Last October, at the height of a political crisis in Iraq’s Kurdistan region, a letter arrived at the Iraqi oil ministry in Baghdad from Igor Sechin, head of Kremlin oil major Rosneft (ROSN.MM). The Baghdad government was showing a “lack of constructive position and interest” about Rosneft’s offer to develop southern Iraqi oilfields, Sechin wrote in the letter, a copy of which was seen by Reuters. Kurdistan, a region of about 6 million people in northern Iraq, had just tried and failed to break away from the rest of the country. Baghdad had dismissed the Sept. 25 independence referendum and sent in troops to seize control of key oilfields – Kurdistan’s main source of income. Now Sechin, one of the closest allies of President Vladimir Putin, said that given Baghdad’s reluctance to work with Rosneft, his firm would instead do business with the Kurdistan Regional Government (KRG), which showed “a higher interest in expanding strategic cooperation”. Russia InsightTake a deep dive into the mechanisms of Russian political and economic life. Global powers including the United States and European Union, which had previously expressed sympathy with the Kurdish independence drive, would eventually reassure Baghdad they recognized its sovereignty over the whole of Iraq, including Kurdistan.
But there was no hint of such conciliation in Sechin’s letter. Rosneft had pledged to invest billions of dollars in Kurdistan to the anger of the Baghdad government. Now, instead of backing off, it was doubling down. And Sechin held a stronger hand than many Iraqi officials realized, according to seven sources familiar with the matter. Days before, Rosneft had taken over ownership of landlocked Kurdistan’s oil export pipelines to Turkey from the KRG in return for $1.8 billion. The aim of the deal for Rosneft was not only commercial but to cement Russia’s political influence in Iraq and the Middle East, according to the Rosneft, oil industry, Kurdish and Iraqi government sources. Control of the pipelines has given Rosneft a central role in ongoing talks between the KRG and Baghdad aimed at resuming full oil exports, which were disrupted by the referendum and Iraqi seizure of oilfields, said the sources. Kurdistan has large oil reserves – possibly a third of Iraq’s total – and its exports are vital to both the regional and national economies.