The war within the war

Alan Greenspan said recently that as far as he was concerned, the Iraq war was "largely about oil."  And while that's a debatable proposition, there's a festering conflict within the war that definitely is about oil.  And this latest news item throws the conflict into sharp relief:

Iraq's Kurdish regional government (KRG) has approved four new oil and gas deals that will attract around $500 million of investment in exploration, the KRG said in a statement on its Web site.

The semi-autonomous KRG has struck five production sharing agreements (PSAs) this year, despite objections from Baghdad. Iraq's oil minister said last month that oil deals that the KRG had signed since February were illegal.

OK, let's step back for a moment and review some recent history:  The northern Kurdish region of Iraq has been more or less independent for a good 15 years now, ever since the U.S. established a "no-fly zone" for Saddam Hussein's air force that basically put the region out of his regime's reach.  The Kurds have jealously guarded this autonomy ever since the U.S. invasion of 2003, to the point where it now feels comfortable cutting deals with foreign oil companies (including U.S.-based Hunt Oil) without feeling any need to consult the central government in Baghdad.

Intrepid Iraq watcher Juan Cole sums up the situation as such:

[Iraqi] oil minister Husain Shahristani has warned that the federal government views these agreements as illegitimate and that the Iraqi government will abrogate them if Baghdad is not involved. The Kurds, who have their own private army and have said that no federal troops will ever set foot on their soil, are clearly not impressed.

Baghdad isn't the only capital where leaders are wringing their hands about this.  There's also Ankara, as UPI's Ben Lando reports:

…the more successful the Kurds are, the more there’s both a fear and reality of an independent nation of Kurdistan. Among the most ferocious opponents: Gen. Yasar Buyukanit, the head of Turkey’s military, itching for a fight after losing religious-based confrontations with his own government.

Turkey has its own restive Kurdish minority, and an independent Kurdistan formed in northern Iraq would undoubtedly spur the Kurds of eastern Turkey to try to break away and join up.

None of this is to say armed conflict is about to break out any minute.  But Kurdistan is a tinderbox that bears watching — just like all the other tinderboxes out there.

The Daily Reckoning