Kurdish politicians and lawmakers are accusing senior officials in the Kurdistan Regional Government (KRG) of a major corruption scheme amounting to more than US$38 billion and accepting bribes of at least US$250 million for the sale of the Iraqi Kurdistan region’s oil pipeline project to Russia’s state oil company, Rosneft.
Ali Hama Salih, former head of the Kurdistan region’s natural resources committee and now the leader of the National Stance political party, along with Soran Omar, an Iraqi lawmaker, declared the accusations of corruption this week.
Rosneft announced on 19 October 2017, the start of a joint project to build an oil pipeline transferring the Kurdish region’s oil to Turkey’s Ceyhan port. In this project, Rosneft holds a 60% share, while KAR Group, a local partner, holds the remaining 40%.
The signing ceremony of the deal was attended by Nechirvan Barzani, the former KRG Prime Minister and current President of the Kurdistan Region, Qubad Talabani, the KRG Deputy PM, and Ashti Hawrami, the former KRG Minister for Natural Resources.
According to Bloomberg, in March 2020, Rosneft reportedly paid US$250 million to an external consultant to secure deals in Iraqi Kurdistan. Hama Salih in several posts on Facebook accused the three senior officials—Barzani, Talabani, and Hawrami—of receiving the US$250 million from Rosneft as “bribes”.
Hama Salih told The New Arab that he has a document from Rosneft’s Singapore branch showing the company paid US$250 million to an external consultant to ensure they secured oil agreements in the Kurdistan Region.
“Every wise human being knows that US$250 million is not a reward for advisory, but a bribe for those who were in the deal to make facilitations. The then-KRG PM Nechirvan Barzani, his deputy Qubad Talabani, and Ashti Hawrami were involved in the contract signed with Rosneft,” Hama Salih asserted.
He said he had presented the corruption case to the Kurdistan region’s public prosecution, but they did not respond.
The New Arab contacted the KRG Ministry of Natural Resources, Fawzi Hariri, head of Nechirvan Barzani’s diwan, as well as Samir Hawrami, spokesperson for Qubad Talabani, but they were unable to respond to media requests by the time of publishing.
Rosneft also did not respond to TNA‘s request for comment.
Despite the halt in Kurdistan’s oil since March 2020, Hama Salih and Soran Omar, presented a document allegedly from Iraq’s financial audit revealing a major corruption case also related to the pipeline. Hama Salih described it as “the theft of the century”.
The alleged document in Arabic, seen by TNA, stipulates that the KRG Ministry of Natural Resources, in response to a request from Iraq’s financial audit, admitted paying US$60 million per month to KAR Group and Rosneft until 2038 as reimbursements for the construction of the Kurdistan region oil pipeline. The document suggest that the payments increased the overall production costs of barrels of oil in the region. Rising production costs of oil in the KRG is the key dispute in negotiations among the KRG, the Iraqi federal government, and International Oil Companies for resuming the northern oil exports to Turkey.
“The Ministry of Natural Resources has allocated $60 million monthly, with $55 million directed towards importing pipelines from Rosneft and KAR Group, divided 60% and 40% respectively, and $5 million paid to local banks. According to the ministry’s response on 29 April 2023, this allocation has increased the cost of transporting crude oil and financing its production. The reimbursement of capital costs involves 340 instalments, with $550,000 monthly payments until December 2027, followed by $384,000 until December 2028,” reads the document.
Hama Salih claimed that in 2038 nearly $16 billion would be given to the two companies, and the KRG would pay the money from revenues obtained from trucking oil to Turkey and Iran. Both politicians said that represents a significant act of corruption by the KRG.
Hama Salih noted that the Kurdistan oil pipeline, constructed by KAR Group, was completed in 2013. Initially, the KRG paid an annual amount of $300 to $500 million—approximately 10 to 16 percent of oil revenues—to KAR Group for operating the pipeline to export oil to Turkey until the company recouped the pipeline costs. Afterward, the KRG owned 60% of the pipeline, while KAR Group retained 40%. The KRG then sold its 60% share to Rosneft for $1.7 billion.
Rosneft’s involvement with the government of Iraqi Kurdistan began in 2017. Between 2017 and 2018, Rosneft advanced $3.2 billion to the Kurds for future oil deliveries, with $1.2 billion covering the region’’ budget deficit due to the war on ISIS and a decrease in global oil prices.
The accusations by the two Kurdish politicians cast a shadow over the integrity of the KRG’s handling of the region’s oil resources and raised concerns over transparency and legality of its financial dealings.
Oil exports from the Kurdistan region through the Iraq-Turkey pipeline stopped on 23 March 2023 after a Paris-based arbitration court’s decision favouring Baghdad over Ankara. The court found Ankara in breach of a 1973 agreement for allowing Erbil to initiate independent oil exports in 2014.
The pipeline’s closure has led to substantial economic losses for both Baghdad and Erbil, halting the daily export of 450,000 barrels of crude oil, amounting to approximately 0.5% of the global oil supply. There have been reports of crude oil from Kurdistan being smuggled into Iran via trucks, observed by TNA.
Negotiations stalled due to conflicting demands among Turkey, the Kurdistan Regional Government (KRG), and the Iraqi federal government. Baghdad contests the legality of production-sharing agreements between the Kurds and foreign companies, as affirmed by Iraq’s Supreme Federal Court. The federal government of Iraq insists that foreign oil firms must negotiate new contracts directly with the Iraqi oil ministry.
