Page 8 - MEOG Week 38 2021

MEOG POLICY & SECURITY MEOG

SOMO yet to receive

any Kurdish oil

IRAQ DESPITE now being in the second half of Sep- should seek to “solve outstanding problems
tember, Iraq’s Federal and Kurdish Regional through dialogue, exchange and respect of
Governments (KRG) still appear some way short views while placing the national interest above
of an agreement to end lengthy arguments about all considerations”.
oil sales. He also expressed “hope” that the meetings
In late March, the Iraqi Cabinet passed an and dialogues with the KRG, especially after
agreement pegging the 2021 budget at IQD130 Minister Al-Atrushi assumes his duties, would
trillion ($89.65bn) with a deficit estimated at “open a new page of serious objective dialogue to
IQD28.7 trillion ($19.79bn). With the country solve outstanding problems and serve the Iraqi
97%-reliant on oil exports, the budget is based people from north to south”.
on an oil price of $45 per barrel with total exports While Erbil continues to wait for its $11.36bn
averaging 3.25mn barrels per day (bpd). share of the 2021 budget, Baghdad has shown
As in previous budgets, the KRG will receive goodwill by sending a combined IQD400bn
12.67% of the total, though this is contingent on ($276mn) in advances during July and August
it handing over the net revenues from 250,000 to cover the salaries of civil servants, though it
bpd of oil exports to Iraq’s state oil marketer has been stressed that these were not budget
SOMO and giving the revenues to the central payments.
treasury.
This week SOMO said that it is yet to receive Sales
any crude from the KRG, no doubt adding fuel Meanwhile, speaking to the official Iraqi News
to calls from Iraqi MPs for a tougher line on the Agency (INA) this week, SOMO’s director-gen-
KRG. Early this year, 113 MPs, mostly Shi’a, sug- eral Alaa Al-Yasiri provided some explanation
gested that section 2a of article 11 of the budget for the aborted $4bn crude pre-payment deal
should read: “The Kurdistan region will abide by earlier this year with China’s Zhenua Oil Co.
sending 460,000 barrels of oil per day to SOMO, “The adoption of the advance payment
and in case of overproduction, they abide by method came for the purposes of supporting
sending the excess amount to SOMO as well.” the financial resources of the Iraqi state treasury,
While the KRG was never likely to agree to which was suffering greatly from the decline in
this, Erbil has committed to a minimum produc- financial revenues to the public budget as a result
tion level of 460,000 bpd. of the decline in oil prices to very low limits due
The lack of crude transfer to SOMO is unsur- to the Corona pandemic,” he said.
prising and illustrates the challenges faced by Al-Yasiri added: “The referral was not made
Iraqi Oil Minister Ihsan Abdul Jabbar and Kurd- at the time, as crude oil prices witnessed a recov-
ish Minister of Natural Resources (MNR) Kamal ery as a result of the decisions of [OPEC] and its
Hamid Al-Atrushi. allies to reduce production.”
Following an August meeting between the With crude prices remaining buoyant, the
two, Iraq’s Ministry of Oil (MoO) released a MoO cancelled the prepayment crude supply
statement expressing “readiness to work to deal agreed with Zhenhua Oil in December.
remove all technical and financial problems and Progress on the contract was stalled in February
obstacles in order to preserve the national wealth as Baghdad benefited from rising oil prices and
that belongs to the Iraqi people according to the in June SOMO said the crude allocated for the
provisions of the constitution”. prepayment had been sold to other customers.
According to the statement, Abdul Jab- The move was unsurprising given the dra-
bar stressed to his Kurdish counterpart the matic increase in crude prices. Zhenhua’s pre-
importance of high transparency between the payment deal assumed a price of $41.67 per
administrations in relation to the management barrel, while the average price achieved by
of oil wealth throughout Iraq, noting that they SOMO in July was $72 per barrel.™

P8 www. NEWSBASE .com Week 38 22•September•2021