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What is the status of the Kurdistan Regional Government’s (KRG) oil exports?
The Kurdistan Regional Government’s (KRG) oil exports remain halted as of January 11,2026,following a ruling by the Paris International Court of Arbitration in July 2023 and subsequent disputes with the federal government of Iraq. These exports, previously autonomous of Baghdad‘s control, were a crucial source of revenue for the KRG.
For decades, the KRG independently exported oil through a pipeline network connected to the Turkish port of Ceyhan. This arrangement allowed the KRG to fund its regional budget and development projects. Though, the Iraqi federal government contested the KRG’s right to independent oil sales, arguing that all oil exports should be managed by the Iraq Oil Marketing Company (SOMO). The dispute escalated to international arbitration.
The Paris arbitration court ruled in favor of Iraq, stating that the KRG’s independent oil exports violated the Iraqi constitution. Iraq Oil Marketing Company (SOMO) now has sole authority over all oil exports from the Kurdistan Region. As of December 2023, Turkey halted the pipeline following the arbitration ruling. Reuters reported on the pipeline shutdown. Negotiations between the KRG and the federal government to resume exports under SOMO control are ongoing, but no agreement has been reached as of January 11, 2026.
What are the financial implications for the KRG?
The suspension of independent oil exports has created a severe financial crisis for the KRG, significantly impacting its ability to pay salaries and fund public services. Oil revenue constituted a considerable portion - approximately 75% - of the KRG’s budget prior to the export halt.
The KRG relied on direct oil sales to finance its operating expenses and investment projects. Without this revenue stream,the regional government has faced difficulties meeting its financial obligations. The KRG has implemented austerity measures,including salary cuts and delays in payments to contractors. Rudaw reported in July 2023 that the KRG was facing a budget deficit of over $1 billion per month due to the halted exports.
In November 2023, the Iraqi federal government agreed to provide the KRG with a monthly budget allocation of 12.6% of the total national budget,as mandated by the Iraqi constitution. Al-Monitor detailed the budget agreement. However,the KRG argues that this allocation is insufficient to cover its financial needs,especially given the rising costs of public services and infrastructure development.The KRG continues to seek a more enduring and equitable revenue-sharing arrangement with Baghdad.
What is Iraq’s position on KRG oil exports?
The Iraqi federal government maintains that all oil exports from Iraq, including those from the Kurdistan region, must be managed and controlled by the central government through SOMO, in accordance with the Iraqi constitution.This position stems from a long-standing dispute over revenue sharing and control of oil resources.
Baghdad argues that the KRG’s independent oil sales deprived the central government of revenue rightfully belonging to all Iraqis. The federal government also expressed concerns that the KRG’s independent deals with foreign companies lacked transparency and perhaps violated Iraq’s national interests. The Iraqi Oil Ministry has repeatedly asserted its authority over all oil resources within the country’s borders. The Iraqi Oil Ministry’s official website outlines its policies and regulations regarding oil exports.
In February 2024, Iraq’s Prime Minister Mohammed Shia al-sudani stated that the resumption of KRG oil exports is contingent upon full compliance with the federal government’s regulations and the transfer of all oil revenues to SOMO. Voice of America reported on al-Sudani’s statement. The federal government has indicated a willingness to negotiate a mutually acceptable arrangement, but insists on maintaining its constitutional authority over oil exports.