As the deadline for an agreement between the central government in Baghdad and the Kurdistan Regional Government approaches, the argument is reignited over new details that reveal a lack of willingness to reach a final settlement. Each party aims to control the oil and gas file, either under the government’s jurisdiction or through the flexibility of the regional system.
Negotiations between Baghdad and Erbil to issue a new oil and gas law have failed again, according to Iraqi parliamentary sources. The parliamentary Oil and Gas Committee has acknowledged that it is unable to resolve the controversial issues between the two parties.
The ongoing crisis since 2005 between the central government and the regional government will persist due to differing views on oil and gas revenues.
It has been observed that the central government maintains that all revenues generated from natural resources in Iraq must be under its control on sovereign grounds. On the other hand, the Kurdistan Regional Government believes that the federal system grants them the right to control these revenues, with the option of accepting supervision from the central government.
Zainab Al-Moussawi, a member of the Parliamentary Oil and Gas Committee, has stated that the process of drafting the oil and gas law is moving at a slow pace due to various contentious issues. The most crucial of these issues are related to the management of oil fields in the Kurdistan region and the financial revenues generated from selling oil and exporting it abroad.
In addition, she mentioned that there are two controversial issues related to the management of national wealth in the Kurdistan region. Firstly, the federal government is responsible for it. Secondly, the management of federal financial revenues and the export of Kurdish oil abroad through the National Oil Company (SOMO) are also contentious points, which Erbil is against.
Al-Moussawi stated that the ongoing discussions between Baghdad and Erbil are aimed at resolving differences and finalizing a law to redefine Iraq’s oil map.
Observers suggest that the dialogues underway are likely to result in only temporary settlements. These settlements may focus on facilitating the disbursement of employees’ salaries in the region, without addressing the fundamental issues related to sovereignty over oil revenues, the limits of central supervision over them, and the extent to which the federal system grants the regional government independent rights to manage local wealth, similar to other local affairs.
There is a commonly held belief in Baghdad that giving Erbil independent control over oil resources will fuel separatist movements and give the Kurdistan Regional Government an unfair advantage in terms of resources. Although some other governorates also have oil reserves, the income from these resources is distributed equally among all governorates, including the three governorates in the region.
Kurdish officials deny that controlling the region’s oil resources is a step towards renewed separatism. They believe that the federal system does not grant the central government all rights, as is currently the case, despite granting it some rights.
The Iraqi government aims to regulate the oil and gas industry through a single national company, which will deposit all imports into a single account.
Last year in February, the Federal Court in Baghdad issued an order to the region to hand over the oil produced on its lands to Baghdad. Additionally, they were asked to cancel the contracts signed with foreign companies. The situation escalated with the judiciary in Baghdad invalidating contracts with many foreign companies, primarily American and Canadian.
In April, Baghdad and Erbil signed a temporary agreement which specifies that the sales of oil from Kurdistan will be made through the Iraqi Oil Marketing Company, SOMO. The revenue generated from the fields in the region will be deposited in a bank account with the Central Bank of Iraq or one of the banks approved by the Central Bank of Iraq.
The Kurds deny that controlling the region’s oil resources would lead to renewed separatist calls.
Jutiar Adel, the head of the Media and Information Department of the Kurdistan Regional Government, emphasized the importance of the draft law reflecting the principle of true partnership. He further added that it should also include mechanisms for the optimal use of Iraq’s natural resources. It is essential to guarantee the rights of all parties equitably and prevent one party’s downfall at the expense of the other party.
The debate between the two parties centers on a specific word used in Article 112 of the Iraqi Constitution, which was issued in 2005. This article confirms that the federal government should manage the oil and gas extracted from the current fields, in collaboration with the producing regions and governorates. It also states that the distribution of imports should be fair and proportionate to the population distribution, with a share allocated to the affected areas that were deprived by the previous regime.
On May 30, 2022, the Kurdistan Region Judicial Council made a decision regarding the inclusion of oil fields under a constitution article. The decision specified that the article only applies to “current” fields, which means that the fields located in the Kurdistan Region are not included, as they were discovered later and are governed by a special law passed by the region’s parliament in 2007. However, some observers have raised a question: if new oil fields are found in other parts of Iraq, would they also be exempt from this article of the constitution?