Iraq, KRG 'soon to agree' on restart of oil production in Kurdistan Region

Iraq could reach an agreement with the Kurdistan Regional Government (KRG) and international oil companies in the next three days to resume oil production in the Kurdish region, the Iraqi oil minister said on Sunday.

Oil minister Hayan Abdel-Ghani, who is also the deputy prime minister for energy affairs, was in the Kurdistan Region on Sunday with a delegation from Iraq’s federal government for meetings with senior KRG officials.

He said that Iraq had reached an understanding with Turkey on the resumption of oil exports from the Kurdish region through the Kirkuk-Ceyhan oil pipeline.

"We have an initial understanding [with the KRG], God willing we will reach a solution within the coming three days," Abdel-Ghani told reporters in the Kurdistan Region capital of Erbil.

Oil and salaries

Oil companies have agreed with the Iraqi government to start exporting Kurdistan's oil، the money will not go to the KRG، and they will pay the salaries of employees in a regular way and protect the security of the pipelines. pic.twitter.com/P3xCaIfWk8

— Hangaw Mama (@Hangaw_Mama) November 11, 2023

"The first step is to agree with the region and companies on adjusting their existing contracts to be consistent with Iraq's constitution," he said.

The announcement came after Iraq's Prime Minister Mohammed Shia al-Sudani on Thursday made an unannounced visit to Erbil, where he met with top Kurdish officials.

Abdel-Ghani and the delegation's visit aimed at "the continuation of discussions previously held in Baghdad about resuming oil production and export operations from the region's fields," according to a statement by Iraq’s oil ministry, a copy of which was sent to The New Arab.

"This effort is crucial for bolstering the federal budget with financial revenues," the statement read.

Prime Minister of the Kurdistan Region Masrour Barzani was quoted as saying by the KRG official website after his meeting with Abdel-Ghani that the region is ready to resume oil exports "under the framework of the constitution and respecting the constitutional authorities and obligations for all parties."

"The Minister of Natural Resources has been assigned to fully coordinate and work jointly with the Federal Oil Ministry team, which will remain in Erbil for several days for this purpose," read part of the statement.

Iraqi Kurdistan began exporting its oil independently to Turkey without the federal government's consent in Baghdad in 2014.

Ankara had stopped handling 450,000 bpd of exports from Iraq's north on 25 March, after an international tribunal ruled in a nine-year-old dispute that Baghdad was correct to insist on overseeing all Iraqi oil exports.

The tribunal, run by the International Chamber of Commerce (ICC), ordered Turkey to pay Baghdad damages of US$1.5 billion for allowing the KRG to export oil between 2014 and 2018 without the Iraqi government's consent.

Iraq's parliament in June approved a three-year budget bill of nearly 198.9 trillion dinars (US$153 billion), the largest in the country's history.

According to the law, the KRG must first deliver 400,000 barrels per day (bpd) to the federal authorities, along with half of the non-oil revenues, before receiving a share of 12.6 percent of the federal budget.

While KRG officials stress they have fulfilled their obligations under the budget law, Iraq has not sent its share from the federal budget, thus preventing the payment of KRG employees. Iraqi officials say Erbil has not fully abided by the law.

The KRG has said it needs 940 billion Iraqi dinars (US$602 million) to pay monthly salaries to over 1.2 million civil servants, but cannot do so if Baghdad does not regularly send its share from the budget.

The Iraqi government has decided to send 700 billion Iraqi dinars (US$ 536 million) as loans to the KRG to pay the salaries of its civil servants.

State workers, including teachers and healthcare staff, have yet to receive September salaries, prompting strikes and protests in some parts of the Kurdistan Region.