In early May 2010 it was announced that the central government and the Kurdistan Regional Government (KRG) had come to an agreement over oil exports. The Kurds would be allowed to resume selling its oil abroad again with the Oil Ministry paying the companies operating there, in return for the profits being deposited in a Baghdad account, which would eventually be distributed to Kurdistan through the regular budgetary process. This was part of a political move by Prime Minister Nouri al-Maliki to woo the Kurds to his side so that he could return as the premier. Within two weeks however the deal was suspended, supposedly because of the political deadlock over forming a new government. It has now been reported the negotiations are being held up because the KRG is demanding that the central government pay for the cost of the investments made in the region’s oil industry. The Oil Ministry is refusing because it claims all the contracts offered by the Kurds are illegal, and that only Baghdad has the right to sign with foreign companies.
Originally the KRG had been allowed to export its petroleum in May 2009, but that quickly came to an end. In June the Kurds starting selling oil to foreign markets, but then stopped in September when its Natural Resource Minister was caught in a stock scandal involving Norway’s DNO, one of the companies pumping oil in Kurdistan. By the next month the two operating petroleum fields were shut down because Baghdad was getting all the profits, but no one was paying the corporations doing the work.
The deadlock over exports has increasingly frustrated Kurdistan. They have gone public with their oil smuggling to Iran, and claimed that they could produce 1 million barrels a day to pressure Baghdad into letting them resume oil sales again, but to no avail. Having signed major deals with international petroleum firms in 2009, the Oil Ministry feels no urgency to give in to Kurdish demands. The Oil Minister Hussein Shahristani is likely to be replaced under a new government anyway, so it’s probably best to hold off on the issue until a new premier and minister are seated and they decide on their energy policy. Until then the KRG will just have to wait.
Kamal, Fatima, “Iraqi Kurds refuse to cooperate with Oil Ministry on oil exports,” Azzaman, 9/17/10