Special Report: How Exxon helped make Iraqi Kurdistan

LONDON/ARBIL (Reuters) – In January 2011, Exxon hired one of the best connected men in Iraq: Ali Khedery, an American of Iraqi descent who had served in Baghdad as a special assistant to five U.S. ambassadors and a senior adviser to three U.S. generals.

At a meeting with Exxon a few months later to analyze Iraq’s future, Khedery laid out his thoughts.

Iraq under Prime Minister Nouri al-Maliki was moving toward dictatorship and civil war, he said he told the session. “We will see a rise in violence and a total paralysis in Baghdad,” he recalled saying. Iraq was likely to align itself more closely with Iran, which will “have an adverse impact on U.S. companies.”

The gloomy scenario grabbed the attention of Exxon executives. Just two years earlier, they had signed a $25 billion deal with Iraq to develop West Qurna, one of the largest oil fields in the country.

“No one wanted to hear that they had negotiated a multi-billion dollar deal in a country which will soon implode,” said Khedery, who has detailed to Reuters the meeting and subsequent events for the first time.

He suggested an alternative: Kurdistan, a semi-autonomous region in northern Iraq that was politically stable, far from the chaos in the south, and had, by some estimates, oil reserves of 45 billion barrels.

Less than a year later, Exxon signed a deal with Kurdistan. The story of how that happened explains much about the would-be nation’s growing power.

Interviews with key players in the secret 2011 negotiations – the talks involved not just Exxon but also fellow Western oil giant Royal Dutch Shell – show how Exxon’s decision to invest infuriated both Washington and Baghdad, and helped propel Kurdistan closer to its long-held goal of independence.

Kurds like to say they are the world’s largest ethnic group without a state. Numbering some 35 million, they inhabit a band that stretches from Syria across southern Turkey and northern Iraq and into Iran. Most follow Sunni Islam and speak their own distinct languages.

The Exxon deal fueled Kurdish self-belief. The presence of the biggest U.S. oil company has helped not just financially but also politically and even psychologically.

“Part of the process of building our region has to do, of course, with dealing with oil, signing contracts, negotiations with various countries,” Fuad Hussein, chief of staff to Kurdistan’s president, told Reuters. The Exxon deal validated smaller oil deals Kurdistan had already signed and was “a big victory for us.”

Exxon declined to comment.

Despite the deal, Kurdistan’s path to nationhood is far from certain. Independence is opposed by Washington, Baghdad, neighboring Turkey and Iran. It also remains unclear whether the Kurds have the strength to stand alone in this volatile region. As militant group Islamic State (IS) advanced through Iraq this summer, Baghdad’s troops melted away, leaving the Kurdish fighters known as peshmerga to halt the extremists.

When IS threatened to take Arbil, Iraqi Kurdistan’s capital, the United States bailed out the Kurds with a bombing campaign. On Tuesday, a temporary agreement between Baghdad and Arbil to end their dispute over oil exports and budget payments looked, at first glance, like Kurdistan returning to the Iraqi capital’s control.

But the deal does nothing to resolve the issues between Arbil and Baghdad, while forcing the Iraqi capital to effectively acknowledge Arbil’s development of its energy resources with Exxon, other foreign companies and Turkey. Arbil has compromised, but it has also locked in the progress of the past three years.

kurds oil

A CHANGE OF THINKING

Oil companies have been interested in Kurdistan for years. But after the United States toppled Iraqi strongman Saddam Hussein in 2003, a series of governments in Baghdad made clear that to get a slice of the biggest prize – the huge reserves in Iraq’s south – firms should not cut separate deals with the Kurds.

The fear: Letting the Kurds control the oil would rob central government of billions of dollars in revenue and bring a breakup of the country closer.

Western firms’ reluctance began to melt after Kurdistan passed more business-friendly oil legislation in 2007. Mid-sized firms began to invest, though the biggest players remained on the sidelines.

Baghdad finally divvied up the oil concessions in Iraq’s south in 2009 and 2010, and oil majors rushed to sign. But terms were tough and many firms, including Exxon, were soon frustrated.

Quietly, in late 2010, Exxon began putting out feelers to the Kurdish regional government. Proper talks began in early 2011, according to Hussein, the Kurdish president’s chief of staff. Khedery had resigned from the U.S. administration the previous year to protest against U.S. policies in Iraq, which he thought were hurting Washington’s interests in the region.

In the oil world, filled with Texas oilmen and former U.S. military types, Khedery stood out. Young, rail thin and with the bearing of an academic, he appeared confident and well connected. He had been privy to many of the backroom political deals in Iraq since 2003, and had a direct channel to the president of Kurdistan.

“He knew almost every official from the American side in Baghdad and he used to know every Iraqi leader,” said Hussein, who had befriended Khedery when they worked together as advisers to the U.S. occupation authorities in Baghdad.

Exxon began to rethink its approach to Kurdistan when a small group of company officials met long-time CEO Rex Tillerson and his deputies a few times in the spring of 2011.

The first meeting took place at Exxon’s headquarters near Dallas. The small Exxon team briefed Tillerson in his huge conference room. The oil boss listened quietly to the presentations, most of which focused on technology and geology, with a brief talk on Iraqi politics. Afterwards, most of Tillerson’s questions were about politics. That’s when Khedery spoke up.

“I told him everything I thought would happen in Iraq,” Khedery said. “I said that if you want to manage risk, then the last place you want to be is in Baghdad or southern Iraq.” Those zones, he warned, were filled with Shi’ite militias, who had killed and maimed thousands of American troops, as well as “neo-Baathist insurgents, al Qaeda sleeper cells, and Iranian Revolutionary Guards.”

He pointed instead to Kurdistan, which was “more peaceful, more predictable, and overwhelmingly pro-American.”

kurdish oil tankerREUTERS/Tom DuncanThe oil tanker SCF Byrranga, which was renamed the United Kalavryta in March 2014 (also known as United Kalavrvta) and is currently off the coast of Texas with a cargo of Kurdish crude oil, is seen off the Isle of Arran, Scotland in this handout photo taken February 21, 2014. 

NEAR FAILURE

Serious talks with the Kurds began soon after, with a call from Khedery to Hussein, according to the presidential chief of staff. The two sides met secretly in London, Dubai and Arbil.

On the Kurdish side, the main negotiator was Oil and Gas Minister Ashti Hawrami. But Kurdistan President Massoud Barzani also tapped Hussein to attend discussions. Unusually, the president even joined some meetings himself. Exxon was represented by senior executives from Texas.

But it was not just Exxon and the Kurds talking. Europe’s biggest oil major, Shell, was also involved, according to Hussein. Shell was Exxon’s junior partner in the West Qurna field and had a separate deal with Baghdad to invest tens of billions of dollars in southern Iraq’s Majnoon field. Exxon and Shell believed that teaming up – they had a combined market capitalization of more than $600 billion – would make it hard for Baghdad to throw them out of the south even if they cut a deal with Kurdistan.

The first meeting was in Arbil, which is dominated by a central citadel that is one of the oldest continuously inhabited settlements in the world. The Exxon team, concerned about Kurdistan’s relationship with Baghdad, and longterm stability, quizzed Barzani on his views of Iraq.

“They wanted to know how my president is thinking, what is his vision,” Hussein said. The chief of staff said Barzani called Prime Minister Maliki’s policies damaging to Iraq. “(Barzani said) that if it will continue this is bad for the country, this is dangerous, the path must be changed.”

Barzani and Maliki both declined to comment.

In the summer of 2011, as negotiations continued, Kurdistan sold two oil blocks to Hess, a U.S. company. Exxon and Shell had been keen to get the blocks, and the surprise sale nearly ended the talks, according to Hussein. To show Arbil was still serious, Barzani promised more attractive terms, according to both Khedery and Hussein.

A signing ceremony in Arbil was planned for mid-October, but another complication arose. Shell was in the final stages of talks with Baghdad to obtain exclusive rights to process all natural gas produced in Iraq’s south, a deal worth $17 billion. If Shell signed with Arbil, Baghdad might scuttle the gas deal.

At a meeting with Barzani in the Imperial hotel in Vienna, where the Kurdish president was on holiday, Exxon executives said they were committed to signing. Shell’s executives, though, seemed less sure.

What Barzani and Exxon did not know was that Shell’s CEO Peter Voser was in Baghdad, meeting Maliki to clinch the gas deal in southern Iraq. Just three days before the Kurdish deal was to be signed, Shell told Exxon it was no longer interested.

A Shell spokesman declined to answer questions about the Kurdistan deal. “Today our focus is on delivering the Basrah Gas Company project and the Majnoon Oil Field development, both of which are projects of critical importance to the reconstruction and economic development of (Iraq),” the spokesman said.

map reuters kurdsReutersMap of the Middle East showing distribution of the Kurdish population in the region. 

 

TERRITORIAL AMBITIONS?

Exxon pushed ahead. The firm believed that rivals such as Chevron and Total would follow suit.

The Texans kept things low key, though. An Exxon delegation flew to Arbil to sign the deal. Tillerson stayed in Dallas.

The six blocks Exxon won were scattered around the autonomous region. One block was near Turkey and another near the border with Iran. The three most controversial were along the line that divides Kurdistan and the rest of Iraq, straddling areas whose control is disputed between Arbil and Baghdad. The Kurds included the blocks in the deal and later managed to bring the governor of Nineveh, one of the provinces affected, on board.

To some, it looked as if Arbil was using Exxon to consolidate its borders. Hussein said Arbil already controlled the disputed territories and did not need Big Oil’s legitimacy. Barzani, though, has since described the presence of companies such as Exxon as a form of insurance for Kurdistan.

“A FEW F-BOMBS”

When news of the deal leaked in early November 2011, both Baghdad and Washington were furious. Maliki wrote a letter to President Barack Obama demanding he push Exxon to scrap the deal. Iraq’s deputy prime minister for energy affairs summoned Exxon executives to explain.

To Washington, the deal was an embarrassment. The U.S. strategy was built on support for Maliki and its ‘one Iraq’ policy of a unified nation under a strong central government. Now one of America’s most powerful corporations had undermined that approach.

A former U.S. diplomat told Reuters the U.S. government had less than a day’s notice of Exxon’s deal. U.S. Ambassador to Iraq James Jeffrey was livid, said the former diplomat. “My understanding is that (Jeffrey) dropped a few F-bombs,” he said. “He was less than amused.”

Hussein remembers a tense meeting he and the Kurdish oil minister, Ashti Hawrami, had with Jeffrey in Baghdad soon after the deal. “He was very angry,” Hussein said. “We were trying to explain that what we are doing is in the interest of Iraq, what we are doing is in the interest of Kurds, what we are doing is legal.”

Hawrami declined to comment. Jeffrey has since left the State Department. He is reported to be a consultant to Exxon, but declined to comment for this story.

Despite the anger, the deal was a political triumph for the Kurds. Exxon had shown Arbil could attract oil majors regardless of what Baghdad thought. Hawrami unveiled the deal at an Arbil energy conference in late 2011. Kurdistan had initially signed contracts with “small and beautiful” companies, he said. Now it was working with “the giant and magnificent.”

Within a few months, both Chevron and Total signed deals, further strengthening Kurdistan. A pact with Russia’s Gazprom followed.

“What really binds Kurdistan to Baghdad is money,” said Robert Ford, who retired from his post as U.S. ambassador to Syria in February and previously served three stints for the State Department in Iraq. “The more the Kurds have an independent source of income, especially from energy, the more it feeds into their desire to establish greater autonomy if not independence from Baghdad.”

In January 2013, Exxon CEO Tillerson made his first and so far only visit to Iraq, traveling to Baghdad to mend fences with the central government. It isn’t clear what happened in that meeting, but Baghdad has not canceled its own contract with the Texas firm. Arbil has even built a pipeline to Turkey, which makes it easier to export its oil.

The Iraqi capital remains riven by strife, but things are looking up for Exxon. The firm’s main Iraqi critics – Maliki and two other senior politicians – were pushed from power this year in elections. The men who replaced them are more amenable to a compromise, as this week’s agreement with Arbil shows.

Khedery, who has since set up his own consultancy, is not surprised. “I think for Exxon,” he said, “with their 125 years in business, the opposition from Maliki was simply seen as something that could be managed and eventually mitigated.”

Reuters (Zhdannikov reported from London, Coles from Arbil, Parker from Baghdad; Edited by Simon Robinson)

Elite Student Programme

Working with students and Higher Education Ministries in Western Asia and Iraq, we aim to improve access to information for high achieving students who are applying for national and international scholarships. We offer guidance on applications and application support documentation, course selection and visa application. We do not charge scholarship students for this service.

Elite Student Programme

Qualifying students will receive advice and support for applications to any UK university. Advice includes:

  • University and Course selection in line with career goals and scholarship guidelines
  • Application support materials, e.g. Personal Statement planning
  • Interview and application advise
  • Visa and pre-departure briefings

Kurdistan, Iraq

Levant Education has been active in Kurdish Iraq since 2010. We established the first UK-focussed education exhibition in that year, and have returned twice per year with leading UK universities to offer enrolment advice, information seminars and government liaison sessions.

Turkey

Levant Education has been active in Turkey since 2009. We established the first UK-focussed education exhibition in 2010, and have returned twice per year with leading UK universities to offer enrolment advice, information seminars and scholarship information sessions, working with EU Jean Monet Schoalrship programme.

Azerbaijan

Levant Education has been active in Azerbaijan since 2011. We established the first UK-focussed education exhibition in 2012, and have returned twice per year with leading UK universities to offer enrolment advice, information seminars and scholarship information sessions, working with UKTI, the British Council and Ministry of Education of the Republic of Azerbaijan.

 

For further information about the Elite Student Programme, please contact Programme Coordinator Hayal Bayramova, Hayal (dot) Bayramova (at) levanteducation (dot) com

Kurdish Independence in the Balance

Levant Education returned to Kurdistan last week in what might be called ‘challenging circumstances’.

Our usual UK education exhibition was reduced to a UK-focussed seminar delivered on 2 campuses, Salahadin University in Erbil and Sulaymaniyah University. Students appreciated the opportunity to learn about the university application process for the UK, and learned about SKOLA language schools – the only exhibitor brave enough to join us this time!

Maqsood Mohamed, David Mitchell, KRG Ministry of Higher Education
Maqsood Mohamed, David Mitchell, KRG Ministry of Higher Education

The security situation in these cities is stable and life continues normally on the surface. However people are living day to day while central government funding remains blocked due to a lack of agreement about oil revenue sharing between Baghdad and the Kurdish Regional Government (KRG).

 

Civil servants in the Education and other Ministries are being paid sporadically. Funding for the HCDP $120 million p.a. scholarship programme has also been hit, with many students already in the UK being adversely affected.

Currently KRG budgets rely on technically-illegal oil sales, and international loans based on future oil revenues. The Kurdish Regional Government is progressing plans to increase oil sales through a bigger pipeline to Ceyhan refinery in Turkey, which is expected to pump 400,000 barrels per day (bpd) before the end of the year. Assuming oil maintains a price of $80 per barrel, and the oil continues to find buyers, this represents an income of $32 million per day, or $1 billion per month.

Direct sales of oil from the Kurdish Region anger the national government in Baghdad, which claims that oil not sold through the State Organization for Marketing of Oil (SOMO) are illegal. It is unclear at the current time who is facilitating the oil sales through Ceyhan, or who is buying the oil. However it is known that Turkey is buying oil from IS in Iraq and Syria – IS oil sales now account for about 3.5 per cent of Turkey’s oil supply.

Oily sunset over Kirkuk
Oily sunset over Kirkuk

Meanwhile the KRG now also controls Kirkuk, which holds the 2nd largest oil deposits in Iraq. Tens of foreign oil companies are drilling in Kurdish Iraq, including Chevron and Exxon Mobil. Peshmerga forces are on their way to Kobane, with international support.

The Kurdish Regional Government is banking on a scenario whereby the international community, principally the US, has no choice but to see the economic and military cards the Kurds are holding, and to recognise Kurdistan as an independent state.

 

 

 

Expression of Interest – Academic Preparation Centre Kurdistan

Levant Education Group invites Expressions of Interest (EOI) from qualified and prestigious language training providers for short listing / selection of partner for establishing a Training Centre in Kurdistan in partnership with a local university.

The Training Centre objectives will include:

  • English Language Training for Academic & General Purposes
  • Test preparation working to recognised Secure English Language Tests for university admission
  • Academic preparation for future Masters & PhD students
  • Assisting with PhD Proposal writing
  • Cultural awareness training

Partner Criteria

The partner chosen to work with Levant Education and the local university will have:

  • Experience in international student preparation for post-graduate education
  • The capacity to provide a Director of Studies and core group of Language Trainers for up to 20 weeks at a time, and 40 weeks in total
  •  Curricula and materials suitable for General and Academic English teaching
  • A commitment to excellent, results-driven teaching
  • Examples of delivery of similar off-shore/in-market projects

EOI Submission Levant Education will receive submissions and shortlist potential partners based on submissions consisting of:

  • A cover letter with authorised signature
  • Organisational profile highlighting relevant experience and capacity to undertake the project
  • Review of relevant project team detailing relevant experience
  • List of relevant courses / academic preparation products that will suit this project
  • CV’s of project team, including Project Lead(s), potential DoS and Language Trainers

Partner Shortlisting

Based on the EOI’s, chosen partners will be contacted for follow up meetings and bid proposals.

To register your initial interest, and receive further details, please complete the form:

UK Education Tour or the British Council?

Levant Education presents a handy guide to choosing between the 2 events that are now on offer in Kurdistan, Iraq.

Images UKET Kurdistan

UK Education Tour

  • Successful UK-focussed exhibitions in Kurdistan since 2011
  • Feedback, references available – universities already signed up for OCT 2014
  • Free cancellation in the event of HCDP cancellation or security issues
  • Well known in the region by universities, government and students
  • Investing in local language teaching and enrolment support
  • Operated by Levant Education, a UK registered business
  • Suitable for direct recruitment or working with your agency
  • Independent company working with no ties to the UK government

British Council in Kurdistan

  • No exhibition experience
  • No track record or references
  • Event not confirmed
  • Pulled out of its Erbil teaching operation (last month)
  • Underwritten by UK taxpayer money
  • Complicated international network of business entities for tax efficiency (avoidance).
  • No experience in international HE marketing or recruitment
  • Part of British government foreign policy
  • A history of incompetence in exhibition administration

At the last UK Education Tour in Kurdistan, hotel event managers informed us that British Council staff had been in to visit, researching our events, our operations, how we put together our successful events. If you have to ask, you’ll never know…

Sign up for UK Education Tour Kurdistan here! 

 

Kurdish Iraq Autumn 2014 – Now Booking

In the Kurdish north of Iraq,  a stable security situation has led to a high level of economic and business development.  UK Education Tour has been working in Kurdistan since 2011 and has excellent local relationships. British-Kurdish relations are strong and British education has an excellent reputation for  the high quality of its university system, research, teaching and training.  Many government and industry leaders were educated in the UK.

Dr Govand Sherwani, KRG Director of HCDP Schoalrship Programme
Dr Govand Sherwani, KRG Director of HCDP Schoalrship Programme


Following more excellent events in 2013 and 2014, will be returning to Erbil, capital of Iraqi Kurdistan and one of the oldest continually-inhabited cities in the world. As well as the University of Salahaddin, there are several public and private universities in Erbil and surrounding cities. We will then travel to Sulaymaniyah, a vibrant commercial city in the east of the region, and home to the Univeristy of Sulaymaniyah.

UK Education Tour N. Iraq 2012
UK Education Tour N. Iraq 2012

The Human Capacity Development Program in Higher Education (HCDP) is an ambitious program that aims to develop human capacities in Kurdistan Region in the field of higher education. An annual KRG budget of one hundred and twenty billion dinars (GBP62 million) is allocated to the scheme. It provides an opportunity for thousands of distinguished young men and women to continue their education in internationally renowned universities.

We are currently awaiting the next round of HCDP scholarships – if they are not announced by October we will postpone the event and refund all registrations. The Iraq Education Initiative scholarship programme, HCED, run by the Iraqi government in Baghdad, aims to send 10,000 PG students abroad every year until 2015. Our events attract many students from all over Iraq.

Itinerary

Monday 6th October: Arrive Erbil
Transfers from Erbil International Airport will be arranged

Tuesday 7th October : Erbil International Hotel
Morning: UK Education Exhibiton
Afternoon: UK Education Exhibiton
Evening: UKET Dinner

Wednesday 8th October: Erbil International Hotel
Morning: UK Education Exhibition
Afternoon:
Transfer to Suleymaniyah
Evening: UKET dinner in Suleymaniyah.

Thursday 9th October Suleymaniyah
Morning: UK Education Exhibition
Afternoon: UK Education Exhibition
Evening: Free evening

Transfers to Suleymaniyah International Airport or Erbil International Airport will be arranged. 

 

==> Click here for More information and online registration <==

 

MoHE_erbil_web
“UKET is well organised and a well connected fair to the people in Kurdistan.
It is well known by the Ministry and has been running for some years which gives us confidence to attend the next one”. Kathryn Land, University of Portsmouth (Autumn 2013)


“Very worthwhile, well targeted and good fun”

Joanne Jacobs, University of Manchester.

“Very effective, well organised event. Well done!”
Nick Bradley, University of Swansea.

“I thoroughly enjoyed the tour and will happily attend again”.
David Stoll, Aberdeen University.

“Exceptional organisation leading to a relaxed and convivial working atmosphere. Many students at both fairs ‘asked all the right questions’ and were genuinely seeking advice on their UK study plans!”
Sarah Byrne, Liverpool School of English.

“Another great event, especially the meeting with the Ministry of Higher Education”
Tim Kerr Dineen, Kings Colleges.

UKET Kurdistan Spring 2014 – Photos

This Spring’s UK Education Tour was once again a great success, thanks to the exhibitors, Ministry of Higher Education officials, Pearson PTE Academic testing, Levant Education and over 1000 students hoping to study in the UK.

Exhibitors can see numbers and provide feedback here.