Hours after the Kurdistan Region’s prime minister arrived in Doha on Tuesday morning with energy cooperation high on his visit’s agenda, Iraq’s federal court ruled the Kurdish oil and gas law to be unconstitutional, putting both the premier’s plans and the Region’s industry in jeopardy, in a decision the Kurdistan Regional Government (KRG) has deemed to be “unjust” and “unconstitutional”.
Iraq’s Federal Supreme Court on Tuesday reviewed cases brought against the export of oil from the Kurdistan Region to foreign countries without prior approval from the federal government. The Iraqi oil ministry filed cases against the KRG, in 2012 and in 2019, for exporting oil without approval from the federal government.
The court’s decision found the Oil and Gas Law of the Kurdistan Regional Government No. (22) of 2007 to be “unconstitutional,” and therefore struck down the legal basis for the independence of the Kurdistan Region’s oil and gas sector.
The KRG responded to the decision late Tuesday, saying that the court’s ruling is not only “unconstitutional” but also “unjust.”
“The decision is unjust, unconstitutional, and violates the rights and constitutional authorities of the Kurdistan Region. It is unacceptable and the court had to investigate further and consider the requests of the Kurdistan Region,” read the statement from the KRG, building an argument around the Kurdish government’s several attempts at cooperation with Baghdad.
“The Kurdistan Regional Government will not give up on the Kurdistan Region’s rights which are set in the Iraqi constitution, and will continue its attempts with the federal government to reach a constitutional solution for this matter,” the statement continued, adding that the KRG had asked the court to adjourn the session in an attempt to reach an agreement with the federal government.
The KRG passed its oil and gas law in 2007, enabling it to administer and develop its own oil and gas resources.
Disputes rose between Baghdad and Erbil in early 2014, when Baghdad cut the Region’s share of the federal budget, setting into motion a series of crises which the KRG still suffers from. By March 2014, the KRG started exporting its oil abroad in an attempt to secure the salaries of its employees.
The Iraqi and Kurdish governments were once again brought around the table in 2021 when Iraq was drafting its budget law. Both sides agreed that the KRG would continue its oil sales, and in return would hand the revenue of 250,000 barrels of oil to Baghdad daily.
Kurdistan Region President Nechirvan Barzani said early Wednesday that the court’s decision could further complicate the disputes between the two capitals.
Other Kurdish officials have slammed the court’s decision.
Kurdistan Democratic Party (KDP) leader Masoud Barzani, who himself played a key role in drafting the 2005 Iraqi constitution, said that the decision was political.
"The decision of the Iraqi Federal Supreme Court regarding the oil and gas of the Kurdistan Region is a completely political decision and contradicts the Iraqi federal constitution, which is aimed at opposing the Kurdistan Region and is against the Iraqi federal system,” the leader said in a statement.
Masoud Barzani’s emphasis on the court’s decision being political comes as the same court on Sunday ruled against the nomination of KDP’s Hoshyar Zebari for the Iraqi presidency post following his temporary suspension last week.
His argument also comes as the Iraqi court’s recent decision is based on a lawsuit filed by Abdul Karim Luaibi, the Iraqi minister of oil from 2012, a period during which Nouri al-Maliki served as the Iraqi prime minister.
Maliki is now a strict rival of the KDP’s alliance with the Sadrists and the Sunnis. It was formed following October’s early elections last year.
Shiite cleric and head of the parliament’s largest bloc Muqtada al-Sadr also criticized the court’s “political” decisions on Tuesday, calling on the parliament to activate its auditory role and “prevent political intervention or politicized judiciary.”
The court ruling came as a surprise for the Region, especially since the KRG’s ministry of natural resources had recently developed good relations with its federal counterpart.
In a meeting between the Region's Minister of Natural Resources Kamal Atroshi and Iraqi Minister of Oil Ihsan Abdul Jabbar in October, Jabbar “emphasized the importance of working on increasing transparency and sharing information on oil activity, revenues achieved and working together for optimal investment of natural and hydrocarbon resources throughout Iraq to support and promote the national economy.”
The decision comes at a very sensitive time for the Kurdistan Region as global oil prices have increased to over $90 per barrel, but also as the Region is looking to further develop its industry.
The ruling was made just hours after Masrour Barzani’s plane landed in the Qatari capital for a visit that had aimed to develop cooperation between Erbil and Qatar in the natural gas field.
Aziz Ahmad, deputy chief of staff to the PM’s office, said in a tweet on Monday that the trip will last for two days and the premiere will “explore synergies in oil and gas” with the Emir of Qatar Sheikh Tamim bin Hamad al-Thani and other officials.
According to the premier’s agenda, which Rudaw English has obtained a copy of, Masrour Barzani is also meeting with Saad Sherida al-Kaabi, the Qatari minister of energy affairs and CEO of Qatar Energy.
There are 52 oil blocks in the Kurdistan Region, 16 of them are in production, and 15 are in exploration phases. Over 30 international and local companies are working in the sector. The Region produces around 450,000 barrels per day.
The KRG exported a total of nearly 80 million barrels of crude oil in the first half of 2021, collecting a net $1.7 billion.
The government will face a number of other difficulties if its oil industry is suspended.
In late June, Atroshi attended a parliamentary session to answer questions about the KRG’s finances. He said at the time that 40 percent of the money from oil sales is spent to cover oil sector costs - 20 percent for production costs, 14 percent in payments to international oil companies, and around six percent for transportation.
Many of the contracts with the companies were signed with prepayment schemes, and the Kurdistan Region owes a large amount of money to those companies. If the Region’s ability to sell its oil is halted, so will its ability to repay those debts.
At around the same time of Atroshi’s comment, the General Secretariat of the Council of Ministers Amanj Raheem told parliament that the KRG owes around $4.3 billion to oil companies. The government has also said it inherited $28 billion in debt from the previous administration.
