Picture: REUTERS
Picture: REUTERS

Dubai — The latest battle for Iraq’s future is unfolding around the country’s oldest oil field.

Federal government troops and forces from the semi-autonomous Kurdish region are facing off in Kirkuk province in northern Iraq. Baghdad wants to get control of the area’s oil deposits back from Kurdish forces, who seized the long-disputed area to ward off Islamic State (IS) militants in 2014. The Kurds, who overwhelmingly voted for independence in a referendum last month, see the resources as a financial lifeline for a future state.

Kirkuk’s oil, discovered by the forebears of BP and Total in 1927, lies in one of the Middle East’s great fields. It’s long anticline — the bump in the Earth that trapped the crude accumulation — can be easily seen from the air, running straight through the disputed city of almost a million people.

Crude flowed from Kirkuk 10 years before Saudi Arabia struck oil and two decades before the kingdom found the giant Ghawar field. While the area around Kirkuk now pumps a fraction of Iraq’s total output of 4.5-million barrels a day — about 350,000 barrels a day, according to estimates compiled by Bloomberg — it remains a valuable prize.

As foreign investment dollars flowed into Iraq’s giant southern oil fields after the overthrow of Saddam Hussein, production in the northern region has been locked in the past. After suffering years of mismanagement under the former dictator — his regime pumped unwanted fuel oil from a local refinery back into the field — Iraq’s failure to pass and enforce a national oil law and set up lasting revenue-sharing arrangements prevented the disputed areas from gaining a benefit from foreign investment.

BP studied ways to boost output in the area as recently as 2015, a project made impossible by the prolonged fight against IS militants.

Now, after routing the Islamist group from areas in the north and west, Iraq’s federal forces and Kurdish forces find themselves facing off

Now, after routing the Islamist group from areas in the north and west, Iraq’s federal forces and Kurdish forces find themselves facing off in the field. On Tuesday, Baghdad’s troops seized two oil-well clusters that produce almost 300,000 barrels a day between them.

The battle is part of a wide regional power struggle involving Iran and Turkey, both of which have large Kurdish populations and reasons to be wary of independence for Iraq’s Kurds.

"The war on IS is edging to an end and now the real war starts, the war between the regional powers to control resources and define their own areas of influence," said Sami Nader, head of the Levant Institute for Strategic Affairs in Beirut. What’s happening in Kirkuk is not just a local Iraqi conflict, but a regional race to establish new boundaries, he said.

The venture that discovered Kirkuk’s oil at the Baba Gurgur well in 1927 involved the predecessors of the European and US companies that would become global majors, as well as Calouste Gulbenkian, the Armenian entrepreneur who played a starring role in the birth of the Middle East’s oil industry.

Gulbenkian was born in the Ottoman Empire, which stretched across modern Turkey and into present-day Iraq. The collapse of that empire during the First World War left behind a patchwork of nations across the Middle East, stitching together the diverse ethnic and religious groups that have so often clashed.

In today’s Kirkuk, those historic divisions underpin the oil-laced battle threatening to rip apart modern Iraq.

Bloomberg

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