A senior advisor in the Middle East Institute and a contributor to Jamestown Eurasia Daily Monitor, Rauf Mammadov, told Kurdpress that there are many oil giants that are seeking to drill in Kurdistan Region as the region enjoys significant oil and gas reserves and, according to reports, over 50 foreign companies are working in the region’s oil and gas section since 2007. Some of the companies have left the region due to economic, political and security concerns but big companies have been replaced. One of the giants is Rosneft which plans to enhance its activities in the region.

Kurdpress spoke to the analyst over the presence of the giant oil company in the region as the deal between the region and the company is greatly significant for Erbil and welcoming for the company.

What follows are his full answers to Kurdpress questions;

First of all, how much is Kurdistan region oil and gas reserve, excluding Kirkuk’s oilfields?

I do not have exact numbers for the Kurdistan region except Kirkuk. Kirkuk holds almost 9 billion barrels of oil. The current export rate from Northern Iraq is between 350 to 400 thousand barrels a day.

According to the last report by Financial Times, Rosneft has given nearly 4 billion dollars to the government of Kurdistan region; the same report says by the investment Russia plans to take control of Iraq and finally, the Middle East. How do you consider it?

It is a combination of both geopolitical and economic factors that necessitate Rosneft's presence in Northern Iraq. Rosneft, like any other majority state-owned energy company of the Russian Federation, traditionally deployed as a foreign policy tool by the Russian leadership. These companies have become a major element in energy diplomacy of Moscow, especially in strategically important geographies such as the Middle East. Russia sees the MENA region as its main competitor in the energy markets. But, current geopolitical and market conditions forced Moscow to abandon zero-sum approach against her traditional rivals in energy domain and to pursue collaborative approach. Participating in exploration and development as well as transportation-infrastructure projects in Iraq will help Russia influence the area’s petroleum-product delivery decisions to Russia’s traditional delivery markets.

Rosneft's investment in the project was expected to be around $1.8 billion on top of $1.2 billion already lent to Kurdistan in the first of months of 2017. Rosneft has deployed the same approach in Northern Iraq that it used in Venezuela, where Russian state provided multi-billion dollar loan to Venezuela, another politically and economically embattled state, in return for the sales of oil in the future. As in Venezuela's case, Kurdistan is planning to return the loan with future oil sales as well. Northern Iraqi oil volumes are important for Rosneft also from a tactical standpoint. Along with cementing Russia's economic and political presence in northern Iraq, oil from the Kurdistan region could be supplied to German refineries owned by the company. By investing in production increases in Kurdistan and pledging to increase the throughput capacity of Erbil pipeline, Rosneft will be able to deliver the oil volumes from the Kurdistan region to its refineries in Germany. By doing so Rosneft will be able to divert its Ural's blend volumes to Asian markets in order to capture more share vacated by Saudi Arabia as a result of the volume-cut deal. The strategy is also aimed at undermining the European Union’s energy supply diversification efforts, which have accelerated since Russia invaded Crimea.

Another Russian company (Gas Prom) is also active in the Kurdistan Region, some say the two are competing, is it so?

Igor Sechin, CEO of Rosneft is a formidable player in "Siloviki" (former KGB) wing of Putin's team and his long-term friend. His appointment as a CEO of Rosneft has certainly contributed to the rise of Rosneft as a company and a major competitor to Gazprom. Russian president Putin prefers "controlled competition" where the president himself is the sole arbitrator. The goal is to create a rivalry (managed competition) between these two companies in order to maximize commercial and political dividends from their activities. Rosneft has been more actively deployed in V.Putin's Middle East economic expansion plans whereas Gazprom has been a traditional player in the European market.

Gazprom is present in Iraq through its oil-producer subsidiary Gazpromneft. Gazprom has been more active in East and South of Iraq through the acquisition of another Russian company Bashneft which used to have operations in Iraq. In the Kurdistan region, Gazprom Neft holds a participating interest of 40 per cent in the Garmian block and 80 per cent in the Halabja and Shakal blocks. These are mainly exploration activities.

Baghdad is not with expanding Russian investment in Kurdistan Region, Can she stop it and how?

Erbil played it smart by signing a contract with Rosneft which made it difficult for Baghdad to obstruct its plans. The central government will find it challenging to stop Russia's energy expansion in Northern Iraq as both Rosneft and Gazpromneft enjoy full political support by Moscow.

Russia took a neutral stance against the Kurdish referendum in 2017 and now we see a giant investment by a giant Russian company in Kurdistan Region, how does Russia see Iraqi Kurds and Kurdistan Region?

In his recent pivot towards the Middle East, Moscow has managed to successfully disentangle its geopolitical considerations from economic interests in the Middle East region. We are witnessing the same political maneuvering with respect to its relations with Saudi Arabia and Qatar as well. Russian leadership opts for the pragmatic and flexible approach in its relations with Middle Eastern states, and Iraq is not an exception. If not dealt correctly Kurdistan region could also become a serious irritant in its relations with Turkey. Therefore, Moscow will act extremely cautious in the region by pursuing its short to mid-term geopolitical ends by not jeopardizing her relations with Tehran, Bagdad and Ankara.

Will this investment help Kurdistan region revive its economy?

It is a significant contribution to the economy of Kurdistan and Iraq in general. The economy of the region is heavily reliant on oil and gas export revenues. If spent wisely these multi-billion dollar investments could bring long-awaited political and economic stability to the region which, in turn, might pave the ground for further investments in the economy of Northern Iraq. Political stability coupled with the agreed mechanism on sharing of oil and gas export revenues between Baghdad and Erbil might bring long-awaited economic revival to the region.

Reporter’s code: 40101