Baghdad and Kurdistan region sign Iraq oil export agreement

Iraq’s government yesterday struck a deal with authorities in the Kurdistan region to restart oil exports, a major step forward in ending a long-running dispute over rights to develop and export energy.

The deal is a win for Baghdad, which wanted to assert its right to manage Kurdistan oil resources since the 2003 US-led invasion that toppled Saddam Hussein.

Baghdad said the agreement would be implemented immediately.

“This agreement underlines the serious and sincere desire by the federal government and the Kurdistan Regional Government to face all the problems and obstacles that we inherited,” Iraqi Prime Minister Mohammed Shia Al Sudani said. Both sides are working to “benefit all Iraqi people”, he said.

Kurdistan Prime Minister Masrour Barzani was in Baghdad to finalise the agreement.

He hailed the agreement as a “crucial step” towards ending the long-running dispute.

The deal “creates a positive and safe atmosphere to finally approve the national oil and gas law”, he said.

Kurdistan had said Iraq’s 2005 constitution gave it the right to sign agreements with oil companies and states without consultation.

Baghdad said the region had no right to sign deals and that exports had to go through state-run pipelines, to be marketed by the federal government’s State Organisation for Marketing of Oil.

Last month, Iraq won an arbitration case against Turkey for allowing the Kurdistan region to export oil without Baghdad’s consent.

The ruling by the International Chamber of Commerce in Paris stopped about 450,000 barrels per day from being exported from the Kurdistan region and northern Kirkuk oilfields.

The new deal comes as northern Iraq’s oilfield shutdowns have led to storage rapidly filling up, increasing the risk of rising costs to resume production. In the absence of exports, the KRG was under strain to pay off debt to oil companies, estimated at about $2 billion, and to oil traders, thought to be around $4 billion.

Under the new deal, both sides will jointly manage an account for oil revenues from exports from fields in the Kurdish region, and jointly market the oil.

Details on how this will affect Kurdish revenues and debt payments have not been revealed, although the draft federal budget says the region will get 12.67 per cent of federal revenues.

There was no clarification on the status of oil contracts signed by the KRG.

Mr Al Sudani and Mr Barzani said the agreement was temporary until the 2023 budget was approved.

A law to share oil and gas export funds will be worked on, Mr Al Sudani said.