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KRG oil sales, revenues and expenditures between 2021-2022

The oil process in the Kurdistan region in (2022) compared to (2021), according to Deloitte data: • The amount of oil delivered by pipeline decreased by 5%. • The average price of a barrel of oil delivered to customers through pipelines has increased by 43%. • Oil revenues from pipelines increased by 36%. • The total revenue from the sale of oil in both pipelines and domestic has increased by 36%. • The total oil revenue returned to the region has increased by 44%. • The total oil expenditure of the region has increased by 30%. • The total fees for loading, transportation and expenditure of oil exported from the region (32%) decreased. • The average price of 1 barrel of oil sold in the region through pipelines has increased by 43%. • Cheap oil sales in the Kurdistan Region have increased by 41% for the average barrel of oil sold through pipelines. • Accordingly, the amount of oil sold domestically decreased by 7%. • The total value of crude oil and condensate sold domestically increased by (3%).

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The Kurdistan Regional Government owes $3.348 billion to oil companies

Draw Media In (2022) the Kurdistan Regional Government has paid back $ 1 billion and 115 million to the oil companies, which due to falling oil prices and the coronavirus could not be paid on time. The Kurdistan Regional Government (KRG) has repaid $331.104 million in loans to the companies in the first three months of last year, including $206.4 million to oil producing companies and $125 million to Turkish Companies. In the second quarter of last year, $422.465 million was repaid to oil companies in the Kurdistan Region, while in the third quarter, $194.220 million was repaid. In the last three months of last year, the Kurdistan Regional Government (KRG) has repaid $167 million and 478 thousand debts to oil companies. In addition to repaying the debts of both Turkish energy company and Turkish Petroleum Company The Kurdistan Regional Government (KRG) repaid $990.267 million to the other oil companies last year. Last year, an average of 9 percent of the oil sales were paid back to previous debts of the companies, which currently (KRG) owes $3.348 billion to oil companies.

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The oil values in Iraq and the Kurdistan Region in 2022

Draw Media Based on Deloitte reports, compared to the data of the Iraqi Ministry of Oil and the measures of SOMO, the value of oil in (Iraq and the Kurdistan Region) and the (KRG oil through SOMO) in 2022 is as follows; 🔹 The average cost of a barrel of oil in the Kurdistan Region was more than (45.93) dollars and in Iraq (13.38) dollars, in other words (54%) of the revenue of every barrel of oil went to the cost of the process and in Iraq only (14%) was the cost of the process. 🔹 If the Kurdistan Region had sold oil at the price and cost of SOMO, then instead of (39.06) dollars per barrel, (82.16) dollars would remain, that is, instead of returning 5 billion and 709 million dollars to the government treasury, (11 billion) dollars would return to the government treasury.   First, compare the oil prices of the Kurdistan Region and Iraq in According to the analysis, the Iraqi government in 2022, through the Iraqi Oil Marketing Company (SOMO) sold an average of $ 95.54 per barrel, the total value of oil sold was (115 billion 466 million 245 thousand) dollars. According to Duraid Abdullah, researcher and expert; “Foreign Oil Companies have 20% share out of 70% of the exported Iraq’s oil. "Iraq spent $16.1 billion last year on oil production," he said. According to this analysis, the return rate of Iraqi oil revenue was 86% and 14% went to the cost of oil processing. In other words, an average of $82.16 per barrel of oil sold returned to the Iraqi treasury and $13.38 was spent per barrel. But that is not true for the Kurdistan Region! According to Deloitte, the Kurdistan Regional Government in 2022, through the Kurdistan oil pipeline, sold an average of $ 84.99 per barrel and the total value of oil sold and delivered to foreign buyers (through the pipeline except domestic) was (12 billion 331 million 417 thousand 848) dollars and (90 million 843 thousand 46) dollars from domestic oil sales, but only (5 billion 709 million 704 thousand 87) dollars were put on revenue and the KRG General Treasury (Ministries of Finance and Natural Resources). Accordingly, the return rate of oil revenue was 46% and 54% went to the expenditure of the oil process. In other words, only $39.06 per barrel of oil sold in the Kurdistan region returned to the general treasury and $45.93 was spent per barrel of oil for the production process.

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TotalEnergies extends deadline to conclude $27bn Iraq deal

After negotiations nearly fell apart two weeks ago, the French firm gave until Feb. 15 to finalize a deal — a deadline now extended by one month. TotalEnergies has agreed to extend a deadline to finalize a $27 billion package of energy contracts with Iraq, creating more space for negotiations after the deal nearly fell apart earlier this month. The two sides have kept the deal alive through a long period of political limbo by issuing a sequence of two-month extensions, the latest of which was set to expire Feb. 15. That deadline has now been extended by one month, according to two Iraqi oil officials and one industry official familiar with the negotiations.

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The Kurdistan Region makes $38 and Iraq makes $82 in a barrel of oil

Oil values in Iraq and the Kurdistan Region in 2022 🔹 The average cost of a barrel of oil in the Kurdistan Region was more than (49) dollars and in Iraq (13.38) dollars, in other words (56%) of the oil revenue in Kurdistan went to the cost of the production process. 🔹 If the Kurdistan Region had sold oil at the price and cost of SOMO, then instead of $38.6, would have $82.16 left. Which means the KRG’s total net revenue would be $11 billion instead of $5 billion. Comparison of oil values in Kurdistan Region and Iraq in (2022) According to the analyses, the Iraqi government in 2022, through the Iraqi Oil Marketing Company (SOMO) sold oil for $95.54 per barrel on average. the total value of oil sold was (115 billion 466 million 245 thousand) dollars. According to Duraid Abdullah, researcher and expert; “Foreign oil companies have 20% share out of 70% of Iraq's oil exports." According to this information last year, Iraq have spent $16.1 billion for the oil production process. In other words, an average of $82.16 per barrel of oil sold returned to the Iraqi treasury and $13.38 was spent per barrel. But this is not true for the Kurdistan Region! Because according to analyses, the Kurdistan Regional Government in 2022, through the Kurdistan oil pipeline, on average sold oil for $87.58 per barrel. The value of oil sold was (12 billion 784 million 353 thousand 956) dollars, but the amount of (5 billion 625 million 115 thousand 741) dollars returned to the general treasury of the Kurdistan Regional Government. Accordingly, the return rate of oil revenue was 44% and 56% went to the expenditure of the oil process. In other words, only $38.65 per barrel of oil sold in the region returned to the general treasury and $49.2 per barrel was spent.

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PKK and Kurdistan Region vie for influence on Iraq-Syria border

DRAW: Reporter By: kurdpress Despite the defeat of the ISIS, some border crossings between Iraq and Syria are still unstable due to the conflict between Kurdish movements, especially the ruling Iraqi Kurdistan Democratic Party (KDP) in the Kurdistan Region and the Kurdistan Workers' Party (PKK), the Carnegie Endowment wrote. The Carnegie Endowment for International Peace reported that the PKK and the KDP are competing for control and influence over some border crossings, such as Simelka, between Iraq and Syria. This long analytical report emphasizes that in the past few years, new developments have occured on the Syrian-Iraqi border, with Kurdish movements competing over some border points between Iraq and Syria, including the Kurdistan Regional Government and the Kurdish Autonomous Administration in Syria seeking control over these points is remarkable. The report emphasizes that the PKK is trying to gain more control over some border crossings, such as Simelka and Ya'aroubia, through Syrian Kurdish forces as well as in some areas, such as Shingal. The Carnegie Endowment for International Peace has blamed Kurdish groups for competing in these areas for the weakness of the Syrian and Iraqi central governments in their complete control of the border areas and for their greater freedom of action. Among the effects of the control of Kurdish groups on the border crossings between Iraq and Syria, are the control of the Kurdistan Region and the Kurdish Autonomous Administration in Syria on the transportation of people and goods in these areas, according to the report. Regarding the PKK influence in these areas, the Carnegie Endowment for International Peace has pointed to its ideological and organizational ties to some local groups, such as the People's Defense Units (YPG) in Syria and the Shingal Resistance Forces. One of the consequences of these developments, Carnegie said, is the intensification of competition between Kurdish groups such as the KDP as the ruling party in the Kurdistan Region and the PKK. The Carnegie Endowment for International Peace also referred to the US alliance with the Syrian Kurds and the use of some border crossings between Iraq and Syria to transfer troops and equipment to Syria, as well as Turkey's willingness to take military action in these areas under the PKK. He also considered the two countries to be influential in the future of the border areas between Iraq and Syria, especially in Shingal region.

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CHALLENGES OF THE IRAQI KURDISTAN’S OIL SECTOR

DRAW: BY MOHAMMED HUSSEIN   Introduction  In the mid-2000s, the Kurdistan Regional Government (KRG), with the support of international oil companies, began investing in oil and gas infrastructure. In a relatively short period, it succeeded in both exporting its oil to international markets and using its produced gas to supply local power plants. However, the KRG failed to establish a successful economic policy to manage its natural resources. Such governance would have ensured managed growth and supported its oil and gas sector. Instead, the KRG’s oil and gas project became a root cause of a constitutional dispute with the Federal Government of Iraq (FGI) that resulted in political and economic damage to the region. Regardless of its lost opportunities, the KRG can still use the Kurdistan’s natural gas reserves to regrow its collapsed economy and achieve political stability. However, this is dependent on its willingness to implement structural economic reforms. The Hopes and Big Mistakes Underpinned KRG’s Energy Sector Kurdish officials were expecting their energy sector attract global and regional powers’ support to their historical Kurdish dream and cause. Initially, a significant number of multinational oil companies, such as ExxonMobil, GASPROM, Genal Energy and Total Global flocked to the region. While the KRG succeeded in attracting these companies, it failed to achieve political and economic overtures from Iraq and the international community. Instead, the region became subject to a retraction of its political relationship with FGI, regional powers and the international community. As a result, its economy faced significant damage.  Many Kurdish leaders saw the development of the Kurdistan Region of Iraq (KRI)’s oil sector as a significant political achievement. In this regard, in the region’s general election of 2013, the Kurdistan Democratic Party referenced the regions newly established oil pipelines as s symbol of economic growth and political success. This optimism was so confident and widespread across the Kurdistan Region that in 2013 all of the Kurdish political parties voted, without the necessary economic due diligence, to make Kurdish oil sales independent of the Iraqi Federal Government. At no point were the FGI’s threats to cut the KRG’s federal budget share taken seriously by the Kurdish leadership. The Kurdish leadership labelled its independent oil sales “an independent economy”. These Kurdish steps resulted in the Kurds’ selling oil independently of Baghdad, which cut off the Kurdish share of the Iraqi Federal budget. In the first year of independent Kurdish oil sales Kurdistan made an estimated oi-income $2.3 billion (this estimate does not subtract the money owed to private oil companies), when their share of the Iraqi Federal budget was 17%; estimated at $7 billion (without subtracting the sovereign expenditures). (1) These estimates reveal that under these new arrangements the Kurds lost 77% of the amount they should have received from FGI. This loss of income was the first shock of the KRI’s new economic model; however, for political reasons, the Kurdish leadership maintained their pursuit of this new economy. Since 2014, Kurdish oil sales have never compensated its cut budget from FGI. Basic Economic Truths Those who designed this new oil-based independent economy for the Kurdistan Region ignored the basic figures of the Iraq’s oil sector. No indicator suggests that Kurdistan could have been better off selling its oil independently. Contrary, all the figures show that Kurds will be worse off. The latest data regarding Iraqi and Kurdish oil exports reveal that in August 2019 the KRG exported 474,000 barrels per day, 13% of the amount exported by the Iraqi federal government (3.6 million barrels per day). (2) Aside from the low export numbers, Kurdish profits from oil sales have further reduced as a result of litigation surrounding the sector, which has presented Kurdish oil as a risky investment. Furthermore, the cost of extraction, marketing, and export of Kurdish oil is four times that of Iraqi oil. For example, to export one barrel of oil, FGI pays approximately $6 (3), while the KRG pays about $ 25 (4) and a further $18 as transit fees to Turkey and its linked companies. While the average price of the Kurdistan’s oil was $54 per barrel in the last quarter of 2018, the KRG only received $29 for each barrel(5). Knowing these simple facts, it is clear to see the extent of economic damage caused to the Kurdistan Region of Iraq, when Iraq cut the region’s 17% share national budget share. All these problems made the KRI unable to depend on its oil income, and it has kept depending on FGI’s monthly transfer. Many of the economic issues that currently face the KRG and the legal lawsuits that have blocked its oil and energy sector were for the most part expected. Iraq’s federal leaders warned Kurdish officials about these consequences; however, the Kurdish officials ignored them. The KRI’s Oil Gamble Until 2009, the most significant issue between Erbil and Baghdad was that of the Iraqi disputed territories, but when foreign oil companies flocked to Kurdistan the subject of the disputed territories shifted to a second-priority. Disagreements and discussions over the management of the natural resources (in particular oil and gas) became the issue that fuelled the degradation of relations between the two sides. As a result, the disagreements blocked the proposed oil and gas legislation from being passed, which in turn prevented the creation of a legal framework to resolve the issues. Relations between FGI and KRG continued to deteriorate to the extent that even the fight against a common enemy (the Islamic State of Iraq and Syria) had little effect in improving relations. Also, the Kurdish energy sector did not have many supporters in the international community. The events that followed the Kurdish independence referendum in October 2017 demonstrated how the global powers whose companies were working in the Kurdish energy sector (such as the United States, Turkey, the European Union, China and Russia) ultimately supported a united Iraq. They chose to remain silent on the Iraqi federal government and the Iraqi Popular Mobilisation Forces’ assault on the Kurdish held Iraqi disputed territories. This event alone and the subsequent loss of Kirkuk’s oil fields reduced Kurdish daily oil exports from 609,000  to 240,000 barrels. (6) This demonstrates that Kurdish oil and natural gas can’t serve the interests of international powers better than those of the FGI. The story of the Kurdish oil and gas sector and its independent economy began when Turkish companies like Genel Energy and the Turkish Energy Company invested in the KRI. Further to this, the KRG became entirely dependent on the pipeline that delivered its oil to the Turkish port of Ceyhan. The day following the Kurdistan independence referendum of September 2017, Recep Tayib Erdogan, the Turkish President, on an official visit to a joint military exercise between Iraq and Turkey on the border with Zaho threatened the KRI saying, “It will be over when we close the oil taps, all [their] revenues will vanish, and they will not be able to find food when our trucks stop going to northern Iraq.” (7)  It is now clear that most of the political plans and decisions that were taken by the Kurdish leadership were not well thought out. Instead, the methods worked to regress the gains in autonomy already made by the Iraqi Kurds since 1991. The KRG failed to take into considerations the threats and difficulties that the geopolitics of the region posed to its plans to create an independent economy. As a result, it was clear that the new Kurdish economy, which Kurdish officials termed independent, resulted in the opposite. The KRI regressed both politically and economically when they could have used the opportunity presented by the Islamic State’s invasion of Iraq to reconcile their differences with the FGI. If they had taken this step, then the international community would have supported them. Moreover, in 2014, 2015 and 2016, the United States helped to achieve financial and military agreements between the two sides. However, neither party was successful in reaching a deal as the political willingness did not exist for a resolution. Had the government in Erbil been willing to hand over control of the KRI’s oil in 2014 as it has today, the economic damage it is currently facing would have been significantly less. Furthermore, the territorial losses it suffered in October 2017 would not have occurred. Instead, the Iraqi government may have been willing to make more overtures to the KRG as it was in a significantly weaker position after losing one-third of its territory to the Islamic State.  Natural Gas in the Kurdistan Region of Iraq The KRG holds three percent of proven global gas reserves, which is estimated at 200 trillion cubic meters. (8) These reserves put the region at the eighth largest proven reserves in the world after the United Arab Emirates and more than that which Iraq has (112 trillion cubic meters). (9) If the Kurdish leadership takes lessons from its mistakes in the management of its oil sector, its natural gas reserves can be utilised as a new cornerstone for its economy and gain more political stability by selling its gas to the FGI. Natural gas is one of the Iraq’s most sought as it is required to resolve Iraq’s electricity shortages. The KRG’s Ministry of Natural Resources (MNR) had plans with Turkey’s Genal Energy to export its natural gas to Turkey. They planned to increase exports to 20 million cubic meters annually by early 2020. However, this plan was not implemented due to the events following the 2017 Kurdistan independence referendum and the war against the Islamic State. Following this, the KRG agreed with Russian Energy Company ROSNEFT to build a $1 million-gas pipeline to export the region’s natural gas to Turkey and the European countries. The proposed pipeline would have the capacity to ship 30 billion cubic meters of natural gas annually. (10) While investors and Kurdish officials want the KRG to export its natural gas to Turkey and the European Union, some economic experts believe that the best market for Kurdish natural gas is Iraq itself, not Turkey. By exporting to Iraq, the KRG can take significant steps towards achieving stability and its broader political goals. These objectives can form a part of any agreement on natural gas sales between the FGI and the KRG. If the KRG can broker a win-win deal, Kurdish natural gas will become a factor of political stability. It will play a role in reducing tensions between the two sides. However, if the Kurds press on with only exporting to Turkey and the European Union through the ROSNEFT pipeline, it is not clear what the KRI can achieve politically. If its previous oil sales are anything to go by, then challenges for relations between the FGI and the KRG are clear and worrying.  For the KRG, Iraq is a closed market and does not come with significant cost to establish an export infrastructure. Most of the Kurdish natural gas fields in the region are located around Sulaymaniyah, Chamchamal and Duhok, and they can be used to fuel the electricity power plants across Iraq. With such a deal, the KRI would be free from paying significant transit taxes to the Turkish government and companies. Currently, the KRG pays $6 per barrel to export its oil through its pipeline with Turkey and also pays taxes and other costs to the Turkish government. According to Deloitte’s figures, the KRG sells its oil for $29 per barrel in 2017. Based on this ROSNEFT and KAR Company, who owns the Kurdistan pipeline to Turkey, gain more than 20 percent of what the KRG gains. Moreover, the taxes and costs paid to the Turkish government are even more. The exact amount is unclear due to the lack of transparency in the Kurdish oil sector.  For Iraq, Kurdish natural gas would be a cheap and easy source of energy. Currently, the Iraqi government pays $11.23 per cubic meter of Iranian gas. In comparison, Germany purchases the same amount from Russia for $5.42 and Kuwait pays $6.49 for the same amount. (11) For Iraq, Iranian natural gas is not only expensive but comes with a significant headache for the Iraqi federal leaders as it must break the United States’ sanctions imposed on Iran. To import from Iran, the Iraqi government must agree to several U.S. conditions, and these conditions would get renewed every six months.  A deal between the FGI and the KRG can help Iraq move away from Iranian gas and replace it with the Kurdistan’s gas. Such a deal would pave the way for a strategic partnership between the two sides that will serve the interests of peace and stability on their border and create significant economic advantages for both parties. If Kurdish natural gas allows for Iraqi city’s like Baghdad and Najaf to meet their electricity needs, it will not be easy for Baghdad to take future decisions that would damage the KRG. On the flip side, if the FGI becomes main buyer of Kurdish natural gas and a significant source of the KRI’s revenue, it will become difficult for Kurdish leaders to utilise their 20th-century nationalistic rhetoric to endanger the economic interests. Moreover, given that both governments are under internal pressures to deliver services for their people, they have no choice but to put economic cooperation before their historic personal and ethnic divides.  On the international level, investment in the natural gas sector is on the increase as western governments are increasingly focused on delivering greener energy alternatives. For these government’s natural gas may be a more viable alternative to oil as it has a 30 percent less pollution rate. (12) Regarding business and markets, gas prices are more stable than those of oil. Oil is less stable and fluctuates in line with political, economic and military events. However, natural gas does not have a standard international price and relies more on agreements between buyers and sellers. The price takes into account geographies and the distance that the gas need to be transferred from seller to buyer. These facts reveal that the Kurdistan’s natural gas reserves can become a stable and reliable source of income compared to oil.  Without a doubt, after Iraqi Turkey can be viewed as the second-largest potential buyer, thereby diversifying its market. Currently, Russian ROSNEFT, which is one of the leading investors of Kurdish natural gas, wants to export Kurdish natural gas to Europe via Turkey. Moreover, Turkey is looking to reduce its reliance on natural gas from Iran, Russian and Azerbaijan. For this, the Kurdistan Region of Iraq is the closest and most suited source of natural gas for Turkey as several sources of the region’s natural gas is located in Duhok, on the border with Turkey. Therefore, Kurdistan can provide natural gas to Turkey and with significantly reduced costs.  For Oil and Gas, Kurdistan Needs a New Vision and Economic Policy To date, the KRG has engaged in an economic model that uses oil revenues to fund public services. This model places Kurdistan into the bottom of the list of rentier countries that subject to multiple crises. This rentier economy has proven to be a significant challenge to other countries elsewhere. For example, Saudi Arabia, producing more than 10 million barrels of oil per day, is now attempting to divert its economy away from oil dependency through its Vision 2030 Plan. In Kurdistan and Iraq, both officials and ordinary people are demanding the diversification of revenue-sources; however, these demands have yet to be acted on by the respective governments.  The plan for economic diversification is not a one or two-year policy decision; instead, it is a process that requires long time period. It needs implementing at a specific time where the income from oil and gas can support the introduction of new industries into the economy. Decisions to diversify revenue sources cannot only be taken as a response to crises to calm discontent and not be acted on, as happened in the KRI when its government responded to the 2017 economic crash. Income from Kurdish oil and gas sales can be utilised to reinvigorate the KRI’s economy and infrastructure. It can also be used to improve the state of public services. Instead, what we see is this income is funding a huge payroll with millions of employees, but one that cannot improve public services. It is for the KRG to take the final decision on which of these paths it wishes the Kurdistan to be on. If it continues on its current path, then it should expect to face continued crises like that of 2017. On the flip side, the KRG can choose a reform path, like the models currently under implementation by Iran and Saudi Arabia, to diversify its economy away from oil. The majority of literature written on the rentier economic model sees the model in a negative light, describing it as an “oil curse”. It begins with the fundamental truth that the nature of income and sources of income that a state relies on ultimately dictates its political character. If a government relies solely on the revenue it receives from the sale of natural resources, it will have no motivation to serve the interests and demands of its citizenry. Moreover, it makes the public powerless and unable to influence the government of the day. Hence, the level of democracy and human rights is comparatively lower in rentier states. If a government and political leaders have enough wealth at their disposal that they can effectively purchase the hearts and minds of its people then that government has no motivation to change and will continue to govern through the distribution of wealth.  For the KRG, the same is true. If it wants to have better and more fitting governance, then the rentier model that it currently engages does not serve this will. It is for this reason that a program of economic reform to move away from oil and gas must be a primary objective of the KRG. Going forward, the KRG must provide employment and develop its economy through new economic sectors such as agriculture, tourism and business. Moreover, any income that it receives through the sale of its oil and gas should be reinvested in those sectors. The KRG’s current model is intrinsically weak and cannot continue to provide for the Kurdistan Region indefinitely. Moreover, it will continue to make the region unstable, in particular as it is susceptible to economic shocks and turbulence internationally. Oil and gas is only a curse because it is mismanaged, if it is managed and reinvested correctly, then oil and gas could be blessing for the Kurdistan. Conclusion  The KRI made a significant investment in its oil and gas. It was able to attract international companies into the KRG’s gas sector. However, numerous economic and political mismanagement and wrong calculations around the industry brought the region into a confrontation with the FGI. This confrontation caused significant damage to the region. Most of the economic and political objectives behind the attempt to make the Kurdistan’s independent oil sales failed to materialise; instead, its effort in most cases had the reverse effects. However, this is not the end of the road as the Kurdistan Region still maintains the opportunity to take advantage of its economic resources to develop its economy and achieve political stability.  The Kurdistan Region’s gas reserves can become a significant source of income for the region and become a factor for achieving political stability between Erbil and Baghdad. In effect, the Kurdistan’s natural gas reserves provides the region with a second chance to reach the objectives it has set itself and failed to meet previously with its oil sales. To achieve these objectives, Kurdistan must synchronise economic reforms with the sale of natural gas. It must take the window of opportunity to diversify its economy away from a renter model. While Kurdish natural gas reserves are vast and have the potential to provide a significant income for the Kurdistan Region, if economic reforms are ignored, then the Kurdistan Region will become subject to the same problems that it has faced in its recent sale of oil.   References (1) Hussein, Mohammed. 2018. The Collateral Damage of the KRI’s Economic Policy. Middle East Center. Accessed 2019. https://blogs.lse.ac.uk/mec/2018/04/17/the-collateral-damage-of-the-kris-economic-policy/. (2) KULLAB, SAMYA. Total Iraqi oil exports rise to 4.077m BPD in August. Iraq Oil Report. https://www.iraqoilreport.com/news/total-iraqi-oil-exports-rise-to-4-077m-bpd-in-august-42079/ (3) KNOEMA Cost of Oil Production by Country. https://knoema.com/vyronoe/cost-of-oil-production-by-country.  (4) Deloitte. 2019. Kurdistan Region – Iraq Oil & Gas Sector Review January 1, 2017, to June 30, 2017. KRG. Accessed 2019. http://previous.cabinet.gov.krd/uploads/documents/2018/KRG_Oil_and_Gas_Sector__Infographics_ENG_KU_AR.pdf. (5) KRG. 2019. Oil production, export, consumption and revenue for the period October 1, 2018, to December 31 2018. May 26. Accessed September 12, 2019. http://previous.cabinet.gov.krd/uploads/documents/2019/q4/Q4_2018_Public_Report.pdf. (6) Roberts, John M., 2018. “TURKEY AND THE KURDISTAN REGION OF IRAQ: STRAINED ENERGY RELATIONS .” Turkish Policy Quarterly. (7) BBC. 2017. Iraqi Kurds must give up on independence or go hungry - Erdogan. September 26. Accessed September 10, 2019. https://www.bbc.com/news/world-middle-east-41398199. (8) Ministry of Natural Resources. 2013. Vision. August 25. Accessed September 11, 2019. http://mnr.krg.org/index.php/en/gas/vision-gas. (9) IndexMundi. n.d. Natural Gas Reserves by Country. https://www.indexmundi.com/energy/?product=gas&graph=reserves&display=rank.  (10) Ministry of Natural Resources, Kurdistan Regional Government. 2017. “KRG and ROSNEFT Deal on Construction of Natural Gas Pipeline, Exports Expected in 2020.” http://mnr.krg.org. September 18. Accessed September 10, 2019. http://mnr.krg.org/index.php/en/press-releases/596-krg-and-rosneft-deal-on-construction-of-natural-gas-pipeline,-exports-expected-in-2020. (11) BP. 2018. “BP Statistical Review of World Energy.” https://www.bp.com. BP. June. Accessed September 9, 2019. https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2018-full-report.pdf. (12) Energy Matters. n.d. Is natural gas environmentally friendly? https://www.enbridge.com/energy-matters/energy-school/natgas-enviro-friendly.

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Bitcoin is a ‘Chinese financial weapon’ that threatens the US dollar

DRAW: The Chinese government may be supporting bitcoin as a means to undermine the foreign and monetary policy of the United States, PayPal co-founder and venture capitalist Peter Thiel has said. He added that Beijing has tried to use the euro in the same way. Speaking at a virtual event hosted by the Richard Nixon Foundation, Thiel, who is a major investor in virtual currency ventures as well as in cryptocurrencies themselves, said that the US should consider tighter regulations on cryptos.  While commenting on whether China’s central bank-issued digital currency (CBDC) could threaten the US dollar’s status as a global reserve currency, the businessman suggested that an “internal stablecoin in China” will amount to little more than “some sort of totalitarian measuring device.”   He said: “From China’s point of view, they don’t like the US having this reserve currency, because it gives a lot of leverage over oil supply chains and all sorts of things like that.  “Even though I'm a pro-crypto, pro-bitcoin maximalist person, I do wonder whether if, at this point, bitcoin should also be thought-of in part as a Chinese financial weapon against the US, where it threatens fiat money, but it especially threatens the US dollar.” Thiel also said that China attempted to denominate oil trades in euros in recent years, in a bid to undermine the global standing of the dollar. “I think the euro, you can think of as part of a Chinese weapon against the dollar – the last decade didn’t really work that way, but China would have liked to see two reserve currencies, like the euro.”

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Gas in Iraqi Kurdistan: Market Realities, Geopolitical Opportunities

DRAW:  by Matthew Zais, Barozh Aziz, Rob Waller - washingtoninstitute U.S. and Iraqi Kurdish officials discuss the future of the region's natural gas sector, including proposals for surmounting various political and commercial hurdles. On January 12, The Washington Institute held a virtual Policy Form with Matthew Zais, Barozh Aziz, and Rob Waller. Zais is the principal deputy assistant secretary for the U.S. Department of Energy’s Office of International Affairs. Aziz is a senior advisor to the Kurdistan Regional Government’s minister of natural resources. Waller is the U.S. consul-general in Erbil, America’s top diplomat to the Kurdistan Region. The following is a rapporteur’s summary of their remarks. Matthew Zais Iraq’s gas situation is unique. Although the country possesses vast natural gas resources, it flares significant amounts of this potential supply and therefore remains dependent on neighboring countries for its energy needs. Gas resources in the Kurdistan Region of Iraq (KRI) will be critical in developing a solution to this challenge. KRI gas issues are not simply another aspect of U.S. policy toward Iran. Developing this sector will permit greater Iraqi energy production for both domestic consumption and exports to Turkey and other neighbors. It will also allow for greater economic integration inside the KRI and with federal Iraq, creating benefits for the entire country. The United States recognizes the importance of energy cooperation with the KRI, as the International Development Financing Corporation has demonstrated by supporting American oil and gas companies working on projects in the region. Any effort to further develop the KRI gas sector will face several challenges. Political hurdles include a dearth of collaboration between international oil companies and Kurdistan’s Ministry of Natural Resources. The abundance of sour gas in the area will require additional investment and technical expertise. From a commercial standpoint, the lack of a benchmark gas price is the central problem. Despite these barriers, the KRI has the potential to produce 40 billion cubic meters of gas annually by 2035, compared to the current level of 5 bcm per year. This vision can be achieved through a gradual process rather than an approach that focuses solely on large-scale projects. View Matthew Zais's presentation on Slideshare. Cooperating on natural gas and electricity production can bring the Kurdistan Regional Government and Iraq’s federal government closer together. The KRI’s energy potential could help ease the tensions that surround yearly budget discussions. Addressing this friction would improve the region’s business climate by giving international oil companies greater certainty about financial flows. Exports of gas-produced electricity—“gas by wire”—from the KRI to federal Iraq are already occurring and are more viable than other proposed solutions to the country’s electricity woes (e.g., interconnection with power grids in Gulf Cooperation Council countries or Jordan). An eventual gas-by-pipeline connection with Turkey would likely start from Duhok, but this would not preclude gas-by-wire exports before that point. Iran consistently attempts to put a damper on Iraqi energy development through its political influence, as it wants to sustain the country’s dependence on Iranian energy and electricity imports. Tehran also manipulates its energy supplies for political ends. Iraqi politicians must find a way to overcome this challenge. Gas pricing is a crucial issue in the KRI’s relatively undeveloped market. The pricing framework must provide investors and Kurdish authorities with adequate returns while also attracting consumers to use natural gas. Two benchmarks merit close consideration: the highly competitive Turkish market, which has several sources of imported supply as well as a recent domestic gas discovery; and the Iraqi domestic market, which relies mostly on oil along with Iranian gas imports and a small amount of domestic gas. In addition, pricing will be affected by the high hydrogen sulfide content of Kurdish gas, which necessitates expensive processing upon extraction. Electricity sector reforms that address subsidies—especially those that encourage oil consumption—are also needed to develop a fair market price. The KRI has enough gas resources to export to federal Iraq and Turkey while still meeting domestic demand. Small-scale exports would likely begin via existing pipeline infrastructure. If the sector develops swiftly, it should be able to compete for Turkish supply contracts that open up as Ankara’s gas deal with Iran expires in 2026. The federal Iraqi market is much less competitive because current Iranian gas imports do not meet demand, so the KRI should be able to increase supply to the rest of the country whenever it develops the necessary capabilities. Barozh Aziz Iraqi Kurdistan struggles with a shortage of electric power. Several power station turbines are idle simply due to the unavailability of fuel. This lack of electricity hinders business development in the region, and the use of at-home diesel generators in response to power blackouts is detrimental to the environment and public health. These challenges are not caused by insufficient power generation capacity, as the region has enough capacity to share with the rest of Iraq. Development of Iraqi Kurdistan’s gas sector would help address these problems while providing the region’s residents with job opportunities. Gas investment is an inherently long-term deal, which only increases the importance of a predictable business environment. Annual budget disputes create significant uncertainty that undermines Iraqi Kurdistan’s gas sector; cooperating on gas issues with U.S. support could help build trust and alleviate this problem. The industry must also develop a solution for the high sulfur content of the region’s gas, a challenge that has stymied midstream investment. Iraqi political tensions, the threat of the Islamic State, and the ongoing COVID-19 pandemic have been hindrances as well. The oil experience in Iraqi Kurdistan can inform the future of the gas sector. The region did not initially possess the expertise or finances needed to develop an oil industry, but it was able to attract these elements from international oil companies. The Ministry of Natural Resources has the experience and leadership needed to apply the same methods toward developing its gas resources. Rob Waller Iraqi Kurdistan’s immense supply of hydrocarbon reserves and human capital make it an exciting place to invest, and the State Department will continue to support U.S. companies looking to enter or expand their footprint in the region. In order to attract foreign investment, the KRI must create a more transparent, competitive business environment. A recent study sponsored by the U.S. Energy Department highlights areas where the Kurdistan Regional Government can make improvements that help unlock its full economic potential. The study also points out areas where the KRI and the Iraqi federal government can cooperate. One particular point they can work together on is electricity sector modernization, which should occur alongside development of the gas sector. For example, transitioning diesel power plants to natural gas would allow for greater power generation at a lower cost. The International Development Financing Corporation has been funding expansion of the Khor Mor gas project, an important initial step in fostering greater energy cooperation between the United States and the KRI. The success of this endeavor has generated increased interest in future U.S. involvement with major energy infrastructure projects. The U.S. government is also committed to bridging the trust gap between the Kurdistan Regional Government and the Iraqi federal government. Energy sector cooperation between them will help build trust that can lead to a fairer revenue-sharing agreement. Political cooperation between the Kurdistan Democratic Party and the Patriotic Union of Kurdistan is also a priority for U.S. gas development policy. The United States is optimistic despite heightened tensions in the KRI, since recent protests may lead both parties to recognize that cooperation breeds prosperity.  

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Production restarts at Sarqala

DRAW: Iraq Oil Report Days after the field was shut down because of disputes between politically connected trucking companies, the Kurdistan region has regained 30,000 bpd of production.   The Sarqala oil field has restarted after a dispute within the Patriotic Union of Kurdistan (PUK) party led to the temporary shutdown of its 30,000 barrels per day (bpd) of production. "It has been two days since we have resumed trucking oil from Garmiyan oil block to Khurmala, following a meeting with the deputy minister [of the KRG Ministry of Natural Resources], Ahmed Mufti,” said an official from Keep Of Oil, the subcontractor responsible for trucking oil from Sarqala to the Kurdistan region’s export pipeline. This content is for registered users. Please login to continue. If you are not a registered user, you may purchase a subscription or sign up for a free trial. Iraq Oil Report Attribution Policy All sources quoted or referenced spoke to Iraq Oil Report directly and exclusively, unless stated otherwise. Iraq Oil Report typically grants anonymity to sources that can't speak without risking their personal safety or job security. We only publish information from anonymous sources that we independently corroborate and are important to core elements of the story. We do not provide anonymity to sources whose purpose is to further personal or political agendas. Iraq Oil Report Commitment to Independence Iraq Oil Report strives to provide thoroughly vetted reporting and fair-minded analysis that enables readers to understand the dynamic events of Iraq. To meet this goal, we always seek to gather first-hand information on the ground, verify facts from multiple angles, and solicit input from every stakeholder involved in a given story. We view our independence as an integral piece of our competitive advantage. Whereas many media entities in Iraq are owned or heavily influenced by political parties, Iraq Oil Report is wholly owned by several of its employees. In a landscape that is often polarized and politicized, we are able to gather and corroborate information from an unusually wide array of sources because we can speak with all of them in good faith. To fund this enterprise, Iraq Oil Report depends on revenue from both advertising and subscriptions. Some of our advertisers and subscribers ‐ including companies, governments, and NGOs ‐ are also subjects of our reporting. Consistent with journalistic best practices, Iraq Oil Report maintains a strict firewall that removes business considerations from editorial decision-making. When we are choosing which stories to report and how to write them, our readers always come first.

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P.U. K uses gas as a pressure card against K.D.P

A report by :Fazil Hama Raffat and Muhammed Rauf. The Patriotic Union of Kurdistan (PUK) is putting and testing a new pressure upon the Kurdistan Democratic Party (KDP). PUK wants to fight against the “PDK oil” with natural gas and start a strong economic and political relationship with Baghdad. Now, part of the natural gas in PUK areas reaches Afghanistan from Chamchamal every day. More details in this report by “Draw”  Does PUK make a decision?  This month, the Political Bureau of the Patriotic Union of Kurdistan will meet to discuss the latest PUK’s stance on its relations with the KDP. PUK asks for the implementation of administrative and financial decentralization for Sulaymaniyah Province, This project has not yet taken significant steps after a few months. PUK has given the KDP and the Prime Minister, Masrour Barzani ,the last permission to make their decision. If the project doesn’t start soon, it is said that PUK will make its final decision.   PUK’s decision! PUK movements have recently increased in Iraq, Lahur Sheikh Jangi, PUK co-leader, has been in Baghdad several times and meets Mustafa Kazmi, the prime minister and other Iraqi officials. PUK wants to achieve a kind of decentralization to the territories which are under its rule through the Iraqi government. For this, PUK has brought up the gas file. There are three gas-rich areas In Iraq, the PUK-controlled area is one of the richest areas. PUK wants to use this gas to strengthen its economic and political position against the KDP-controlled areas, which is the leading oil producer in the region. According to “Draw” report, there is an idea in the PUK that has not yet been fully outlined. The idea is to build a company called the Sulaimaniyah Gas Company. It will be joint between Sulaimaniyah province and the Iraqi oil ministry and it controls all the oil and gas fields in the PUK-controlled areas (Taq Taq, Kor Mor, Hasira,and Chia Surkh), including the fields in Kirkuk and Khanaqin borders.  "The PUK border gas can fill Iraq's internal needs and make Iraq no longer need to buy gas from Iran to operate power stations," said energy experts at the PUK. The Americans support this step and the United States has received guarantee from U.S. energy officials on this, but such a step may make Iranians worried and angry, especially when Kurdistan’s gas will be an alternative to Iran's gas in Iraq. In addition, 45,000 barrels of oil are produced daily in the PUK-controlled area, and the PUK wants to increase its oil investment level to 72,000 barrels per day through the agreement with Baghdad. PUK wants to do all this on the condition that Baghdad separately provide salaries separately for employees in the Sulaimaniyah border and deal directly with Sulaimaniyah province, not through the Kurdistan Regional Government and the KDP. This could be the reason that Masrour Barzani, the head of the regional government, recently said in front of the Kurdistan Parliament that some cases cannot be touched, as they may lead to the outbreak of civil war. To hand over gas and oil to Iraq, the PUK has resorted to Article 112 of the Iraqi constitution, which says oil and gas are run jointly between the federal government, the region and the provinces. In the PUK-controlled area in Garmian, there are two fields, Kurdamir and Topkhana, which are now escalated into conflict between the KRG and a company in the area of Sulaimaniyah (Petrolium Dynasti), the company is very close to the PUK. The Sulaimaniyah company in London Court has filed a lawsuit against Ashti Hawrami and wants to get a contract to invest in the fields, and in February this year, the Court will make its final decision, and if the Kurdistan Regional Government loses this case to the Dynasty Company, it will cause greater economic and political damage to the energy sector. The two fields, apart from oil, also has natural gas, but it has not been produced yet. Those who work for the PUK, dream of having the Turkish companies to invest gas in Garmian's fields and export it to Turkey after developing the fields and increasing the level of investment. It is unclear whether the Iraqi government will eventually reach such an agreement with the PUK. According to information achieved by “Draw”  from some PUK officials that Mustafa Kazmi, the Prime Minister of Iraq, is in favour of this scheme, but the problem is that it is unclear whether Kazmi will stay as the Prime Minister or not, especially when Iraq is in front of a pre-election. Gas in Kurdistan Region According to the official website of the Ministry of Natural Resources, the Kurdistan Region has 200 trillion cubic feet (5.7 trillion cubic meters) of natural gas reserves, which is 3% of the world's gas reserves. But this is the reserve that has not been proven, as the region's proven natural gas reserves, according to U.S. energy reports are only 25 trillion cubic feet. The Oil Price magazine which is a specific publication about energy, reported that last year only 10 trillion cubic feet were found and worked on, which is now produced in the PUK border in Kor Mor. The natural gas of Kor Mor field in Chamchamal, is produced by the United Arab Emirates — Dana Gas Company. The company now produces 430 million cubic feet, which was 850 tonnes over the past three years, showing that the UAE company has increased its investment level. The Kurdistan Region's natural gas reserves are mostly in the PUK-controlled area. Generally and geographically gas can be found in the following areas: PUK-controlled area reserve:   • Kor Mor Field: 8 trillion and 200 billion cubic feet Chamchamal Field: 4 trillion and 400 billion cubic feet Miran Field: 3 trillion and 46 billion cubic feet KDP-controlled area reserve:   • Bina Bawi field: 7 trillion and 100 billion cubic feet • Khurmala: 2 trillion and 260 billion cubic meters • Palkanafield: one trillion and 600 billion cubic feet • Shekhan Field: 900 billion cubic feet • Pirmam Field: 880 billion cubic feet The Kurdistan Region's gas is transferred to Afghanistan Generally, kurdistan region's natural gas is still used for local needs, meaning it is used for fuel power stations and provide household gas. What is known so far is that the Kurdistan Region's gas is not transferred to another country, but according to the information “Draw” has  gained from several sources at the Bashmakh border, the company that buys the gas of the Kor Mor Field, is illegally exporting 7 to 10 tanks of Liquefied petroleum gas (LPG) daily and the gas is taken to Afghanistan In the past few days, the Washington Institute has published a report on the Kurdistan Region's gas content. The report was about the discussion between the American and Kurdish officials on the future of gas in the region. One of the people who spoke in the meeting was Matthew Zais. He is the principal deputy assistant secretary for the Energy Department's Office of International Affairs. Matthew says: Kurdistan Region can increase the annual level of natural gas investment to 40 billion cubic meters by 2035, compared to the current level of gas investment in the region which is 5 billion cubic meters annually.  Matthew Zais has explained that co-operation in gas and electricity production may lead them to have better relationships.  Kurdistan Region's capacity in the field of energy will reduce the complexity between the region and Baghdad over the annual budget. It will also improve the circumstances in the region by giving guarantees to the worldwide oil companies in the field of oil. Matthew Zais, in another part of his speech, points out that the Kurdistan Region's power grid (electricity) is essentially generated by gas and it is exported to Iraq. Exporting electric power form Kurdistan Region to Iraq is more reasonable than the other suggestion which have been proposed to solve Iraq's electric power problems, including the suggestion to link Iraq's electric power to the power grid of the Gulf Cooperation Council (GCC) or Jordan. The US official expects that, like the region's oil exports to Turkey, the region's gas pipeline to Turkey will eventually be built, but he points out that Iran is constantly trying to restrict energy development in Iraq through its hegemony. Because according to him, Iran does not want Iraq to depend on its energy and electricity abilities. In addition, Iran is using its energy in Iraq for political purposes, so Iraqi officials must find a way to get rid of this challenge. The U.S. Consul General in Erbil, Rob Waller, said in the meeting that under the supervision of the U.S. Ministry of Energy, a recent study has been conducted on the fields in which the Kurdistan Regional Government can reform them in a way that can be rehabilitated and get benefit from them economically. One of the fields which was described in the research is the cooperation between Kurdistan Regional Government and the Iraqi Government in electricity sector which should be renewed with the development of gas sector. Changing the power stations that use diesel to natural gas leads to less cost and more production.  The American council states that the cooperation between KDP and PUK is an important priority in the public policy of the United States to develop gas sector in the region. He said in spite of having the tensions in the region, recent protests have prompted both parties to admit that their cooperation will revitalize the region, Rob Waller said. Bahroz Aziz is a senior advisor to the Kurdistan Regional Government's Minister of Natural resources, attended the Washington Institute meeting and has mentioned the obstacles in front of the Kurdistan Region's gas field to develop. Aziz also said that developing Kurdistan Region's gas sector will result in the end of using generators to provide household electricity. The generators use diesel which pollute the environment and would be harmful for public health, and the development of this sector will provide job opportunities for the residents of the region. The presence of large amounts of Sulfur in the Kurdistan Region's natural gas is one of the obstacles to the development of the Kurdistan Region's gas field, said Bahroz Aziz. He also said having a lot of sulfur in the gas has paralyzed investment in the region's gas, this is alongside some other reasons such as the danger of ISIS and the spread of The Coruna virus. despite this situation, the senior advisor to the Kurdistan Regional Government's minister of natural resources is optimistic about the future of gas in the region, saying: "The region did not have the expertise and money to develop its oil sector at first, but it was able to attract international companies and achieved both. The Ministry of Natural Resources needed experience and leadership to implement the same tools in the development of gas resources.  

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