Iraq Kurds hope to resume oil exports after Baghdad offers higher cost payments

Authorities in Iraq’s autonomous Kurdish region said Wednesday they hoped oil exports could resume “as soon as possible” after the federal government offered higher cost payments to producers.

The region’s oil exports have been at a standstill since March 2023 when the arbitration tribunal of the International Chamber of Commerce in Paris ruled oil exports by the regional government illegal.

In its judgement in a case first lodged in 2014, the tribunal ruled that the federal government had the exclusive right to market all Iraqi oil, halting the region’s independent exports by pipeline via Turkey.

The federal and regional governments have been haggling ever since over the production and transport costs payable to the region and its commercial partners.

But in a budget amendment on Tuesday, Baghdad agreed to form an independent body within two months to set the cost payments and to pay $16 a barrel in the meantime.

A federal oil ministry official said that the interim cost payment already represented a $10 premium on those for oil from Iraq’s southern fields.

In a statement Wednesday, the regional government welcomed the move by Baghdad as an “opportunity to resolve the problem and resume oil exports to international markets as soon as possible”.

The Association of the Petroleum Industry of Kurdistan, which represents international oil firms operating in the region, said a deal would be worth $1 billion a month to the region and its partners.

It put losses to all parties since the export pipeline closed at $20 billion.

Gulf analyst Yesar Al-Maleki, of the Middle East Economic Survey, said a range of contractual issues still had to be thrashed out with the oil firms before exports could resume.

“While raising the cost recovery rate set by the budget is a positive step that shows willingness to resolve the impasse and move forward, many thorny issues still remain,” he warned.