In Iraq, Exxon oil deal foments talk of civil war

“It is the responsibility of the government to defend Iraq’s sovereignty,” Deputy Prime Minister Hussain al-Shahristani said in an interview, warning that if Exxon chooses to operate in disputed territories, “they would be committing a grave mistake.”

The Obama administration did little to discourage the Exxon deals, and it has not taken action to prevent the company from drilling next year, according to several U.S. officials. But American diplomats have mediated between leaders in Baghdad and the Kurdish capital of Irbil. They helped Iraqi army and pesh merga commanders agree on a plan in which all forces would have returned to their pre-crisis positions, but the plan was rejected — by Barzani, or Maliki, or both, according to varying accounts.

In Iraq, Exxon oil deal foments talk of civil war

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On Thursday, with American assistance, Iraqi President Jalal Talabani, a Kurd, brokered an agreement between Maliki and Barzani to tone down their public statements and form a committee to create a solution for security in disputed areas. But neither side has committed to military demobilization. Talibani was in intensive care at a Baghdad hospital Tuesday after reportedly suffering a stroke.

Meanwhile, Exxon’s contracts with Iraqi Kurdistan contain strict timelines. At the beginning of 2013, the company will begin surveying and other work in the disputed blocks, and Exxon plans to begin exploration drilling in the summer, according to an official who is close to the company and has direct knowledge of its plans. Changes would have to be negotiated with authorities in the Kurdistan region, said the official, who spoke on the condition of anonymity because of political sensitivities. An Exxon spokesman declined to comment on the company’s intentions, but the oil giant has a reputation for adhering to the letter of its contracts.

As Exxon ramps up, both Maliki and Barzani have political incentives not to back down.

Barzani has enjoyed a surge in stature as the fractious parties within Iraqi Kurdistan rally behind him against a common threat. He visited the pesh merga’s front lines in Kirkuk on Dec. 10 — a provocative move that demonstrated his physical control over that especially sensitive territory.

A day later, a procession of Maliki-aligned politicians denounced what they termed a “war visit.” They are also rallying a coalition in parliament to slash 2013 federal funding for the Kurdistan Regional Government.

The Kurds still rely on Baghdad for the vast majority of their budget, but they have taken steps to create their own oil sector, signing nearly 50 contracts with international companies, increasing the Kurdistan region’s control over its revenue streams. The Kurds could sever their economic dependence on Baghdad if they finalize a deal being negotiated with Turkey for oil exploration and pipelines.

Maliki’s advisers argue that Iraqi Kurdistan has more to lose from a civil war, because foreign companies are attracted by the region’s excellent security, whereas those that invest in southern Iraq anticipate a risk of violence.

“All of their success is built on the assumption that it’s a stable region,” said Askari, the Maliki ally. “Instead, it will be a conflict region.”