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Published: Sunday January 12, 2014 MYT 11:35:01 PM
Updated: Sunday January 12, 2014 MYT 11:35:55 PM

Iraq's Maliki threatens to cut funds if Kurds pipe oil to Turkey

Iraqi Prime Minister Nuri al-Maliki speaks at a United States Institute of Peace (USIP) forum on Iraq's transition in Washington October 31, 2013. REUTERS/Yuri Gripas

Iraqi Prime Minister Nuri al-Maliki speaks at a United States Institute of Peace (USIP) forum on Iraq's transition in Washington October 31, 2013. REUTERS/Yuri Gripas

BAGHDAD (Reuters) - Iraqi Prime Minister Nuri al-Maliki threatened on Sunday to cut central government funding for Iraq's autonomous Kurdistan region if the Kurds pursued a drive to pipe oil exports to Turkey without Baghdad's approval.

The Kurdistan Regional Government said last week that crude had begun to flow to Turkey and exports were expected to start at the end of this month and then rise in February and March.

"This is a constitutional violation which we will never allow, not for the (Kurdistan) region nor for the Turkish government," Maliki told Reuters in an interview.

He reiterated Baghdad's insistence that only the central government has the authority to manage Iraq's energy resources.

"Turkey must not interfere in an issue that harms Iraqi sovereignty," Maliki said.

The central government and the Kurds differ over how to interpret the constitution's references to oil and how revenues should be shared. The Kurdish share was set at 17 percent after the U.S.-led invasion in 2003, although the Kurds frequently complain that they get less than that.

Maliki said the Kurds had not met their budgeted commitment to export 250,000 barrels per day of oil, with the revenue going to the national treasury, but that so far the government had not retaliated by reducing their share of the budget.

"We did not do that as we did not want to affect the Kurdish people and we were looking to find acceptable solutions...that would preserve national unity and the national wealth, but this year the situation looks difficult," Maliki declared.

Referring to a dispute over the costs of oil companies operating in Iraqi Kurdistan, he said: "We have been telling these companies...give us the oil and we will pay your costs, but they did not deliver, so there will be no payments."

Maliki said it was unfair to expect Baghdad to pay the oil firms' costs, plus the Kurds' 17 percent budget share, when the oil revenue was not being channelled through the government.

In October 2012, the Kurds agreed to export an average of 250,000 bpd in 2013 if Baghdad paid the operators in the region. As the wrangling went on, the Kurds stopped pumping oil via the Baghdad-controlled pipeline to Turkey, instead exporting smaller quantities by truck and taking the revenue directly.

Iraqi Kurdistan has prospered over the past decade, largely escaping the violence unleashed in the rest of the country after the U.S. invasion that toppled Saddam Hussein.

Kurdish leaders say they prefer the region to remain part of a federal Iraq, rather than seeking secession, but oil is a highly sensitive issue in volatile relations with Baghdad.

Companies that have risked exploring for oil in Iraqi Kurdistan had welcomed its plans to pipe oil to Turkey as a signal they might begin to generate export income from their investments, despite Baghdad's objections.

Those companies include Gulf Keystone, Genel Energy, Norway's DNO, Hungary's MOL and Britain's Petroceltic and Afren.

(Additional reporting by Isabel Coles in Arbil; Writing by Alistair Lyon, editing by William Hardy)

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