LONDON: Iraq said it could slap sanctions on US oil major Exxon Mobil before the end of the year for signing a deal with its semi-autonomous Kurdish region without approval from Baghdad or blessing from Washington.
At risk for Exxon is its contract to develop a huge oilfield in southern Iraq after it agreed to six exploration deals with the northern Iraqi Kurds, who are in dispute with the Baghdad government over oil and land rights?
"The Iraqi government is considering sanctions, and will inform the company before they make a public announcement," Deputy Prime Minister for Energy Hussain al-Shahristani told an industry conference in London on Tuesday.
Baghdad has said any oil deals signed with the Kurdish Regional Government (KRG) are illegal. Exxon is the first oil major to test that.
"The position of the US government has been that they were unaware of it and if they had been asked, they would have obliged (Exxon) to get approval of the Iraqi government," Shahristani told an audience of hundreds of Western executives and consultants.
The US State Department, in its first comment on the deal, said it had warned Exxon and other firms of the risks of signing contracts in Iraq without nationwide approval. But it did not say whether it specifically talked with Exxon about the Kurdish contract.
"We have had conversations with Exxon, as we have with all of our firms, advising them to wait for national legislation," State Department spokeswoman Victoria Nuland told reporters.
Nuland said she could not "speak to" whether the US government has had subsequent conversations with the company or the Iraqi government to try to resolve the matter.
Iraq's Arab-dominated central government and the Kurdish region have for years disputed control of Kurdish fields.
Iraq has yet to agree on a national oil law to decide such vital issues the role of federal and regional authorities in regulating oil and gas development as well as how to share the revenues from the energy sector.
"Washington must be furious. What can you say when your own company goes and destroys stability in Iraq?," said one industry consultant with clients in Iraq who asked not to be named.
Exxon has yet to comment on the deal, which appears to have been a miscalculation of political risk in Iraq by the world's largest publicly traded oil company.
"They had some poor political advice," said another industry source. "They were told that Iraq is moving toward a resolution with the Kurds but they were also told from a senior level that, down the road, Iraq could split apart."
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