* KRG calls plan with BP for Kirkuk illegal
* Baghdad and Kurdistan locked in long oil dispute
* Kurdish region has begun to truck oil to Turkey
By Patrick Markey
BAGHDAD, Jan 18 Iraq's Kurdistan has defended
its oil policy as constitutional, and rejected a deal between
Baghdad and BP for an oilfield in the disputed city of Kirkuk as
an "illegal" step in the autonomous region's feud with the
The statement came after Iraq's oil minister said Baghdad's
government would sue companies exporting crude from Kurdistan,
warned of cuts to the self-ruled region's federal budget and
announced an accord with BP in Kirkuk.
Iraq's Arab-led central government and Kurdistan Regional
Government or KRG, run by ethnic Kurds, are locked in a widening
dispute over control of oil revenues, oilfields and territory
that is fraying the country's uneasy federal union.
The ethnically mixed city of Kirkuk, sitting on the internal
border between Iraq and Kurdistan, is at the heart of their
long-running battle over constitutional rights to the OPEC
member's crude reserves, the world's fourth-largest.
"Iraq's citizens are simply tired of this sort of language
of threat and intimidation, which in the cynical pursuit of
narrow political agendas serves only to create division and
strife," the KRG said in a statement on its website.
"In terms of oil and gas management, the KRG firmly believes
in, and abides by, the letter and spirit of Iraq's permanent,
Speaking to Reuters on Wednesday, Oil Minister Abdul Kareem
Luaibi said Baghdad intends to sue Genel Energy - the
first company to export oil directly from Kurdistan - and may
slash the government's allocated 17 percent budget to the region
unless it halts what he rejected as smuggling.
Luaibi announced a preliminary agreement with BP to
revive the northern Kirkuk oil field, which - apart from being
at the centre of the fight between Kurdistan and Iraq - is
suffering massive output declines.
"He reveals details of an illegal and unconstitutional plan
to allegedly allow BP to enhance the recovery of some of the
depleted fields in Kirkuk... without consulting and obtaining
approval of the other parties to the dispute," the KRG said.
The feud between Baghdad and the Kurdistan enclave, which
has run its own regional administration and armed forces since
1991, has escalated since the KRG began signing deals with oil
majors like Exxon Mobil and Chevron.
Iraq's government claims only it has the constitutional
authority to export crude oil and sign deals, but Kurdistan says
the constitution allows it to agree to contracts and ship oil
independently of Baghdad.
Baghdad and Kurdistan late last year both sent troops to
reinforce positions along their internal border in a major
escalation of tensions between the two regions, but neither
appeared to have the stomach for open conflict.
The KRG has given permission to Genel to truck exports
directly from Kurdistan's Taq Taq oilfield to Turkey, bypassing
the federal pipeline system linking Kirkuk with the Turkish
Mediterranean port of Ceyhan.
While the central government dismisses that as smuggling,
the KRG said the barter with Turkey was making up part of
Kurdistan's entitlement to 17 percent of refined products since
Baghdad was not supplying the full amount.
The regional government also rejected Luaibi's suggestion
that Baghdad might cut Kurdistan's 17 percent allocation of the
"The federal oil minister is stepping well beyond his remit
in speaking about the federal budget, creating yet another
smokescreen for the incompetency of his ministry and of the
federal administration," it said.
The move to truck oil directly to Turkey came after
Kurdistan exports were halted via the Baghdad-controlled
Iraq-Turkey pipeline due to a dispute over central government
payments to oil companies working in Kurdistan.
Baghdad has made one payment in 2012, but Iraqi officials
said last month they would not pay firms a second installment
because Kurdistan had failed to reach agreed production under a
deal made in September.
The central government says Kurdistan is expected to provide
250,000 bpd to Iraq's 2013 oil export target of 2.9 million bpd.
In 2012, the KRG was to contribute 175,000 bpd to the federal
budget, but handed an average of 61,000 bpd, Luaibi said.
"Had it not been for the federal government's obstructionist
policies, the Kurdistan Region could now be exporting 500,000
barrels per day or some $18 billion per year," the KRG said.