* Top security official: direct trade "like dividing Iraq"
* Kurds push on with own oil pipeline
* Turkey trade links grow with Iraqi Kurdistan
By Peg Mackey
LONDON, March 19 Rising oil trade between Iraqi
Kurdistan and Turkey threatens to split Iraq in two, a senior
Iraqi official said, as the autonomous region ignores Baghdad's
threats of tough action against what it terms illegal exports.
Oil lies at the heart of a long-running feud between the
central government and the autonomous Kurdistan region. Baghdad
says it alone has the authority to control exports and sign
contracts, while the Kurds say their right to do so is enshrined
in Iraq's federal constitution.
"If oil from Kurdistan goes through Turkey directly, that
will be like dividing Iraq. This is our big concern," Iraq's
Deputy National Security Adviser Safa al-Sheikh Hussein said on
the sidelines of an Iraq conference.
The Kurdistan Regional Government (KRG) started on the path
towards economic independence early this year by exporting small
volumes of crude oil by truck to Turkey.
The move further angered Baghdad, which threatened action
against the region and foreign oil companies working there to
stop the exports, which it says are illegal.
KRG crude used to be shipped to world markets through a
Baghdad-controlled pipeline running from Kirkuk to the Turkish
port of Ceyhan, but exports via that channel dried up in
December due to a payment row with Baghdad.
The northern region is now pushing ahead with plans to build
its own oil export pipeline to Turkey, despite objections from
the United States, which fears the project could lead to the
break-up of Iraq.
KRG Energy Minister Ashti Hawrami has said a gas pipeline
now being laid can be converted to ship up to 300,000 barrels
per day of crude by June.
"Kurdistan is almost independent and they want more gains
now," said Hussein, deputy of the National Security Council,
created in 2004 as a forum for security decision-making. "They
are a little over-confident and overly ambitious."
For its part, energy-hungry Turkey has increasingly courted
Iraqi Kurds as relations with the Shi'ite-led central government
in Baghdad have soured and it now ranks as a major trading
partner for the autonomous region.
A broad energy partnership between Turkey and Iraqi
Kurdistan ranging from exploration to export has been in the
works since last year.
Though steadily developing more energy autonomy, the region
still relies on the central government for a share of the
national budget from oil revenues.
"There's a lot of tension with the Kurds," said Hussein. "I
don't think it can be resolved this year, but maybe we can
Kurdistan's exploration contracts with oil majors like Exxon
Mobil and Chevron are a further source of
friction that have prompted Baghdad repeatedly to warn companies
they risk losing their assets in the south of the country.
Exxon has been weighing whether to sell out of the giant,
southern West Qurna-1 oilfield, but industry sources say Iraq's
Prime Minister Nuri al-Maliki offered the company substantially
improved terms in January to keep it at the $50 billion project.
Since then, Iraqi and Kurdish officials have both suggested
Exxon will side with them.
Hussein said that if Exxon were to start to drill in
territories disputed with Kurdistan, "there will be a legal
response ... to end all (of Exxon's) work in the rest of Iraq."
"We are determined to resolve our problems peacefully, but
this can influence the integrity of Iraq," he said.
Officials from Exxon and Iraqi Kurdistan last month visited
the Qara Hansher oil exploration block that lies in disputed
territories where both regions claim jurisdiction and discussed
building a camp there.
And industry sources said the U.S. major has drilled three
water wells at the al-Qush block, also in the disputed zone, in
preparation to start drilling by early June.
The oil dispute has been accompanied by an increase in
military tension between the two regions.
Last year, Iraqi national army and Kurdish Peshmerga forces
both sent troops to reinforce their rival positions around towns
dotted along the disputed territories, including the sensitive
ethnically mixed town of Kirkuk.
"Neither side wants to end this militarily," said Hussein, a
former Brigadier General in Iraq's Air Force.