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Iraqi federal and Kurdish officials reach oil export deal

Published : 02 Apr 2023 10:26 PM

Authorities in Iraq’s semi-autonomous Kurdish region said Sunday they have reached a deal with the central government in Baghdad that will allow oil exports from the northern Kurdish region by way of Turkey to resume.

Officials in Baghdad and Irbil, the seat of the Kurdish government, have long been at odds over oil revenues, a dispute that has been exacerbated by the lack of a federal law detailing the sharing of funds from oil and gas exports.

The agreement comes after an arbitration process by the International Chamber of Commerce (ICC) last sided with Iraq over a long-standing dispute over the independent export of oil by the Kurdish regional government. Exports via a pipeline that goes through Iraq’s Fish Khabur border crossing to Turkey’s Ceyhan port will resume this week, according to Lawk Ghafuri, spokesperson for the Kurdish regional government.

Iraq filed for arbitration against Turkey in 2014 after the Kurdish region began exporting the resource without the consent of Baghdad through the neighboring country. Iraq argued that a 1973 agreement with Turkey requires all oil exports to go through Iraq’s state-owned oil marketing company, SOMO. Iraqi officials announced on March 25 that the arbitration tribunal had ruled in its favor. Turkey’s Ministry of Energy and Natural Resources said in a statement that the arbitration ruling had thrown out four of Iraq’s five claims and upheld one.

In any case, the ruling halted oil exports from the Kurdish region by way of Ceyhan, which previously amounted to about half a million barrels per day. The stoppage, if prolonged, would have been a significant blow both to global oil supplies and to the Kurdish region’s budget.

Already in recent years the Kurdish government has frequently been late in paying public sector salaries, in part due to the ongoing dispute over oil and gas revenues, which has led to the central government withholding budget transfers to Irbil.

Ghafuri said Sunday that after “several meetings” between officials from Irbil and Baghdad, an initial agreement had been reached allowing exports to resume. The agreement will remain in effect until the long-delayed oil and gas law is passed by the Iraqi Parliament, he said.

Under the deal, oil will be exported jointly by SOMO and the Kurdish region’s Ministry of Natural Resources, with the revenues going to a financial account managed by the Kurdish government and monitored by the central government.

A spokesperson for the central government’s Ministry of Oil did not respond to a request for comment on the agreement.

The head of the parliamentary Oil, Gas and Natural Resources Committee, Haibet al-Halbousi, said Sunday in a statement that there is a “quasi-political consensus” to speed up passage of an oil and gas law and that the committee will be meeting with the heads of the various political blocs to reach a consensus. “The oil and gas law serves all Iraqis and not a specific party, because oil and mineral investments belong to all the people,” Halbousi said.

In a statement on the arbitration decision, Turkey’s Energy and Natural Resources Ministry on Tuesday stressed Ankara’s support for Iraq’s territorial integrity, the “political and economic stability of both Iraq and the region” and its efforts to support global oil markets.

“As always, Turkey is ready to fulfill the requirements of international law and to provide all types of contributions to the permanent settlement between the main parties to the dispute,” the statement added.