BAGHDAD, February 3 - Iraq's parliament has approved a budget amendment aimed at subsidizing production costs for international oil companies in the Kurdistan region, a move intended to facilitate the resumption of oil exports from the area. The amendment sets a transport and production cost rate at $16 per barrel, significantly higher than a previously proposed $7.9 per barrel, which the Kurdistan Regional Government (KRG) deemed insufficient.
This parliamentary decision is seen as a crucial step in resolving a nearly two-year standoff regarding Kurdish oil exports and improving relations between Baghdad and Erbil. The resumption of exports is anticipated to relieve economic strain in the Kurdistan region, where halted oil flows have resulted in salary delays for public sector employees and reduced essential services.
Kurdish lawmaker Rebwar Orhaman stated that the approval is pivotal for resolving the oil dispute and will expedite the return of Kurdistan oil exports, thereby enhancing national revenues. The Iraqi oil ministry, in collaboration with the KRG's Ministry of Natural Resources, plans to appoint an international consultant within 60 days to evaluate fair production and transportation costs. If an agreement is not reached, the Iraqi cabinet will select a consultancy without Kurdish input.
This amendment was proposed by Iraq's cabinet in November 2024 and includes a requirement for the KRG to transfer its oil output to the state-run State Oil Marketing Organization (SOMO). Oil exports through the KRG's pipeline were halted by Turkey in March 2023 following an International Chamber of Commerce ruling that mandated Ankara to pay Baghdad $1.5 billion in damages for unauthorized exports by the KRG from 2014 to 2018. Negotiations to restart these exports have stalled due to conflicting demands between the KRG and Iraq's federal government.