State-run Iraqiya television said the Iraqi military has also captured a gas plant and a main road in Kirkuk, which has emerged as a flashpoint in the power struggle between the federal government in Baghdad and the Kurdistan Regional Government. Kirkuk’s oil fields and deposits inside the adjacent Kurdish region were exporting about 600,000 barrels a day through a Kurd-controlled pipeline to Turkey, according to a person familiar with the matter, asking not to be identified because the information is private.
According to Bloomberg, Iraqi troops and allied militias are advancing on Kirkuk, home to Iraq’s oldest-producing oil fields, amid an already-tense showdown between the central government and the semi-autonomous KRG following a Kurdish referendum on independence from Iraq on Sept. 25. The KRG included Kirkuk on the vote, despite competing territorial claims to the area.
While there was no halt to oil exports in the early stage of the military advance, the potential for disruptions sent Brent crude as much as 1.7 percent higher to $57.84 a barrel in London. The benchmark gained 2.8 percent last week.
‘Complex Issue’
“Tensions are definitely escalating in Iraq at the moment, and it will be a supporting factor for oil prices for the time being,” said Kim Kwangrae, a Seoul-based commodities analyst at Samsung Futures Inc. “It’s a complex issue.”
Prime Minister Haider al-Abadi ordered Iraqi forces to impose security in Kirkuk in cooperation with Kurdish Peshmerga forces, state television reported late Sunday, adding that government troops had captured areas in the city without a fight. The Kurdish Rudaw news service said at least seven Iraqi militiamen were killed south of Kirkuk, citing an unidentified Peshmerga commander.
The Kurdistan Security Council said late Sunday that Iraqi forces and Shiite militias intend to take over a military base near the oil fields. Earlier, al-Abadi’s office had accused the Kurds of deploying militants from the Turkish PKK organization, saying that was considered a declaration of war against Iraq.
Iraq is the second-largest OPEC producer, pumping most of its 4.47 million barrels a day from fields in the south and shipping it from the Persian Gulf port of Basra. But with Iraq supplying about 14 percent of total production from the Organization of Petroleum Exporting Countries, a conflict centered in the country’s north could have an immediate impact on oil markets.
Eurasia Group estimates that Iraq taking control in Kirkuk could cut shipments by 450,000 barrels daily until the federal government repairs its own disused pipeline to Turkey or reaches a revenue-sharing deal with the Kurds.
The latest dispute between Baghdad and the KRG over the Kirkuk area flared after their combined forces routed Islamic State militants from most of northern Iraq earlier this year. Kurdish forces occupied much of Kirkuk province in June 2014 after Iraqi troops retreated ahead of the then-advancing militants. Baghdad refuses to recognize Kurdish control of the area.
“The war on ISIS is edging to an end and now the real war starts, the war between the regional powers in order to control resources and define their own areas of influence,” said Sami Nader, head of the Levant Institute for Strategic Affairs in Beirut. What’s happening in Kirkuk is not just a local Iraqi conflict but a regional race to establish new boundaries, he said.