Iraq’s Kurdish region considers next move in oil dispute with Baghdad

Only days are left before Iraq’s Kurdistan Regional Government will respond to a move by Baghdad to control the semi-autonomous region’s oil and gas sector.

“After a KRG delegation visited Baghdad and met with the Iraqi Oil Ministry, the ministry put forward a proposal which the KRG is currently studying,” Kurdish spokesman Lawk Ghafuri tweeted on Monday. “The KRG will officially respond to Baghdad’s proposal by Friday and co-operation will continue in accordance with the Iraqi constitution.”

In February, Iraq’s Federal Supreme Court ruled that the KRG must hand its crude oil supplies to Baghdad after deciding that a 2007 Kurdish law on oil production, revenue and exports was unconstitutional.

The ruling was one of the most significant developments in a nearly 20-year dispute over the extent to which the Kurdish region can enter into oil contracts with foreign companies, make its own energy regulations, and independently export and market oil.

Iraq’s Minister of Oil, Ihsan Ismail, said Kurdish oil was being sold at an unacceptable discount compared to that offered by Iraq’s federal State Organisation for Marketing of Oil.

But Mr Ismail also claimed there is “no desire for Baghdad to control the oil activity in the Kurdistan region, but to organise that activity and turn it into a real, clear and transparent business activity”.

Currently, crude oil from the KRG is exported through a pipeline that runs from Kirkuk to Ceyhan in southern Turkey.

Implementing the Iraqi court’s decision would mean that Baghdad’s Ministry of Oil would have control over Erbil’s crude.

However, questions remain as to how complex such an undertaking might be, especially given that one section of the export pipeline originates in Kurdish territory. Part of Iraq’s plan, revealed by the Ministry of Oil in April, includes setting up a company in Erbil to manage the KRG’s oil and gas.

In recent months, international oil companies have been cutting back operations in the Kurdish region after significant financial losses incurred during the Covid-19 pandemic, which caused an oil price crash. There have also been disputes with the Kurdish authorities.

US international oil company Exxon stopped its oil operations there last month.