Baghdad and Erbil Exchange Sharp Words over Oil Revenue Dispute
By John Lee.
Iraq's federal Ministry of Oil and the Kurdistan Regional Government (KRG) have issued competing statements over the longstanding dispute regarding oil production and revenue sharing, highlighting the continued impasse that has cost the country billions of dollars in lost exports.
Federal Government Position
The federal Ministry of Oil in Baghdad has demanded that the Kurdistan Regional Government comply with the constitution, federal court decisions, and budget laws requiring the handover of oil produced in Kurdish territory to federal authorities for export. The ministry stated that despite sending official correspondence and delegations to the KRG, these efforts have proved fruitless.
According to the federal ministry, the KRG's continued non-compliance is causing significant financial losses to Iraq through two mechanisms: firstly, by preventing the federal government from receiving and exporting Kurdish oil, and secondly, by forcing the ministry to reduce production from other Iraqi fields to comply with Iraq's OPEC quota, which includes Kurdish production regardless of compliance issues.
The ministry also accused the KRG of continuing to smuggle oil outside Iraq and warned it would pursue all legal measures whilst holding the regional government fully responsible for such activities.
Kurdish Regional Government Response
The KRG's Ministry of Natural Resources issued a detailed rebuttal, characterising the federal statement as "political" and divorced from objective facts. The regional government accused Baghdad of violating the constitution and blocking the passage of a federal oil and gas law for years, instead relying on what it termed outdated centralised legislation from 1976 that contradicts federal principles.
The KRG defended its constitutional right to manage its natural resources, stating that international oil companies would not have invested billions of dollars without proper legal foundations. The regional government claimed it had fulfilled all commitments regarding export resumption, including agreeing to sell oil through the federal marketing company SOMO and deposit revenues in the state treasury.
Regarding smuggling allegations, the KRG accused federal authorities of engaging in widespread corruption and oil smuggling in southern Iraq, citing local and international reports.
Financial Impact and Technical Details
The dispute has resulted in the suspension of Kurdish oil exports since 25 March 2023, following legal action by Iraq's federal oil ministry against Turkey's energy ministry. The KRG stated this stoppage has cost the federal government, the region, and oil companies more than 25 billion dollars.
The regional government reported delivering over 11.8 million barrels of oil to federal refineries over five months without receiving any payment, leading to production companies' reluctance to continue deliveries. The KRG also noted that budget law provisions setting production costs at six dollars per barrel have discouraged most companies from maintaining production levels.
Ongoing Negotiations
Both sides referenced attempts to resolve the dispute through joint committees and negotiations. The KRG emphasised its flexibility and readiness to cooperate, whilst the federal ministry maintained that previous discussions had been unsuccessful. A joint committee was established to draft federal oil and gas legislation, though the KRG accused federal authorities of delays in pursuing this critical file.
The dispute continues to highlight fundamental disagreements over the interpretation of Iraq's federal constitution and the respective roles of Baghdad and Erbil in managing the country's oil resources.
Click here to read the original statement from the Federal Ministry of Oil [Arabic]
Click here to read the original statement from the Kurdistan Regional Government [Arabic]
(Sources: Federal Ministry of Oil; Kurdistan Regional Government)
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