Russia is set to resume oil and gas operations in Iraq’s Kurdistan Region, guided by Energy Minister Sergei Tsivilev. This strategic move seeks to reestablish Russia’s geopolitical presence, especially following the U.S. withdrawal from the Iran nuclear deal. Historical actions by Rosneft have significantly positioned Russia within Iraq’s oil sector, while Western investment interest grows amidst regional geopolitical complexities.
Russia is poised to revive its significant oil and gas operations in the Kurdistan Region of Iraq (KRI), as stated by Energy Minister Sergei Tsivilev. From 2017 until the overthrow of Syrian President Bashar al-Assad, Russia’s energy activities in the KRI facilitated access to economical oil and gas and bolstered its geopolitical strength in the region. The revival of these operations is a critical maneuver for Russia amid competition with China’s regional influence following the U.S.’s withdrawal from the Joint Comprehensive Plan of Action with Iran in 2018.
Following the 2017 Independence Referendum in which over 90% of the KRI’s population favored independence from Iraq, Russia seized the opportunity to extend its influence. The Kremlin’s oil company, Rosneft, executed three essential agreements to dominate the KRI’s oil sector: financing the KRG with $1.5 billion through forward oil sales, acquiring an 80% working interest in five oil blocks, and securing a 60% stake in the KRG’s pipeline by investing $1.8 billion for enhancements.
Russia challenged the Federal Government of Iraq (FGI) concerning budget allocations for the KRI and conditions for resuming oil flows after the 2017 referendum. Rosneft insisted that suspended oil flows would not fully resume until transit fees and tariffs were settled. Controversially, Russia also appealed to the FGI to reassess its designation of Rosneft’s stake in the five blocks as invalid, which represent significant oil reserves.
Moscow’s renewed operations in the KRI coincide with significant embargoes on Iraqi oil exports through the Kirkuk-Ceyhan pipeline due to Baghdad’s attempts to curtail independent oil sales from the KRI. This situation enables Russia to extend its leverage and influence over both the KRI and FGI regions.
Since al-Assad’s ouster, Western interest in investing in the KRI has surged. Western nations aim to incentivize the KRG to sever ties with Chinese, Russian, and Iranian entities. A significant deal, such as BP’s $25 billion agreement to develop four oil fields in the Kirkuk region, illustrates potential revived cooperation. Conversely, Russia and China intend to undermine the KRI’s financial foundation by curtailing its oil exports and budget transfers from Baghdad, asserting, as a senior Moscow source noted, a desire to see Iraq remain unified while excluding Western influence in energy deals.
The KRI boasts substantial oil potential, and despite limited exploration activity, earlier assessments estimated proven reserves of around 4 billion barrels, which the KRG later increased to 45 billion barrels. This drastic revision may still underestimate the resources available. Moreover, Iraq had only extracted approximately 15-20% of its recoverable oil resources by 2017, indicating that further exploration could yield significant discoveries. Current estimates suggest that the KRI holds around 200 trillion cubic feet of natural gas reserves, representing approximately 3% of global totals.
In summary, Russia’s decision to recommence its oil and gas operations in the KRI underscores its strategic ambitions in Iraq and the wider Middle East amid rising competition with Western powers and China. With historical ties and recent developments, Russia aims to solidify its influence in the KRI while countering external forces. Concurrently, the KRI’s untapped resources present significant opportunities for both Russia and potential Western investments, highlighting the ongoing geopolitical and energy dynamics in the region.
Original Source: oilprice.com
