ERBIL, Kurdistan Region - The Kurdistan Regional Government (KRG) is set to deliver its official response to Baghdad on Monday concerning a key draft agreement that could restart Kurdish oil exports, signaling that a resolution to the long-standing oil revenue dispute may be within reach.
A source close to the KRG, speaking to Rudaw on condition of anonymity due to the sensitivity of the discussions, confirmed that the proposed arrangement is "in its final stages." Under the deal, the "KRG will hand over all crude oil produced to Baghdad. In return, the Iraqi federal government will be responsible for supplying the Kurdistan Region with its domestic needs for refined petroleum products,” the source added.
Oil exports through the Iraq-Turkey pipeline have been suspended since March 2023, following an arbitration ruling in Paris that found Turkey had violated a 1973 pipeline agreement by enabling Erbil to independently export oil.
Last week, Kurdistan Region Prime Minister Masrour Barzani stated that the halt has resulted in more than $25 billion in lost revenues for the KRG.
Key demands
In February, the Iraqi parliament amended the federal budget law to include a provision for a $16-per-barrel fee to cover production and transportation costs for international oil companies (IOCs) operating in the Kurdistan Region. The amendment also called for the joint appointment of an international consultancy within 60 days to audit those costs.
A representative of one of the IOCs told Rudaw on Wednesday that the companies officially submitted their feedback and proposals to the KRG, which has passed it on to Baghdad.
The companies insist that the $16-per-barrel compensation "be valid for 90 days while the consultancy firm” to be assigned, “completes its review,” and that "existing contractual terms remain unchanged and that financial entitlements be calculated based on contractual percentages rather than fixed sums." Another key demand by the IOCs is that "a party - either Baghdad or Erbil - be clearly designated as responsible for paying more than $900 million in outstanding debts to these companies."
Production capacities
Moreover, Iraq's federal budget law requires the KRG to hand over 400,000 barrels of oil per day (bpd) for its monthly financial share. The first source added that Baghdad has recently been informed that "the Region’s current production capacity is closer to 280,000 bpd.”
The source added that an Iraqi oil ministry delegation is expected to visit the Kurdistan Region, noting that their mission will be twofold: "to determine [the Kurdistan Region’s] actual production levels and to assess the Region’s needs for products such as kerosene, gasoline, and diesel."
Initial estimates suggest that the KRG requires "between 50,000 and 55,000 barrels of oil per day for its refineries to meet domestic demand," the source explained.
Of note, the draft agreement is being shaped in consultation with the Shiite-led Coordination Framework in Baghdad, which backed Prime Minister Mohammed Shia’ al-Sudani to premiership. However, the prime minister is personally overseeing negotiations.
In late May, tensions between Erbil and Baghdad escalated after the federal finance ministry halted all transfers to the KRG, claiming that it exceeded its 12.67 percent share of the 2025 budget. The freeze has suspended salary payments for over 1.2 million KRG public employees, drawing strong criticism from Kurdish political parties, who say the move is unconstitutional.
If the draft agreement is approved and partial funds are released, salary payments could resume as early as Tuesday, offering critical relief to the Region’s civil servants.
Hastyar Qadir contributed to this article.
