Exxon Makes a Deal with the Kurds, Ignites Tension with Iraq

The Iraqi government is miffed with Exxon (NYSE:XOM) for signing a deal with Kurdistan to explore for oil in territory that is hotly disputed between the Kurds and Baghdad.

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The American troops so far have acted as a buffer between the two groups, but after their withdrawal the simmering dispute could reach flashpoint. The Kurds are seeking to control this oil-rich area as a part of their northern territory, while Baghdad is of the view that the exploration should be within the purview of the central government. About a third of Iraq’s 143.1 billion barrels of proven reserves of conventional crude are located in the Kurdish region.

Exxon’s deal covers six pockets in northern Iraq and this includes disputed land. The deal was condemned by Parliament speaker Osama al-Nujaifi, as an “unacceptable violation” of the administrative boundaries. The deal “will certainly contribute to further complicating the relationship” between the Kurds and Baghdad, said Gala Riani, Middle East and North Africa Regional Manager at the London-based IHS Global Insight.

Though Baghdad has threatened to retaliate by withdrawing its existing contracts with Exxon (NYSE:XOM), just how far it will proceed against the company is doubtful, considering its own pressing need for investment in the oil exploration industry.

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To contact the reporter on this story: Lindsey Grossman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com