RRT ERBIL: KRG PM BARZANI FORECASTS HYDROCARBON

C O N F I D E N T I A L BAGHDAD 001447

SIPDIS

E.O. 12958: DECL: 05/10/2018
TAGS: PGOV EPET IZ
SUBJECT: RRT ERBIL: KRG PM BARZANI FORECASTS HYDROCARBON
NEGOTIATIONS IN JUNE

REF: A. A: BAGHDAD 1277

B. B: BAGHDAD 1426

Classified By: Erbil RRT U.S. Team Leader Jess Baily for Reasons 1.4 (b
,d).

This is an Erbil Regional Reconstruction Team message.


1. (C) Summary: Kurdistan Regional Government (KRG) Prime
Minister told the Ambassador,s Senior Advisor for Northern
Iraq and RRTOffs May 6 that he expects the KRG to complete
its short list of modifications to the February 2007 text on
national hydrocarbon legislation soon. He does not plan,
however, to convey them to Prime Minister Maliki until early
June, when he returns from his upcoming visit to the United
States. While stating that the GoI and KRG must reach a
solution on hydrocarbons, he &personally does not believe
the law will pass.8 End Summary.


2. (C) Ambassador,s Senior Advisor and RRTOffs met on May 6
with KRG Prime Minister Nechirvan Barzani to discuss disputed
territories and relations with Turkey. (These discussions
will be reported septel.) Asked at the end of the meeting
about the next steps on hydrocarbon legislation, Barzani
spoke positively about his recent meetings in Baghdad,
reiterating many points he made to S/I and EMIN in Baghdad
(ref A). He noted that the KRG has offered full transparency
in its production sharing agreements (PSAs) and has agreed to
let an "independent commission of experts" review them. The
transparency of KRG contracts &is no longer an issue," he
asserted. He repeated a familiar riff that the GoI is
content with low production levels instead of boosting output
to six to 10 million barrels per day. In reply to GoI
complaints about KRG Minister of Natural Resources Ashti
Hawrami, Barzani said he would sack Ashti the minute Prime
Minister Maliki replaces Minister of Oil Shahristani. (Note:
the latest indications from the negotiations over the KRG
cabinet reshuffle have the KDP retaining the Energy Ministry,
thus increasing the likelihood of Dr. Ashti staying on
through the hydrocarbon negotiations.) He also reiterated the
offer to put 100,000 barrels per day from DNO fields in Zakho
into the northern pipeline and expected a team from SOMO to
visit soon.


3. (C) Barzani stressed that Iraq must reach a solution on
hydrocarbons. He also sounded a surprisingly pessimistic
note, however, saying &I personally do not believe that the
(hydrocarbon) laws will pass8 due to a lack of genuine
political will in Baghdad. The key for the KRG is to
eliminate the perception that it is the obstacle, by
&showing everyone that we want an agreement.8


4. (C) The next step, he said, is for the KRG to complete its
list of the most important modifications to the February 2007
texts, down from its initial 95 or so comments. He expects
this to conclude shortly, and will present the revised list
of Kurdish demands in Baghdad in early June, after visiting
the U.S. to receive an honorary degree on May 17. He insists
on delivering the KRG,s position in person to PM Maliki. If
the KRG instead sends a text to Baghdad ahead of the meeting,
he fears the Ministry of Oil and other advisors will
discourage PM Maliki and torpedo the negotiations before they
even begin.


5. (C) Comment: PM Barzani,s waiting until June to continue
negotiations on hydrocarbons in Baghdad and his pessimist
comment about the eventual failure of the law merit some
concern. While he advised the USG to play a quiet role in
the process, we should remind him of the need to maintain the
positive momentum by meeting as soon as possible with PM
Maliki to present the KRG,s main concerns about the February
2007 text. The Ambassador this week passed a similar message
to President Talabani (ref B). Meeting sooner rather than
later offers the best hope of maintaining the Kurds, image
and allowing the KRG to benefit from the increased value of
its concessions, more drilling activity, and pipelines from
oil and gas into world markets. End comment.
CROCKER