* Kurdish leader says no practical progress in negotiations
* Kurds to seek new relations with centre if talks fail
* High stakes for foreign oil companies
* Barzani determined to keep developing ties with Turkey
By Isabel Coles
ARBIL, Iraq, June 3 (Reuters) - Iraqi Kurdistan will be forced to seek a “new form of relations” with the central government in Baghdad if negotiations fail to resolve their disputes over oil and land, the president of the autonomous region said.
Masoud Barzani, who has hinted at full independence from Iraq in the past, told Reuters the current round of talks, which started last month, marked the final opportunity to end a feud that has strained Iraq’s uneasy federal union to the limit.
How the matter is settled will have a major impact on oil producers like Exxon Mobil and Iraq’s neighbour Turkey, which has upset Baghdad and Washington by deepening energy ties with Kurdistan.
“The current talks will be the last chance,” Barzani said in an interview at his presidential office outside the Kurdish capital Arbil. “There has been a softening of their (Baghdad’s) position, but practically speaking there has been no progress”.
“Either we will be able to reach an agreement... or we will have to think of a new form of relations between the region and Baghdad,” he said, declining to elaborate.
Ten years after the U.S.-led invasion of Iraq, a stable power-sharing arrangement between Shi’ite, Sunni and ethnic Kurdish factions is still elusive and a recent intensification of violence has prompted warnings of civil war.
But Kurdistan has managed to insulate itself against the fallout, and is enjoying unprecedented prosperity for a region that was once the most impoverished and repressed in Iraq.
The northern enclave is also pursuing increasingly independent energy and foreign policies, antagonising Baghdad to the point that both sides have deployed troops to reinforce positions along their disputed internal border.
In recent years, the Kurds have signed contracts on their own terms with the likes of Exxon Mobil, Total and Chevron Corp. That has infuriated the central government, which insists it alone is entitled to control exploration of Iraq’s oil.
Kurdistan used to ship crude through a pipeline network controlled by the central government and receive a share of the national budget. But exports via that channel dried up last December due to a row over payments for oil companies operating in the region.
The region says the constitution allows it to exploit the reserves under its soil, and is building the final leg of an independent export pipeline that could help bypass the central government and send as much as 300,000 barrels per day (bpd) of oil to international markets through neighbouring Turkey.
Resource-hungry Turkey has cultivated close energy ties with Barzani’s Kurdistan Regional Government (KRG), despite objections from the United States, which fears the region’s increasingly independent oil policy will lead to the break-up of Iraq.
“Both sides (Turkey and the KRG) are determined to make progress in terms of this relationship,” Barzani said. “When you have oil, oil will find its own way”. (Editing by Patrick Markey and Mark Trevelyan)