In an exclusive interview with Kurdish Globe, Yadgar Sadiq, an expert in oil and gas management and Director of the Roonbin Organization for Transparency in Oil Processes, shared his insights on the Iraqi government’s decision to resume oil exports from the Kurdistan Region and the challenges surrounding it.
Sadiq explained that Iraq has long claimed to support oil exports but has hesitated to finalize an agreement in the past. According to him, what’s different now is the significant pressure from the United States. “This pressure, indirectly aimed at Iran, is a key factor,” he said. Since the U.S. withdrew from the nuclear deal in 2018, it imposed extensive sanctions on Iran, and Iraq was granted special exemptions to import gas and electricity from Iran. “Iraq has heavily relied on these imports, and the U.S. wanted to prevent unrest in Iraq,” Sadiq explained. “But for seven years, Iraq has struggled to become self-sufficient in energy. They’ve made some efforts, like utilizing flared gas, but haven’t made much progress.”
Under the new U.S. administration, Sadiq noted that there has been increased pressure on Iran to enforce sanctions. “Iran has adapted to the sanctions by boosting its energy exports to Iraq, which has helped it earn significant revenue,” he said. However, Sadiq pointed out that the U.S. is no longer willing to tolerate this. “Some of Kurdistan’s oil has been exported through Iran, which has benefitted Tehran. The U.S. wants to stop that, even though cutting off Iran’s oil exports may conflict with their goal of reducing oil prices,” he said.
This situation, according to Sadiq, reflects broader geopolitical dynamics. “The U.S. is balancing sanctions on Iran while easing restrictions on Russia’s energy sector due to the Ukraine conflict. The U.S. wants to ensure energy stability globally while limiting Iran’s role,” he observed. Sadiq also mentioned that Iraq’s government, with elections on the horizon, faces internal political pressures, which complicate the resolution of these energy issues. “Despite Iraq’s significant oil production, which is crucial for global energy markets, the U.S. has a range of non-energy sector measures it can use to pressure Iraq,” he said. “They could freeze oil revenues or sanction banks, and it’s clear the U.S. administration is serious about taking action.”
When asked about the challenges facing the re-export of Kurdistan’s oil, Sadiq explained that the issue involves multiple parties: the Iraqi government, the Kurdistan Regional Government (KRG), International oil Companies (IOCs), and Turkey. “While Turkey is ready to facilitate the exports, and both the Iraqi and KRG governments have agreed on key points, the oil companies are still holding out,” he said.
On April 4, 2023, an agreement was made between the KRG and the Iraqi government stipulating that the KRG would hand over its oil to the Iraqi National Oil Company (SOMO), with revenue channeled through the federal government. However, Sadiq pointed out that the unresolved issue lies in the cost of IOCs, a matter that has been a sticking point for over 23 months. “The oil companies have been very clear that they will only resume exports if they are guaranteed payment for both past and future financial entitlements . They also want assurances that their contracts will be honored,” he emphasized.
Sadiq elaborated that the companies’ demands include several key issues. “Firstly, their contracts must be respected and recognized. Secondly, they are owed substantial debts from the KRG for oil delivered but not paid for between October 2022 and March 2023 he said. The companies also want clarity on how their entitlements will be paid moving forward. “They are demanding formal Sales Agreement, not just verbal assurances,” Sadiq added.
The new Iraqi budget law includes provisions for international consultants to review the costs of oil, but companies remain concerned about the scope of work and need clarity on it, as well as potential interference with their contracts. “The companies are worried that any audit of their costs might alter their agreements, which is why they are cautious,” Sadiq explained. “The Iraqi government has assured that contracts won’t be altered, but the fear of cost audits still looms over them.” He pointed out that this negotiation cycle has continued for almost two years without resolution.
The companies now find themselves in a stronger position due to a recent favorable ruling from the Karkh Court, which confirmed the legality of Kurdistan’s oil contracts. “This ruling reassured the companies that their contracts are legitimate under Iraqi law,” Sadiq said. He also mentioned the involvement of U.S. diplomats in recent meetings. “A U.S. representative was present at a tripartite meeting in Baghdad, and Secretary of State Antony Blinken directly told Iraq’s Prime Minister that Kurdistan’s oil exports must resume,” he said. “This pressure from the U.S. is serious, and the companies involved know they have backing.”
The companies are standing firm on their demand for legally binding agreements on their financial entitlements . Just APIKUR’s members companies are owed substantial sums—around one billion dollars,” Sadiq noted. He explained that the key issue is how and when these debts will be repaid. “The KRG must work with Iraq’s Financial Oversight Office and the Prime Minister to resolve this,” he said. Until these financial matters are settled, Sadiq pointed out that the oil export process remains stalled.
In conclusion, Sadiq stressed that while there is political will to resume Kurdistan’s oil exports, significant hurdles remain. “The key challenge is finding a resolution to the financial arrangements and providing legal guarantees that satisfy the companies involved,” he said.