It's remarkable how oil, this sticky black fluid, arouses ambitions – ranging from the quixotic to the Machiavellian. Entrepreneurs see it as a ticket to wealth; ambitious politicians, the tool to achieve nationalist dreams; local people, as a route out of poverty. These ambitions merge into a spectre that is haunting the wider Middle East – the spectre of resource regionalism.
In Iraqi Kurdistan, recent oil and gas finds offer the region the prospect of independence – whether formal or factual – from Arab Iraq, and aspirations to leadership of the wider Kurdish community. But for now, the Kurdish budget still comes almost entirely from Baghdad, and independent exports require agreement with Turkey.
Next door, Syria’s Kurds seem to have achieved at least temporary control over the oil-producing north-east.
In Libya, federalists under Ibrahim Al Jathran have declared autonomy for the eastern Barca (Cyrenaica) region, with two-thirds of the country’s oil production and three-quarters of its reserves, and announced their own national oil company. This remains so far without legal basis and the federalists may not even command much support within their own region, but oil production has been almost entirely halted. Meanwhile protests in the west by the Amazigh community have also closed down fields.
The Somaliland and Puntland regions of Somalia, autonomous though internationally unrecognised, are at a much earlier stage but have still attracted several international companies to explore. Among these is Genel, headed by former BP chief executive Tony Hayward, which is also a leading player in the Kurdistan region.
Over the past decade or more, a major concern of oil companies was resource nationalism – the phenomenon where strong leaders such as Hugo Chávez in Venezuela or Vladimir Putin in Russia strengthened the central state's control over oil and gas resources, reduced or eliminated the role of international companies, and raised taxes on the industry.
But the events in Kurdistan, Barca and Somaliland are different – they represent resource regionalism. For Massoud Barzani in Erbil, Jathran in Benghazi, and Somaliland oil minister Hussein Abdi Dualeh in Hargeisa, oil can help bolster their claim to autonomy, right perceived historic wrongs of unfair distribution of wealth with a central government, and fund their region’s economic development. And international oil companies are, so far, their allies rather than adversaries.
Why is resource regionalism rising now? Revolutionary political change has broken down the central power that once emanated from Tripoli, Baghdad or Damascus. Now the genie is out of the bottle, it’s hard to imagine the Kurds in particular will give up their hard-won autonomy and relative peace and prosperity. High prices make oil a prize worth struggling over – and at the same time, encourage companies, firstly entrepreneurial wildcatters, then behemoths such as ExxonMobil – to take a chance in politically risky areas.
The question of “fair distribution” of revenues where one region holds a large share of a country’s oil will always trigger tension. Local people want to see reinvestment, jobs and compensation for environmental damage. Central government needs funding for broader national development.
Khuzestan, the heart of the Iranian oil industry which complains of discrimination, the separation of South Sudan from Khartoum’s rule, Nigeria’s oil-rich but violent Delta, poor but gas-endowed Balochistan in Pakistan – even North Sea petroleum that might fund a Scottish vote for independence, and exaggerated Canadian fears of a “petro-state” distorted by Albertan oil – are all facets of this question.
Each of these debates has its unique local characteristics and possible solution. Sometimes, only independence or loose federalism will suffice. In others, devolution of some powers, fairer revenue-sharing and local decision-making may be enough.
But if these regionalist disputes aren’t resolved, they will undermine national finances, stymie regional development – and prevent the oil companies from profiting from their gambles.
Robin Mills is the head of consulting at Manaar Energy, and the author of The Myth of the Oil Crisis.
