Baghdad threatens Exxon with sanctions

LONDON - Reuters

Iraq said it could slap sanctions on U.S. oil major Exxon Mobil before the end of the year for signing a deal with Kurdistan Regional Government (KRG) without approval from Baghdad or blessing from Washington.

At risk for Exxon is its contract to develop a huge oilfield in southern Iraq after it agreed to six exploration deals with the northern Iraqi Kurds, who are in dispute with the Baghdad government over oil and land rights. “The Iraqi government is considering sanctions, and will inform the company before they make a public announcement,” Deputy Prime Minister for Energy Hussain al-Shahristani said.

Baghdad has said any oil deals signed with the KRG are illegal. Exxon is the first oil major to test that. “The position of the U.S. government has been that they were unaware of it and if they had been asked, they would have obliged (Exxon) to get approval of the Iraqi government,” Shahristani said.

The U.S. State Department, in its first comment on the deal, said it had warned Exxon and other firms of the risks of signing contracts in Iraq without nationwide approval. But it did not say whether it specifically talked with Exxon about the contract. “We have had conversations with Exxon, as we have with all of our firms, advising them to wait for national legislation,” State Department spokeswoman Victoria Nuland told reporters.

Nuland said she could not “speak to” whether the U.S. government has had subsequent conversations with the company or the Iraqi government to try to resolve the matter. Iraq has yet to agree on a national oil law to decide such vital issues the role of federal and regional authorities in regulating oil and gas development as well as how to share the revenues from the energy sector