. And that is in the hands of Iraqis themselves. It is not – (inaudible) – of their neighbors or the intent of any neighbor.
So I feel – (inaudible) – reject accusation of interference of particularly Turkey with internal affairs of Iraq. Yes, they’ve been even-handed – (inaudible) – and we respect that. They realize they have some economic interest, like everybody else – nothing wrong with that, but again, I think that adding more fuel to the fire doesn’t help – (inaudible) – Turkey has been a bad guy. And this is absolutely not to the interest of Iraq or geopolitical interests. So I’d like to on behalf of – (inaudible) – reject completely those accusations, because we know experience how – (inaudible) – Republic of Turkey, and we have good relationship with that, and we’re proud of that. But that is not at expense of our own country, that Iraqis want Iraq to be stable and united, secure. We are not doing anything to undermine our own country by having good relationship with our neighbors.
So I think – (inaudible) – exporting or having some degree of freedom of Kurdistan, of having export goal and goal – and investment goal on behalf of all of Iraqi people and then turning around saying, oh, the Kurds may have some other ulterior motive or Turkey may have some other ulterior motive – (inaudible) – what you’re saying, if Iraq implements its own constitution firmly and squarely and adopts democratic truths, Iraq will be – (inaudible) – sort of situation.
So I think – (inaudible) – issues were engaged, but the (illness ?) is at home, is we are the source of our problem ourselves, Iraqis. It’s not being caused by Turkey for us.
Of course I respect and am encouraged by the goodwill of – (inaudible) – in Kurdistan and many others what we have done, basically created an environment for investment. And the history will judge what Kurdistan has done probably will save Iraq, what Kurdistan has done will take Iraq into the right direction for their security, for business production and economic development, whereby the bad politics eventually will be diminished. And unity of Iraq can only be preserved with – (inaudible) – recognize, with the constitution of Iraq being firmly implemented. It cannot be done by everybody playing to Baghdad and pretending there is no new constitution.
And that is where the difference is. And we are continuously in dialogue with our colleagues in Baghdad. There is no – (inaudible) – and budget issue. We continue to do that. And the September 13th agreement is a very good example how that came about. It was our initiative. We started with the – (inaudible) – and thanks to some of our friends in Washington, they’re also welcome there, and they helped us to come to that agreement. That was our initiative. So we continue with it. We will support it. We will – (inaudible) – fully implemented. But, of course, it could be – (inaudible) – again that we start another one. We will not stop till the constitution is fully implemented, this sheer volume of oil and gas is unlocked and found its way – found its way to the market, as Tony said. I don’t know – anywhere from 100,000 to 500,000 barrels being net unlocked. (inaudible) – potential of Kurdistan, which – (inaudible) – and potentially 2 million barrels; and of course, adding to that the access routes for another million barrels of other Iraqi oil will have to find its way through the – (inaudible) – to the markets. So – (inaudible) – Kurdistan to the market is what we’re talking about.
I have – many of the speakers in – (inaudible) – talking about – (inaudible) – invest in Turkey – (inaudible) – but I will say in a small way in Kurdistan too because we are actually part of that 3 million barrel through Kurdistan (flowing ?) safely through to get to international market. So Kurdistan is part of the same corridor as Turkey. It’s part of Iraq, but without stability in our part of the region, that 3 million barrel of oil is – (inaudible) – regardless whether the facilities might be – (inaudible) – Turkey or not.
So – (inaudible) – few more minutes, Mr. Chairman, yes, there are other issues. They are constitutional. They lead to power-sharing issues, arguments – (inaudible) – in place; revenue sharing, which is an important pillar to share the wealth of the oil; then all the other technical issues – (inaudible) – and the rest of it will become easier to manage, to exercise constitutional issues as defined by the people of the constitution.
So we are in a transition period. There is still – (inaudible) – in Iraq. (inaudible) – is in the pipeline of that, so we’ll have to be – (inaudible). (Inaudible) – political issues – (inaudible) – Syria and other issues, and – (inaudible) – Iran and so on and Arab Spring. So all of these feed into some uncertainty, but they’re – not all of them are under control of what we do within Iraq.
But those issues are contrasted by the sheer opportunities, the opportunities that two of our colleagues here discussed about – recognition that Kurdistan – (inaudible) – unlocking part of Iraq’s oil as well, with the 45 billion barrels of oil or more and with a gas potential for the European and Turkish market – it must be encouraged. It must – (inaudible) – politics to make the system foreign, because the (Ba’ath ?) politicians will never engineer the right policies. But by showing by example, by leading be example, by creating opportunity, by – (inaudible) – on the ground, some of those politicians will – (inaudible). In fact, we’ve shown by example the 250,000 barrels per day – (inaudible) – why we now talking, all of us in Iraq, about that 250,000 and has to be – (inaudible) – has to be legally exported? It’s because it is their (money ?). So if you continue that policy – (inaudible) – we’ll come into that discussion.
But if you do nothing, having waited for the last seven years, waiting for people to agree on a hydrocarbon – (inaudible) – I’m afraid we would not be talking about 45 million – billion barrels of oil, maybe even 1 billion – not, not any – (inaudible) – talked about today.
So what we have done, despite the bad politics and arguments between – call it Baghdad and Erbil – is actually we’ve done the right thing to actually – (inaudible) – the very conference we are in about focus about Kurdistan is actually a sign that we’ve done something right. That doesn’t mean we should ignore our problems. The problems are there to be sorted out.
But I think one more issue I’d like to – (inaudible) – issues between – apart from Turkey – (inaudible) – between Erbil and Baghdad, Erbil and Baghdad, Erbil and Baghdad. I’m afraid it’s no longer that. It’s actually bad politics, good politics. It’s about democracy, and it’s about sharing the power and the wealth of Iraq. And many, many other communities in Iraq, many other provinces, from the north to the south – they’re demanding the same things as – (inaudible) – was demanding a few years ago.
So it’s no longer actually – really if you look at Iraqi politics and where the issues are, the issues are broader than Kurd/Arab. Hopefully that will never become an issue. And it’s different between – it’s no longer Kurdistan alone with the rest of Iraq. It’s basically there are many issues of a common ground for all of us in Iraq. Yes, there might be some selective issues between Kurdistan and Baghdad such as – (inaudible) – on that, and many even to some extent hydrocarbon law. (inaudible) – revenue sharing and other things – power sharing and democracy – all of that – all Iraqis are concerned about all of those issues.
So what I’m saying – the opportunities are matched, maybe are greater than the issues surrounding those opportunities. Therefore, the opportunities, I believe – (inaudible) – and the issues around those issues we talked about – (inaudible) – and some of them then have to be negotiated out.
For example, exports – oil exports will happen – this million barrels will get to the market. It will get to the market – (inaudible) – Turkey. Private sector – (inaudible) – the political piece to connect it together – (inaudible) – but the pipeline, when it’s built – (inaudible). But if you just say to – (inaudible) – agrees on it, it will be another five years. So this is a pragmatic approach, what we’ve been doing in business in Kurdistan. And we continue doing that. And this is not at the expense of our colleagues in Baghdad or the rest of Iraq, but the revenue belongs to all of us. And – (inaudible) – rest of Iraq – (inaudible) – through Turkey – (inaudible). Yes, Turkey has – (inaudible) – companies working internationally – (inaudible). Well, why – (inaudible) – so sensitive because we have a relationship with Turkey working well and everybody should be immediately thinking, oh – (inaudible) – break up Iraq or the Kurds mean to separate?
But what I’m trying to say, because we suffered so much in the past, by asking for our rights, that doesn’t mean you automatically should put a question mark, that intentions are bad, we mean to separate out. This is where – (inaudible) – get it wrong. (inaudible) – if you look around who was mediating in Baghdad, between various components of Iraq to actually make the government even more functional was the Kurds.
So – (inaudible) – and we continue to support our country and – (inaudible) – but we also demand our rights as written in the constitution.
Thank you very much.
MR. PFLUGER: Well, thank you very much for that impressive statement. I think three points are clear. And we should perhaps not try to dispute them today but concentrate on how we concretely proceed. Clear is the enormous potential of the Kurdistan region. Nobody disputes this. Clear is – and we just have heard that in very, very strong words from Dr. Ashti – there is no attention to do it alone, to separate. And we perhaps, as foreigners, should not stir up those suspicions but understand the Kurds, who just developed for the first time their country and with enormous speed, cannot have an interest in instability, because it would bring all the energy companies to leave. So they do not have that interest. And the Americans and the international community and definitely the Turks do not have that interest either. So we all discussed on the basis of the Iraq as it stands today and don’t want to change it.
And a third thing which is undisputed – and I think Tony made that very clear – is there is gas and oil, and it will find its market. There is no doubt about that, that a country like Turkey with that huge need for gas and oil and energy to build up its growing economy, that this country will get and exploit together with the Kurds this enormous richness.
So what we have to do now and perhaps concentrate on – how can we bring forward a carbon law which is acceptable to everybody? How can we do work on all sides to encourage the partners to find a way to bring out gas and oil from the Kurdistan region as fast as possible to the world without in any case endangering the existent state of Iraq?
And I ask, first of all, the panel, if someone of you want to react or what has said before. If not, I would turn to the floor and especially would like to encourage our Turkish friends here to speak out, because Turkey is not represented here on the podium, but we’ve talked a lot about Turkey’s intentions. And therefore, I’d be happy if we’d get some Turkish speakers as well.
But you’re the first, please. If you’d be so kind to briefly introduce yourself.
Q: Sure. My name is – you can hear me, right? No? OK, can you hear me now? OK.
My name is (name inaudible). I’m a journalist from Turkey, Hurriyet Daily News, the English language.
One question to Mr. Hiltermann – do you think that one of the consequences of Turkey’s approach towards Maliki has been to maybe push Maliki towards Iran? Second, how do you think we can get out of this stalemate? Do you think that Turkey will be revising its policy towards Maliki, or do you think it will wait for Maliki to go, if it – if you think he’s going to go? And also, is there a personality problem there? I mean, does the problem goes beyond Maliki? Because from Ankara’s point of view, they don’t have a major – major problems with the Shiites in Iraq. It seems that there is a problem with the – with the – with the person.
And Mr. Hawrami, thank you very much for this clear-cut messages. But the Turks and the Kurds – they have not always have – had the best of relations. We’re talking about a country here that 10 years ago didn’t even accept the existence of Kurds. And five years ago you couldn’t even talk to a Turkish government about Kurds selling their own oil and gas. My question is this. What makes you so confident to become so dependent on Turkey? Because I think Mr. Hiltermann was saying that Turkey was on a position of unlocking a landlocked country. So if this means that Turks can lock the landlocked country as well, the tides could change. Maybe Mr. Maliki can go, someone else can come. So my question is, what makes you so confident of building up this very in-depth relationship and cooperation with Turkey? Because you have no other choice or because you think that the improvement has come to such a point that it’s irreversible between Turks and Kurds?
MR. PFLUGER: Can we start – can we start with another question from – (microphone feedback).
MR. : Microphone – mic.
MIN. ASHTI: Very good question, thank you. I am confident because a long, long time ago, when we talked to our Turkish counterparts, they tell me exactly what they think. They’re not – (57:19) – deceit or misguiding or something like that. So the trust is there. And when the trust is there, issue of – solutions are found, you both – (inaudible). And we are confident we go in the right direction.
But the centerpiece – comes back to what I said about our oil problem. When you have (2, 3 ?) million barrels of oil, it will find the sale to the market. The same concept applies to our relationship with Turkey. Turkey is a big nation. It’s a consumer nation with 70, 80 million – an energy bill of $60 billion, whatever it is, Kurdistan on the backyard of the country, and you have large portion of – (inaudible) – so it’s not a question of not having a relationship. It’s very natural. We’ve been part of thousands – of history. We may have had 50 years of bad history, but with a thousand years we’ve been together. This is what our history is.
Therefore, economically thinking, this piece of Kurdistan with this – (inaudible) – Turkey needs it. Really, Turkey – (inaudible) – the market, one simple equation, and that is to the interest of Kurdistan, to the interest of Turkey, and decision-maker sitting in Ankara – and we’re grateful to Prime Minister Erdogan to being visionary – to unleash this and create this discussion environment, we are confident there is no – (inaudible) – there.
But I repeat what I said in my opening remark. This is not at the expense of unity of Iraq, not at the expense of our relationship with Baghdad. Baghdad is our capital. Baghdad is – Iraq is our county. But it doesn’t stop us having good relationship with other immediate neighbors. Iraq’s border with Turkey is Kurdistan actually. There no another border. We have – Iraq has to go through Kurdistan to Turkey and vice-versa.
So we need to have that good relationship for our own economic interests in Iraq, and therefore we are a catalyst for that. We are confident there is no turning back on that.
MR. PFLUGER: Thank you.
MR. HILTERMANN: Yeah, thank you very much for those questions.
You know – (inaudible) – the government in Iraq in order to keep them out of Iranian – out of an Iranian embrace. And that has worked up to a point, of course. The United States was doing the same thing. The – it is really unfortunate that the conflict between – to the extent the political conflict between Turkey and Iraq has become so personalized. It is very much a conflict between Mr. Erdogan personally and Mr. Maliki personally. Of course it doesn’t mean that there aren’t other people in Turkey who don’t agree with – that – who agree – that don’t agree with Mr. Erdogan; there is a lobby. But at the same time, it has become highly personalized.
And that – I guess there is a good and a bad to it. The bad is that it’s very hard to overcome these personal grudges. But the good is that leaders eventually (pass ?) on both sides. And so hopefully the basic relationship has not been harmed. And you’re absolutely right to point out that – you know, that Turkey doesn’t see the Shiites as such as the problem in Iraq. I think that is very important.
But the question – your second question was about Turkish policy now is pushing Mr. Maliki toward Iran. And I would say there are two factors that are pushing Mr. Maliki towards Iran, even though he’s still not an Iranian proxy. One is alienation by other countries like Turkey, potentially the United States – this is not happening now, but it could happen.
And second is the Syria crisis, because – not because Maliki – Mr. Maliki is doing Iran’s bidding in this regard but because it was a coincidence of interests. Neither of them for any reasons, separate reasons, don’t want the Syrian regime to go – or to go without having a stake in what follows next, what comes next.
So I think there is – the potential definitely is there that Mr. Maliki will be further pushed into Iranian arms if the alienation continues from Turkey’s side.
Finally you asked about is there another way to deal with Mr. Maliki. Well, you know, there’s going to be elections in two years’ time. It’s the perfect time to get rid of him. But I would suggest that Turkey not pursue the policy of four years ago – I mean in 2009 where Turkey chose sides. I would pursue a more subtle policy in order to get the results that you – that serve your interests best.
MR. PFLUGER: Other questions, comments?
Q: (Name inaudible) from Japan – (inaudible) –
MR. PFLUGER: Would you – would you please stand up? It’s easier for all of us.
Q: My name is (name inaudible). I’m a correspondent of – (1 inaudible) – from Japan.
We haven’t talked about the organization of PKK, which is mostly considered a terrorist organization by U.S., EU, and Turkey and most of the international community. So it is there in the northern Iraqi mountains. And you’re talking about tremendous opportunities of oil and gas. And we have been seeing that there’s some explosions in the pipelines and so forth – and so forth.
So can we fully exclude the PKK out of the equation while trying to make these huge deals work, or will there be a solution – (inaudible) – ways to make these huge projects work?
MR. PFLUGER: So do we have other questions? If there are other questions and comments, we should take them right now, because we have lunch soon. Some other remarks? At least not yet, so who wants to answer?
AMB. JEFFREY: Well, on the PKK, of course, I think we’re all up on the panel agreed that the PKK is a terrorist organization and the enemy of everyone.
But I would like to get back to two of the points you asked. (Inaudible) – agree with you on your three points, I would to some degree challenge two of them. First of all, my colleagues to my left and right have basically said if you build an oil industry, the politics will come. If we’re talking about capital gains tax adjustments or tweaking depreciation allowances, that’s one sort of politics. But politics involving the United States to get oil flowing in this region since 1986 have involved a – (inaudible) – half a million U.S. troops in Desert Storm in 1991, 12 years of Operation Northern Watch and Southern Watch over much of Iraq; and, of course, 2003. Directly or indirectly, these all have a lot to do with oil.
And the United States, in looking at this region and in looking at some of the issues here, I’m very, very confident will want to have a say in how all of this fits together so that nobody assumes that if it starts going bad we will show up once again with a deployment like we’ve had to do four times in the past 20-plus years.
The second thing is, the issue is not that one accepts the unity of Iraq. I think everybody does. The issue is whether policies will be pursued that could inadvertently and almost accidentally challenge that unity. And one of them – and I’m not an expert in oil export policies, but from what little I know, if a part of a country with the support of a(n) adjacent country exports oil without the concurrence, approval, whatever of the central government, you have an unusual and tricky situation. I won’t say "dangerous" at this point, because that’s where politics can come in. That’s an unusual and tricky situation and would have to be very carefully dealt with by all parties involved: Baghdad, Erbil, and Ankara and everybody else who is interested in the oil coming out and the place staying stable.
MR. PFLUGER: (Audio break) – comments in the panel concerning this question?
Q: I’m Alex Cranberg. I’m chairman of Aspect Holdings. And I find it unusual as an American to think that it would be considered an unusual and tricky situation for private parties or state entities to export oil without permission, for example, of Washington, D.C.
I’m curious why the United States, of all countries, having come together as a group of states with state militias and fully state-owned oil lands, cannot help persuade people in this region that stability in fact can come from state rights, from regional rights, and not despite them.
AMB. JEFFREY: Again, we do support regional development of hydrocarbons. The United States was an active adviser to the 2005 Iraqi constitution, which lays out, particular for new oil, a very broad authority for regions and provinces to have a, quote, "together role" with the central government in that. So there’s no disagreement.
But again, in fact, if you want to export gas or oil from the United States, you have to go to the central government and get permission to do it.
MR. PFLUGER: Well, perhaps you’ll allow me a comment to what you said just before. And that is the key issue we discuss here. Is it a good idea, is it dangerous or tricky, that the Kurdistan region and the Turks do business with themselves? Of course it is not an easy thing, and it is a difficult thing.
On the other hand, I have been working in this region for quite some time now. And for me, it’s still almost a miracle that Turks and Kurds, who operate so closely and trustfully with each other within the Kurdistan region. So many business, so much relationship, or Erdogan inaugurating the international airport of Erbil – both against PKK, to take up that question.
So why the international community still believes the PKK-Turkey question is the most important one, you have an enormous network of relations between Turks and Kurds, and the Turkish government has become some sort of good hegemon for the region. And I think we as international community should not immediately be suspicious what’s going on there but welcome that – perhaps to a certain degree even historic – development of the last years.
But Tony has a comment, and then I give the word to Mr. Hawrami for a last word.
MR. HAYWARD: Well, I just wanted to make a – I just wanted to make a reflection on – without taking sides here – (inaudible) – in this continuing saga.
If you look at the history of the last couple of years, in the beginning of 2011, the – (inaudible) – in Baghdad reached an agreement to export oil from Kurdistan to sell it on the international markets through SOMO and for Baghdad to pay the Kurds their share of the rent. And Kurdistan went ahead and exported, and the problem was they never got paid. And it broke down.
And we’ve now, 2012, restarted. We have an agreement that says the money will flow. And in the last 24 hours, we’ve had Baghdad again say, well, actually, they changed their mind. And I think, you know, one of the issues for me is, as we interrogate this, about, you know, which side of this continually breaks this agreement. From my understanding, Kurdistan does not – (inaudible) – export independent of the central government or do anything. It’s been very happy to sell its oil through SOMO on the international markets, provided it’s paid. And the problem is, they’re not paid. And it’s been consistently Baghdad that’s broken the agreement, not the people in Erbil. And that’s just an objective perspective from a businessman, not a politician.
MR. PFLUGER: Thank you.
The last speaker in the panel is Dr. Ashti Hawrami.
MIN. ASHTI: Well, thanks for that. I’ll maybe – (inaudible) – what Tony said. The current agreement we have was initiated – (inaudible). We – (inaudible) – continue supporting it. Yes, we are concerned about negative reactions or negative statements coming elsewhere. But the agreement was signed, supported by – (inaudible) – in Baghdad. And of course, we have the prime minister – Prime Minister Maliki himself is fully supportive of this. The people came to a negotiation that – (inaudible) – with six senior people, including myself – (inaudible) – who have signed the document . And under that document, there are provisions for any disputes or any misunderstandings to be resolved.
So anybody actually making statements who was not part of that history, if you’d like, perhaps, basically, has misunderstood or doesn’t understand the nature of the agreement. I don’t know – (inaudible) – last 24 hours. But from my point of view – (inaudible) – that Tony is right. At the end of the – (inaudible) – for some reason are interrupted – hopefully they’re not – then yes, it will create uncertainty, and it will create eventually another stoppage, will be regrettable and will be bad for Iraq.
But let us not forecast the gloom. Let us be positive. Let’s assume that Iraq recognizes 250,000 – (inaudible) – 10 billion barrels to the balance sheets – (inaudible) – a lot of money and the bad politics or somebody who doesn’t really want the 10 billion – (inaudible) – hopefully will not have that voice to prevent it.
So from us, we continue – (inaudible) – as ever to stay supportive – (inaudible) – different scenario.
What I want to really touch on – I don’t agree with what Mr. Jeffrey said – (inaudible) – during the panel. I wish life was as simple as that – you sit down in a room and say, this is a constitution – (inaudible) – together. OK. We did that in 2006 and ’07 and as part of a committee to write the law. And – (inaudible) – one of the key people – (inaudible) – the draft is actually they did not want to implement it. There’s a saying that you can take your horse to water – it doesn’t want to drink. What are you going to do? I have a constitution – doesn’t want to implement it. I agree – (inaudible) – doesn’t want to pay for it. That’s (previous one ?). You agree – agreements have no meaning; what is written on the paper has no value. (inaudible) – take that (at its value ?), the option for Kurdistan just continue begging and wait, wait, wait for another 10 years for this to happen, may never come; or exercise your right within the constitutional boundaries and create the facts on the ground – should get the bad politics out of the way.
I am in the – firmly, hundred-percent in the latter category. And we continue to do exactly that. We believe Kurdistan will eventually lead the way to not just actually to prosperity of Iraq; to unity of Iraq, because at the end, the revenue creates the security of Iraq. And we need that. So be patient with us. Be supportive. But please don’t be suspicious about – (inaudible). We have not only desire – (inaudible) – 17 percent from even our own effort, 83 percent goes to Baghdad.
So – (inaudible) – supportive, Turkey has nothing to be ashamed of. Turkey has done the right thing to be supportive of Kurdistan. (inaudible) We share histories. It’s not at the expense of Baghdad. (inaudible) – issues about – (inaudible) – and this is not a particular platform for those things. I believe a lot of this will be – in a year’s time we’ll be sitting – (1:14:33) – a lot has passed, and a lot of new things will be – more positive things, hopefully; and maybe some negative things, hopefully not – will be there to (affect this ?).
So thank you for this session, for recognizing – particularly – (inaudible) – Kurdistan’s oil and gas, Kurdistan of Iraq. And hopefully next year we’ll be talking about planning for 500,000 export.
So this is – (inaudible) – yes, we have to pay attention to that. Ultimately, creating the results, it will be where actually the solution lies.
Thank you very much. (Applause.)
MR. PFLUGER: Mr. Minister, panelists, we have to thank you. We have to thank the audience and the Atlantic Council for bringing about such a great panel, and the staff of the Atlantic Council for the perfect organization.
Thank you very much, and have a good lunch – just next door. (Applause.)