Iraqi oil fields (Photo Credit: AFP)
For the first time since 2002, oil revenues from Iraq’s Kurdistan Regional Government (KRG) will be transferred to a bank account supervised by the Iraqi central government, state-run Iraqi News Agency (INA) reported on 17 March, citing the prime minister’s media adviser Hisham al-Rekaby.
The decision came three days after Iraqi Prime Minister Mohammed Shia al-Sudani met with KRG Prime Minister Masrour Barzani and affirmed the need to end outstanding disputes between the two sides.
The meeting came during Sudani’s first visit to Erbil, the KRG capital, since assuming the Iraqi premiership in October and after the Iraqi cabinet approved the federal budget bill for 2023, 2024, and 2025.
The return of central government supervision over Kurdish oil revenues comes as part of a broader trend reversing previously gained Kurdish autonomy.
Following the US invasion of Iraq in 2003, Kurdish political parties won concessions from the central government written into the new Iraqi constitution passed in 2005. This gave the KRG more control over revenues from oil produced in its territory within the context of a system of federalism.
When ISIS militants invaded Mosul in 2014, Peshmerga forces from Masoud Barzani’s Kurdistan Democratic Party (KDP) took advantage of the ensuing collapse of the Iraqi army.
They quickly moved to take control of oil-rich Kirkuk and further increase KRG hydrocarbon reserves. This gave KRG leaders control of the infrastructure to export oil to Turkey via pipeline, independent of Iraq’s central government, boosting future Kurdish aspirations for independence.
Exporting Kurdish oil from Kirkuk proved controversial, as much of this oil was, in turn, immediately sold by Turkish traders to Israeli firms.
Forbes reported in June 2014 that the sale of KRG oil to Israel had been confirmed, citing reports from Reuters, Bloomberg, and the Wall Street Journal showing that a tanker carrying oil from the Ceyhan port had docked in the Israeli city of Ashkelon.
The Financial Times reported that by August 2015, roughly 77 percent of Israel’s oil supply was being imported from Iraqi Kurdistan via the Ceyhan port,
After Barzani announced an independence referendum in the KRG in September 2017, Iraqi Prime Minister Haider Abadi sent the Iraqi army to re-take control of Kirkuk the next month and block Barzani’s bid to break away from Iraq.
Tensions remain between Erbil and Baghdad due to Kurdish oil exports to Israel via Turkey and the independence of Peshmerga forces from the Iraqi army.
Al-Monitor reported that tensions between the two parties increased after Iraq’s Federal Supreme Court ruled in February 2022 that the KRG’s 2007 oil and gas law was unconstitutional. The law allowed the KRG to contracts with foreign energy firms.
Several international oil services firms, including Halliburton, Baker Hughes, and Schlumberger, committed to stopping work in Iraqi Kurdistan in response to the court ruling.