Iraqi oil production is expected to reach 3.5 million barrels a day by the end of the year and Baghdad plans to triple the production in the next few years. Whether this is an accessible target or not, most of the oil is intended for export and one of the main obstacles remains the country’s inadequate infrastructure. New pipelines are being constructed or planned, into Turkey, the Gulf or even Syria depending on the political and security situation in the neighboring country. A Mega-port is being planned south of Basra together with a new railway system connecting the Gulf to Europe through Turkey. Al-Faw al-Kabir’s development has been much slower than hoped. Kuwait is also building a mega-port a few kilometers away. Rapid construction of its Mubarak al-Kabir port cast doubt on the viability of the Iraqi project, but this did not prevent Iraqi authorities from pursuing their own plans.
The development of such colossal infrastructure and Baghdad’s self-proclaimed target of reaching 12 million barrel per day in 2017 presume an agreement of some sort on the security situation, which poses the biggest challenge for Iraq’s reconstruction and post-war development. Iraq has passed multi-billion dollars deals with the Americans to buy 36 F-16 jet fighters and M-1 tanks. Both sides are also negotiating an agreement to equip the Iraqi army with unarmed surveillance drones to protect Iraq’s oil installations in the south. After the withdrawal of US troops in December 2011, Iraq is expected to ensure its own protection and stability. There seems to be a minimum regional agreement around this idea. There are reasons to believe Iran does not oppose such deals. Tehran might be wary of the rapid development of the oil sector in Iraq but it has also shown great interest in its neighbor’s projects, aware that Iraq represents an opportunity to get around international sanctions. It has for example expressed interest to link its rail network to the Iraqi network which is expected to be revamped if Al-Faw al-Kabir’s construction project goes as planned.
Another challenge to the development of the oil sector is the confusion and the repeated disputes between the central governments and the regions over the control of oil revenues due to the absence of a petroleum law. The autonomous northern province of Kurdistan has concluded several contracts with foreign oil companies, including two of the biggest American oil companies, Exxon Mobil, and more recently, with Chevron. Baghdad fears that increased oil autonomy would encourage separatism in the North and insists all oil deals must pass through the central government or they will be considered illegal. Prime Minister Nouri al-Maliki warned on 19/06 that such contracts could lead to war and urged President Barack Obama to intervene to stop Exxon Mobil from proceeding with the deal. Hussein al-Shahristani, deputy prime minister for energy, also warned foreign companies that all contracts in Iraq would be terminated if a deal is signed with a regional government without passing through Baghdad. The more attractive production-sharing agreements proposed by Erbil are sure to attract other foreign oil companies to operate in Kurdistan [Frances’s Total and Norway’s Statoil are also interested in developing oil fields in the northern province. On 31/07, Total announced that it acquired a 35% stake in two exploration blocks, Harir and Safen, in Kurdistan], thus increasing the pressure on Baghdad to review the commercial terms it is offering through its service contracts.
As the events unfold in Iraq, it is becoming increasingly clear that despite the withdrawal of US troops, the Americans are still called upon to ensure security and stability, whether in the north or in the south of the country. Oil deals signed in Kurdistan will help reassure the Kurds, particularly worried over the F-16 deal between Washington and Baghdad. “If ExxonMobil came, it would be equal to 10 American military divisions” Barzani once said. Similarly, military cooperation and the procurement of American weapons will help secure the southern region and its oil facilities. Equally important is the news that the USA intends to enhance its military presence in Kuwait to give its troops the ability to quickly intervene in case of a sudden conflict in the region.
As America adjusts to the withdrawal of its troops from Iraq, it is trying to equip itself with the necessary means to manage and monitor the situation from a distance. This new and rather indirect role does not seem to arouse as much hostility as its own military presence in Iraq used to generate in the past.