ECONOMY
Aerial view of West Qurna oil field near Basra, Iraq, on February 21, 2017. Photo: Nabil al-Jourani/AP
ERBIL, Kurdistan Region - The Kurdistan Regional Government (KRG) on Tuesday stated that “unjust” articles in the Iraqi budget law have complicated the process of resuming Kurdish oil exports, claiming that the Erbil’s oil industry should not be seen as equal to Baghdad’s.
Oil exports from the Kurdistan Region through the Iraq-Turkey pipeline were put on pause over a year ago, after a Paris-based arbitration court ruled in favor of Baghdad against Ankara, saying the latter had breached a 1973 agreement by allowing Erbil to begin independent oil exports in 2014.
”The Kurdistan Region's oil industry was established through foreign investment without spending a single dinar from the state budget, but the budget law considers it similar to the Iraqi oil industry, which is built on billions of dollars from the country's budget,” read a statement from the KRG’s natural resources ministry.
The ministry added that the funds allocated in the budget for the Kurdistan Region’s production and transportation of oil do not correspond to the actual cost.
Article 13 of the Iraqi federal budget obliges the Kurdistan Region to hand over, on a daily basis, at least 400,000 barrels of crude oil to Iraq’s State Oil Marketing Organization (SOMO) to be exported through Turkey’s Ceyhan port, or be used domestically in case it is not exported.
The statement claimed that the KRG has handed over more than 11 million barrels of oil to the federal government, but has yet to see a single dinar in return, rendering Erbil unable to pay the financial entitlements of the oil producing companies.
The Association of the Petroleum Industry of Kurdistan (APIKUR) claims that the KRG owes IOCs in the Kurdistan Region over $1 billion between September 2022 and March 2023. The piled-up debts mainly come as many of the contracts with the IOCs signed in the early stages of the KRG’s independent oil sales were signed with prepayment schemes.
The cash-strapped KRG has frequently failed to pay civil servants on time and in full for nearly decade, and the halt in oil exports has further exacerbated this issue. Public sector employees have gone unpaid for over 50 days as of the time of this writing.
“After the suspension of oil exports, the Kurdistan Region has been put into a severe financial crisis, which has delayed the payment of salaries,” the statement added.
The ministry statement underlined that Kurdistan Region Prime Minister Masrour Barzani and Iraqi Prime Minister Mohammed Shia' al-Sudani have begun efforts to restart oil exports in hopes of reaching an agreement on resolving the outstanding issues and have instructed both the Iraqi oil ministry and the KRG's natural resources ministry to address the obstacles hindering the resumption.
Sudani and Barzani signed an agreement to resume the Region’s exports in April 2023, but there is still no oil flowing through the pipeline to Turkey nearly a year later.
The Iraqi oil ministry on Monday reiterated Baghdad’s willingness to reopen the pipeline. The ministry identified the refusal of the foreign companies operating in the Kurdistan Region to hand over their production to the KRG as one of the main reasons the process has not resumed.
The closure prevents the export of some 450,000 barrels of crude oil per day from the Kurdistan Region, costing Baghdad and Erbil billions of dollars in losses.
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