Iraq’s flood of ‘cheap oil’ could rock world markets

Iraq has the fourth-largest proven reserves in the world of 143 million barrels of crude, but “the country is only about 30 percent to 40 percent explored,” said Mr. Lando. “There’s a lot of opportunity to find more oil.”

Prior to the clashes that broke out in November, Baghdad and Kurdish authorities had reached some tentative compromises in their dispute, including a move by Baghdad to tolerate some Kurdish exports through a pipeline going through Turkey that had been shut down for years.

“Washington is the only outside actor with the power and experience to push Baghdad and the [Kurds] toward formalizing the compromises achieved this summer,” Mr. Henderson said, adding that this should “be a priority for the second Obama administration.”

James Jeffrey, a former U.S. ambassador to Iraq, agreed.

“The U.S. has been very active trying to work out arrangements where everybody cooperates and oil and eventually gas from the north is exported in cooperation with Baghdad,” he told Platt’s Energy Week. “The latest deal has fallen through. People are back arguing, and more needs to be done to ensure that a solution satisfactory to everybody can be achieved because this involves military as well as energy politics.”

Despite the public rhetoric, he said, the Kurds and central government have cooperated on the shipment of oil when it benefits them.

“Everybody is playing a veiled as well as open game here,” he said. “A great deal is at stake, not only in energy, but in the political stability of Iraq, where we lost so many people, and therefore I know the U.S. government is very energetically engaged in trying to find a solution.”

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