Editor's Note: The conflict in Iraq is escalating beyond all hope of control - and it's impacting a huge number of investments worldwide. So we reached out to Dr. Kent Moors, one of very few people who've advised both the Kurdish regional and Iraqi federal governments.
What he told us was incredible, bringing crystal clarity to what had been an extremely murky picture.
More importantly, Kent's showed us a way forward through the supply crisis and, as we'll see shortly, a way to profit from it.
Money Morning: Some of the first news we heard out of Iraq about the current crisis was from the north in Iraqi Kurdistan, specifically the city of Kirkuk. What is the significance of the armed conflict there, relative to the federal government in Baghdad? Kurdistan and Baghdad, historically, have had a poor relationship, but now it would seem they have a common enemy in the Islamic State of Iraq and Syria.
Dr. Kent Moors: Kirkuk has been a bone of contention for some time, and the Kurds have always regarded Kirkuk as the natural capital of Kurdistan, a geopolitical region in northern Iraq where the Kurds are the ethnic majority.
This goes back hundreds of years. But if you go back maybe 40 or 50 years ago, Kirkuk was also one of the most interesting cities in the Middle East. It was very diverse, with large Asian, Turkmen, and Jewish communities. It was a very different, cosmopolitan kind of Middle Eastern city.
When Saddam Hussein was in power, he started physically displacing Kurds and moving in Iraqi Arabs, to change the population.
MM: How has the city changed since Saddam Hussein was deposed?
Kent: Well, when he finally fell, the Kurds started moving a Kurdish population back into Kirkuk.
And Kirkuk is the center of northern oil production.
From there you have a primary, major, two-pipeline export system to Ceyhan in southeastern Turkey. Virtually all of it is outside of Kurdistan and part of Iraq. When it came to protecting Kirkuk, the Kurds contended, "Look, the Iraqi security forces just laid down their arms, took off their uniforms, and left."
The Kurds and their Peshmerga militia are providing a useful service. And by retaining Kirkuk, they're maintaining the integrity of about 20% of the oil exports.
Baghdad flatly rejects - and has always flatly rejected - that Erbil, which is the provincial capital in Kurdistan, has any right to export on its own, or has any right to provide leases or contracts on its own. All that had to be through the central government.
So given the fact that I was advising both the Ministry of Petroleum in Baghdad and the Ministry of Natural Resources in Erbil, I really had to stay out of that.
The Kurds have been playing this game for 3,000 years. They're very good at this sort of jockeying diplomacy. You have to remember, the Kurds are the largest ethnic population in the world that don't have their own country.
Eastern Turkey, northwestern Iran, and the Kurdistan Regional Government area in Iraq... That's all Kurdish.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.