Oil deal reached between Iraq and Kurdistan Regional Government

The Kurdistan Regional Government (KRG) in Iraq announced on Tuesday that it reached an agreement with the federal government on their oil dispute. The region's oil exports to Turkey, halted following a court ruling, are now set to resume. 

The KRG's head of Foreign Media Affairs, Lawk Ghafuri, tweeted that KRG Prime Minister Masrour Barzani and Iraqi Prime Minister Mohamed Shia al-Sudani signed an agreement to resume oil exports from the Kurdistan Region to Turkey via the Ceyhan port. Ghafuri said the exports would resume on Monday.

An agreement on the #Kurdistan Region's oil exports has been signed. pic.twitter.com/cEyIgeMKOW

— Kurdistan Regional Government (@Kurdistan) April 4, 2023

Reuters reported that the agreement stipulates that Iraq's state oil company, SOMO, will have the right to market the Kurdistan Region's oil. Revenues will be deposited into an account at the Iraqi Central Bank that is controlled by the KRG, according to the outlet, which cited anonymous Iraqi sources. 

Ghafuri confirmed the news to Al-Monitor, but added that SOMO will coordinate with the KRG's Ministry of Natural Resources on marketing the oil.  

For his part, Barzani said the agreement is "temporary."

“This agreement is temporary but all its principles will be reflected in the federal budget and the oil and gas law,” Barzani told the Kurdish Iraqi news outlet Rudaw.

Sudani’s office said in a tweet that he met Barzani in Baghdad on Tuesday, but has yet to release further details. 

In a statement later in the day, Barzani said that the agreement could pave the way for a new federal law on energy. 

"We also agreed that we now have a framework for a draft budget law and, in the near future, discussions can begin on a new federal oil and gas law," said Barzani. 

Background: Reports surfaced last month that the Paris-based International Chamber of Commerce ruled in Iraq’s favor in its case against the Kurdistan Region’s oil exports to Turkey. The exports were halted following the news, though the decision has yet to be released to the public.

The Iraqi government has taken issue with the KRG's independent oil exports for years and wants more control over the autonomous region’s energy sector. Last year, the federal Supreme Court ruled that the KRG’s legal basis for the exports was unconstitutional. The KRG disputed the ruling, leading to the current dispute. The two have also long disagreed about the KRG's portion of the federal budget, among other issues. 

Why it matters: Several international oil companies in the Kurdistan Region announced in March they were halting operations in response to the oil stoppage. Like its federal counterparts, the KRG is dependent on oil sales for the majority of its revenue. A long-term stop could hurt the Kurdistan Region’s economy, not to mention further KRG-federal tensions in Iraq.

Editor's note: this article was updated to include a statement from KRG Prime Minister Barzani.