Erbil, Baghdad sign agreement to resume Kurdish oil exports

ERBIL, Kurdistan Region - Prime Minister of the Kurdistan Region Masrour Barzani and Iraqi Prime Minister Mohammed Shia’ al-Sudani on Tuesday signed an agreement to resume the Region’s oil exports, calling the deal “important” for all components of the Iraqi state.

Barzani arrived in Baghdad on Tuesday morning, accompanied by a high-level delegation of the Kurdistan Regional Government (KRG), where he met with Iraqi Oil Minister Hayyan Abdul Ghani, Prime Minister Sudani, and President Abdul Latif Rashid.

Barzani and Sudani announced the agreement in a joint press conference, referring to the deal as “temporary” without specifying how long it would remain in effect. 

“This agreement is temporary but all its principles will be reflected in the federal budget and the oil and gas law," Prime Minister Barzani told Rudaw's Sangar Abdulrahman, adding that halting the Region’s oil exports impacts Iraq as a whole, not just the Region.

Similar remarks were echoed by Sudani, who acknowledged that a further delay in oil exports will impact the expected income for the 2023 federal budget.

“This agreement will pave the way for the passing of the federal budget,” said Sudani.

Both leaders expressed their gratitude for the continued cooperation between Erbil and Baghdad, with Sudani saying that the agreement “confirms the desire of both federal and Kurdistan Regional governments to combat the obstacles and problems we have inherited over the years."

The International Chamber of Commerce (ICC) arbitration court ruled on March 23 that Turkey had breached a 1973 pipeline agreement that obliges the Turkish government to abide by instructions issued by Iraq regarding the transport of crude oil exported from Iraq. Iraq welcomed the ruling, claiming to be triumphant.

Oil firms in the Kurdistan Region halted production or reduced output after a Paris-based arbitration court last week ruled that Turkey had violated an agreement with Iraq by allowing independent oil exports from the Region through its pipeline in 2014. Oil exports from the Kurdistan Region have been halted for a week as a result.

The halt in oil exports has jeopardized the production of around 450,000 barrels of oil per day as IOCs are storing produce. The suspension of oil exports to the port of Ceyhan also contributed to a 5.7 percent rise in global oil prices. The deal will restore stability on the oil market and serve as re-assurance for international oil companies (IOCs) operating in the Region. 

The KRG is heavily reliant on revenues from its oil exports and an extended inability to sell its crude will severely impact its economy. The government has struggled for years to pay over a million civil servants on time and in full.

Last month, a budget agreement was reached between Erbil and Baghdad, with Iraq finally passing a budget after nearly a year without one in place.

In an interview with Al Jazeera aired on Sunday, Sudani said that the Kurdistan Region had no choice but to accept unbalanced deals back in 2014, adding that IOCs had exploited Erbil at the time. He stated that Erbil and Baghdad had agreed to draft an oil and gas law under six months, admitting that the process will take longer that the originally-set deadline.

Calls for drafting a joint oil and gas law between Erbil and Baghdad have resurfaced since the formation of the new Iraqi government under Sudani in October, after a ruling from Iraq’s top court in February 2022 deeming the Kurdistan Region’s oil and gas law “unconstitutional” escalated tensions between the KRG and the federal government.

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