RRT ERBIL: THE OIL IMPASSE: VIEWS OF THE KRG

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001364 SIPDIS DOE FOR GEORGE PERSON E.O. 12958: DECL: 05/25/2019 TAGS: EPET ENRG PGOV IZ SUBJECT: RRT ERBIL: THE OIL IMPASSE: VIEWS OF THE KRG MINISTER OF NATURAL RESOURCES REF: A. BAGHDAD 1250 ¶B. BAHGDAD 1230 Classified By: RRT Erbil Team Leader Lucy Tamlyn, reasons 1.4(b,d) This is an Erbil Regional Reconstruction Team (RRT) cable. ¶1. (SBU) Summary: In a discussion before the recent oil export breakthrough (reftels),Kurdistan Regional Government (KRG) Minister of Natural Resources Hawrami urged the United States to focus on assisting passage of an oil revenue sharing law as the most important priority in establishing a structure for the GOI and KRG to manage Iraq's hydrocarbons resources. The KRG Minister criticized GOI Oil Minister Shahristani for his reliance on technical service, instead of production sharing, agreements to attract foreign investment and blamed him for the breakdown in an agreement to allow export of oil from KRG fields. End summary. ¶2. (U) RRT Team Leader met with KRG minister of Natural Resources Ashti Hawrami April 27 to discuss the KRG's hydrocarbons sector. Minister Hawrami's chief adviser, Khaled Salih attended. (Note: The meeting took place before the recent oil export breakthrough was agreed between the KRG and the GoI. Minister Hawrami gave no hint of this impending approach in the meeting, but focused on the longer term strategy for resolving the current impasse over hydrocarbon management and revenue sharing. End note.) Revenue Sharing Should Be First Priority -------------- ¶3. (SBU) Minister Hawrami opened the discussion by recalling that the third U.S. benchmark for Iraq was to ensure equitable distribution of hydrocarbon resources to Iraqis - not agreement on oil sector management. According to him, it was regrettable that the U.S. focus had subsequently shifted to oil sector management with the more important benchmark of oil revenue sharing being put on the back burner. Minister Hawrami argued that agreement on revenue sharing should be given precedence, as it took the most difficult issue - who gets the money - off of the table. He also ventured (note: as have other KRG officials) that agreement on oil revenue sharing would defuse some of the Kirkuk tensions, by making it clear that the KRG did not seek Kirkuk for its oil. Minister Hawrami reiterated that the Kurds have committed to the principle that oil revenues coming from the Kurdistan Region would be subject to the same 17/83 split that applies to other revenues. (Note: Prime Minister Barzani has also stated this repeatedly. End note.) USG Role -------------- ¶4. (C) Minister Hawrami felt that the United States could play a stronger and more effective role by assisting the oil revenue sharing question to be resolved, as this law did not directly affect U.S. interests (in the same way that duQ"">ln~QQe:ly",Q