October 9, 2009 / 10:09 PM / 8 years ago

Iraq Kurdistan denies wrongdoing in DNO affair

3 Min Read

BAGHDAD, Oct 10 (Reuters) - Iraqi Kurdistan's oil minister has denied wrongdoing in a murky stock deal that has left some outsiders raising questions about doing business in a relatively stable corner of Iraq.

Ashti Hawrami, natural resources minister of the semiautonomous Kurdish region in northern Iraq, defended financial assistance made privately over the past year to two foreign companies working in the region's Tawke oilfield.

Hawrami issued a a wide-ranging, nine-page statement late on Friday. Earlier, in Oslo, Norwegian authorities pushed for an investigation of transactions made in shares of oil company DNO International (DNO.OL), including trades involving the Kurdish Regional government.

Hawrami also vowed Kurdistan would not export oil until a row with Iraq's central government over payment to foreign companies was settled.

DNO International sold 44 million of its own shares last year to the Kurdish Regional Government (KRG), which ended up in the hands of privately held Turkish company Genel Energy, in the process of merging with Heritage Oil HOIL.L -- a London-listed oil company active in Kurdistan.

After the sale became public last month, the KRG suspended DNO's activities for allegedly tarnishing its reputation, but the firm's local operations have since restarted.

In the statement, Hawrami said he arranged assistance for the companies, whose financial woes he said were due partly due to oil export restrictions imposed by Iraq's central government, in order to keep the region's energy plans on track.

"The reasons for the help were very clear and sounded. Failure of these two companies would have meant failure of the KRG's overall policy," he said.

He wrote that "the $50 million sum involved, which I used for both purposes (initially for DNO and later on for Genel), was approved by my prime minister. It is important to realise that we had clear justifications to help DNO and Genel, as that was to our own self interest."

Kurdistan is feuding with the Oil Ministry in Baghdad as it seeks to exploit its considerable energy resources independently. The ministry deems Kurdish contracts such as the one with DNO illegal.

While exports from Kurdish fields began this year with backing of the ministry, foreign companies working in Kurdistan have not yet been paid for those exports.

There are few signs the central government, whose oil marketing agency is actually exporting the Kurdish oil, is going to budge on its refusal to provide Kurdish officials with that money.

"We will only resume export with guaranteed payments," Hawrami wrote.

The minister also blamed political opponents for trying to exploit the DNO situation, faulted the bank which facilitated the stock deal for failing to provide complete information and heaped criticism on the Iraqi Oil Ministry. (Editing by David Gregorio)

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