Events in Kurdistan’s embattled energy sector seem to be coming to a head in an unprecedented manner. Real negative impact, and measurable associated costs, are flowing from the State Oil Marketing Organization (SOMO)’s late August letters to traders and the Basra Oil Company’s threats to blacklist EPCs who work in both the federal and Kurdistan energy sectors. These developments fly in the face of high Kurdish expectations – based on rather thin evidence – after the August meeting in Baghdad between Prime Minister Mustafa Kadhimi and his Kurdish counterpart, Masrour Barzani.
Masrour’s meeting with Kadhimi – and separately with the chairman of the Higher Judicial Council, Judge Faiq Zaidan – created an expectation in Kurdistan that legal de-escalation would begin. This relied upon Kadhimi working energetically with Oil Minister Ihsan Ismail to freeze new communications from Ministry of Oil subsidiaries to traders and EPCs. Either Kadhimi did not push Ihsan hard enough, or Ihsan did not do his part, because SOMO felt at liberty to issue new and more expansive threats to traders on 23 August.
When Horizon investigated how this set of SOMO letters was issued, Ihsan was embarrassed in front of the prime minister; his control of SOMO, the Basra Oil Company and the Ministry of Oil Legal Affairs Directorate was shown to be lacking. Ihsan’s excuse was that SOMO issued pro forma letters to traders about Kurdistan crude every two months and that his late July guidance to stop the practice was overlooked by accident. The fact that the pro forma letter went further than previous ones rebuts Ihsan’s claim or shows that SOMO is simply disregarding him and “asking for forgiveness, not permission.”
All of the Ministry of Oil’s senior officials are thinking in survival terms, if not seeking to actively gain from ongoing persecution of the Kurdistan Region. SOMO Director General Alaa al-Yasiri (see our Personality of the Week) is seeking to win new friends outside of the Sadrists who have been his sponsors, and these new friends are primarily the kind of anti-Kurdish forces (Nouri al-Maliki and especially Qais al-Khazali) who have pushed Federal Supreme Court (FSC) Case 59 (2012) the hardest.
highlights
Ministry of Oil Legal Affairs Director General Laith al-Shaher is one of the most patient and longstanding opponents of the independent oil sector in Kurdistan, and he is clearly relishing the obligation of implementing the FSC ruling. Laith – like al-Yasiri – evidently does not fear Ihsan one bit. This suggests that Ihsan’s chances of staying as minister are 50-50 at best, and more probably much lower. It also suggests that even if Ihsan stayed, the deputy ministers and director generals know that their survival is not contingent on him but could easily be supported by political sponsors like Parliamentary Speaker Mohammed al-Halbousi or resurging political middleman Ammar al-Hakim.
Ihsan is also likely playing games with the FSC ruling. He works hard to retain the trust of Prime Minister Mustafa Kadhimi but is wearing out the premier’s tolerance. It is clear that if Ihsan is to survive – possibly without Kadhimi above him – then he will also need new friends. At the very least, he cannot remain under investigation, and there are already two cases in the investigative court stage against him for slow implementation of the FSC ruling. As a result, while the oil minister was undoubtedly slow-timing the implementation in the spring and early summer, the weakening of Kadhimi’s position (and that of the Sadrists) has forced Ihsan to recalculate.
After SOMO sent the 23 August letter, Ihsan did offer to retract the communiqué and clarify that SOMO was not authorized to issue new correspondence due to the ongoing court cases in Baghdad, which required a reduction of the pace of implementation in order to stay in sync with legal proceedings. Such a retraction was seen by the premier’s office as too inflammatory and would surely have brought unwelcome Iraqi attention to the issue of non-implementation or delayed or partial implementation of the FSC ruling. Ihsan’s signature on the retraction, which would have been leaked widely by his enemies and by Kurdistan’s friends, would have almost certainly marked the end for the minister – and potentially his incarceration. No Iraqi technocrat takes such a risk upon their own head.
In Iraqi politics, no player or institution ever truly surrenders a source of leverage. Instead, they put it on ice – but very carefully, to allow easy thawing and reuse. This is probably the best that can be expected of the FSC ruling, and maybe the EPC blacklist. Some kind of stronger public symbol of the freezing of the issue might occur if a government is formed in Baghdad, likely requiring Kurdish participation, in late 2022 or early 2023, depending on whether new elections are required. In the interim, Kadhimi seems to have conveyed to Ihsan his displeasure at non-implementation of the tactical freeze of the FSC issue, and the Ministry of Oil may hold off from new painful reopening of wounds. Retraction or clarification of letters to SOMO and EPCs would be a heavy political lift, necessitating powerful international pressure. Threats of litigation – if undertaken very privately – might have some impact in Baghdad, but if made publicly could be very damaging and cement Baghdad’s position. The trick is always to make Iraqi officials feel personal responsibility for taking risk, and to make de-escalation the least risky option for them.
personality of the week
Alaa Khader Kadhim al-Yasiri
Director General of the State Oil Marketing Organization (SOMO). A career oilman in his late 50s, al-Yasiri worked his way up in the Ministry of Oil during the 1980s and 1990s, including the challenging years of sanctions, when Iraq was forced into the oil-for-food scheme. After the fall of Saddam Hussein, al-Yasiri rose to become SOMO’s deputy director general in charge of finance. In February 2017, he became the director general of the Economic and Financial Department at the Ministry of Oil headquarters in Baghdad.
On 10 September 2017, the cabinet appointed him as acting director general of SOMO, the sixth person to hold that position since 2003. His predecessor, Falah al-Amiri, was at retirement age and had faced growing harassment from enemies in parliament after leading SOMO since 2006. Al-Yasiri had big shoes to fill. His predecessor had successfully introduced the Basra heavy grade and set up a public-private JV oil-trading enterprise based out of Dubai. Initially, al-Amiri stayed on as a ministerial consultant for marketing and strategy, as well as Iraq’s OPEC governor, a post usually held by the SOMO director. Al-Yasiri now plays the OPEC role but is typically overshadowed by Minister of Oil Ihsan Ismail.
Al-Yasiri was originally a placeholder, installed to allow al-Amiri to move into semi-retirement, but he has done well in the role. He oversaw Iraq’s plan to switch its Basra crude benchmark in Asia to Oman futures pricing based off the Dubai Mercantile Exchange in 2018. COVID and other issues put a stop to his active efforts to work with the State Company for Oil Projects to redevelop the Kirkuk-Beyji-Fishkhabur twin-pipeline, as well as on new oil export options to Jordan and Iran.
Since 2020, al-Yasiri has swung more firmly under Sadrist domination but he is trying to even out with contacts with the Coordination Framework blocs. Militia influence in SOMO has increased significantly; al-Yasiri uses such connections to ensure his longevity and to make him semi-immune to the influence of the prime minister and oil minister.
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