January 3, 2010 / 11:47 AM / 11 years ago

Iraq's Maliki calls for end to Kurd oil deal row

BAGHDAD, Jan 3 (Reuters) - Prime Minister Nuri al-Maliki called for an end to a bitter row over oil contracts brokered by Iraqi Kurdistan, which has fuelled investor questions about the risks of doing business in war-torn Iraq.

In a rare direct reference to the feud between Arabs and minority Kurds, Maliki said on Sunday he had discussed the contracts — which the largely autonomous Kurdish region signed with foreign companies — with the region’s prime minister, Barham Salih.

“We said it is time to look at this file and settle it with flexibility and realism, in order to preserve rights and interests in these contracts,” Maliki was quoted saying on the government’s national media centre website. “We hope to end this crisis.”

He gave no details about how the two sides might settle the long-running feud, in which Iraq’s Arab-led government in Baghdad has labelled Kurdish contracts illegal and Kurds have demanded reimbursement for exports from Kurdish fields.

Companies such as Norway’s DNO (DNO.OL), Turkey’s Genel Enerji and London-based Heritage HOIL.L have struck production-sharing agreements for a handful of fields in northern Kurdistan.

In a move hailed as a Kurd-Arab breakthrough last year, oil was briefly exported through Iraq’s main northern pipeline. The agreement fell apart and since then Kurdish authorities have demanded they be paid for those sales.

EXPORTS HALTED

The government’s position is that Kurdistan can repay the companies out of their regular 17 percent cut of the federal budget.

DNO, a trailblazer in Kurdistan, said last month it had stopped drilling there after exports were halted.

But Maliki, signalling perhaps his federal government has not changed course, also wrote in an answer to a question submitted by a local journalist that revenue from Kurdish oil exports will not be paid directly to Kurdish authorities.

“The revenues will be part of the national revenues that are distributed equally to all Iraqis,” he wrote.

The dispute adds another element of uncertainty for investors in Iraq, where violence continues even as the country heads into national elections in March and U.S. forces prepare to withdraw by the end of next year.

Disagreement over the Kurdish contracts is part of the larger conflict between Arabs and Kurds, who make up about a fifth of Iraq’s population, over disputed territories, oil resources and the strength of the federal government.

The hand of the central government may have been strengthened last month, when the Oil Ministry awarded a host of contracts of its own that could help quadruple Iraqi oil output.

Hussain al-Shahristani, Iraq’s oil minister, banned oil companies doing business in Kurdistan from that auction.

Yet Barham Salih, who recently stepped down as Maliki’s deputy prime minister, is also seen as a conciliatory figure who might be able to nudge Arabs and Kurds toward compromise. (Editing by David Holmes)

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