Russia's biggest oil company, Rosneft, has agreed to take control of Iraqi Kurdistan's main oil pipeline, boosting its investment in the autonomous region to $3.5 billion despite Baghdad's military action sparked by a Kurdish vote for independence. Ciara Lee reports.
It's been a chaotic week for Kurdish oil fields The Iraqi military took control of the oil-rich Kirkuk area from Kurdish Peshmerga forces this week. (SOUNDBITE) (Arabic) COMMANDER OF 3RD BATTALION EMERGENCY RESPONSE DIVISION, LIEUTENANT COLONEL ATHEER IBRAHIM, SAYING: "This morning we advanced into north oil fields including Bai Hasan north oil field and Bai Hasan south oil field. As you can see order is restored and imposed." And now another twist in the pipeline. Russia's biggest oil company, Rosneft is to take control of Iraqi Kurdistan's main oil pipeline, boosting its investment in the autonomous region to $3.5 billion. Oil prices settled on Friday, having spiked earlier in the week amid fears of violence. SOUNDBITE (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "Supply has not really been impacted that much yet. It may come. So I really think that really has been the perception of the potential impact that's really been driving this sort of like moves in the market." Russia's move appears to be part of a strategy to boost its Middle Eastern political and economic influence. Rosneft's investment comes as Kurdistan's relations with the central government in Baghdad have hit crisis point. Kurdistan held an independence referendum last month, angering neighbours Iran and Turkey. The U.S. called the referendum a provocation. But Moscow has effectively supported the vote, saying it understood Kurdish aspirations for independence. Rosneft says it would own 60 percent of the pipeline, with current operator KAR Group retaining 40 percent. Baghdad has threatened to re-route a big chunk of oil flows towards an old oil pipeline Although industry experts have said that's unrealistic as the pipeline is rusty and in need of major investment.