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Update No: 054 - (25/10/07)

Unruly Kurds 
The Iraqi government has decided to put the Oil Law on hold until a broader consensus can be reached. In the meanwhile, tension between the central government and the Kurdish provincial government continued in October as the Kurds kept signing oil deals disregarding opposition in Baghdad. Armed with its own oil law, the Kurdish provincial government signed in October three more production agreements with a Canadian company (Heritage) and one with French company Perenco. Since Baghdad threatens to exclude companies signing deals with the Kurds from working in the rest of Iraq, it is not surprising that so far only minor players in the oil industry signed deals in Kurdistan. The Kurds have tried to attract the majors with attractive deals, offering 20-25% of production for the investors (as opposed to the 15% offered to the small players), but so far to little avail. A point of criticism is that the deals were bilateral agreements without any transparent and open bidding. Two more deals of this kind are said to be about to be announced. By 2012 the Kurds are planning to have reached a 1 million bpd output. The Kurdish provincial government has also announced plans to build two refineries, which are expected to satisfy 30-40 of local demand for fuel. Observers comment that the vague phrasing of Iraq's Constitution with regard to central and regional prerogatives is the ultimate culprit of the rising confusion and tension. 

Shiites more and more divided
The Kurds have room for. manoeuvre because of the multiple splits which are riddling the central government, of which they are also a key component. Even among the Shiites, divisions are getting stronger and stronger. The Supreme Islamic Iraqi Council (SIIC, ex SCIRI) is intensifying its campaign in favour of federalism, rousing the bitter opposition of Muqtada As-sadr's group. The withdrawal of the British from Basra represents another factor stimulating the rivalry among Shiites, with several factions competing for the control of the city and of the lucrative oil fields. The South Oil Company is becoming the focus of seizure attempts, with massive infiltration of clients of various militias. Those excluded from the spoils are increasingly dismayed by the failure of the Shiite Alliance to provide anything resembling an effective government. 

Turkish threat
The level of violence in Iraq has been diminishing over the last two months and more markedly during the first half of October, in part possibly because of a lull in Iran's promotion of anti-US activities. The Iranians might be trying to show to the Americans that they can deliver peace as much as they can deliver war. The political situation, however, remains as complicated as ever and possibly even more so. The Sunni insurgents who are making deals with the Americans maintain their autonomy, their weapons and their structure and are adding to the plethora of illegal but tolerated militias which dominate much of the country. Moreover, regional tensions are surfacing to complicate the scene. The Kurds were in the eye of the storm in October also because of the deteriorating relationship with Turkey. Following yet another attack by Kurdish nationalist guerrillas within Turkey against Turkish troops, the Turkish government started gearing up for an incursion into northern Iraq to chase the guerrillas who escape acros the frontier. This is unacceptable to the Iraqi Kurdish provincial government, which is vowing resistance, while the central government is asking the Kurdish nationalist insurgents to leave Iraq, a request very unlikely to be fulfilled. Are the Turks bluffing or will they really invade? They have parliamentary approval from Ankara to cross the border in hot pursuit, now at the military's discretion. Baghdad says it cannot withdraw Iraqi troops to protect the northern borders, away from their current anti- insurgent operations in Baghdad A limited incursion across the border is the most likely option and during mid-October the Turkish army was already shelling border areas of Iraq in a display of muscle.

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