Iraq’s Parliamentary Oil and Gas Committee believes that finalizing the long-awaited Oil and Gas Law could finally resolve the entrenched disputes between Baghdad and the Kurdistan Regional Government (KRG) that have plagued the country since 2003. After nearly twenty years of legal limbo, economic losses, and political tensions, Iraqi lawmakers are positioning this comprehensive legislation as the key to unlocking billions in stalled revenues and establishing a unified framework for the nation’s most crucial economic sector.
The draft law represents more than mere bureaucratic housekeeping—it addresses fundamental questions about federalism, resource sovereignty, and revenue distribution that have fractured Iraq’s oil governance since the fall of Saddam Hussein’s regime. With oil revenues constituting over 90% of Iraq’s national income and the country exporting an average of 3.3 million barrels daily, the stakes could not be higher for both the federal government and the semi-autonomous Kurdistan Region.
Legal Deadlock Creates Billion-Dollar Crisis
The absence of federal hydrocarbon legislation has created a bifurcated system that economists warn is now costing Iraq dearly. Nine foreign companies are demanding $24 billion in compensation for halted exports, highlighting the mounting economic pressure from the unresolved legal framework. This crisis intensified following a 2022 Federal Supreme Court ruling that declared the Kurdistan Region’s independent oil practices unconstitutional, yet Erbil continues to challenge Baghdad’s authority.
The constitutional ambiguity stems from competing interpretations of Iraq’s 2005 constitution. While Article 111 declares oil and gas the property of all Iraqis, Article 115 allows regional laws where federal authority is not explicitly established. The KRG has leveraged this provision to justify its 2007 Oil and Gas Law, which grants the regional government control over licensing, production, and contracts—particularly for fields discovered after 2005.
Baghdad’s position remains uncompromising: all oil must be managed through the federal State Organization for Marketing of Oil (SOMO), and the KRG’s independent contracts are illegal. The federal government points to significant revenue disparities, noting that federal licensing rounds yield up to 96.5% revenue compared to the KRG’s 80%, translating to substantial losses for the national treasury. Iraq’s Oil Ministry has accused the Kurdistan Region of “legal and procedural violations” that have cost the country billions in potential income.
Parliamentary Push Amid Rising Stakes
Members of Iraq’s Parliament say that agreeing on the draft law and securing Council of Ministers approval before parliamentary submission would contribute to addressing many unresolved issues between the federal and regional governments. The federal government has assembled a high-level negotiating committee including the Deputy Prime Ministers for Energy and Economic Affairs alongside SOMO officials to hammer out disputed clauses with KRG representatives.
The urgency has intensified following recent court decisions. While Baghdad celebrated a 2023 International Chamber of Commerce arbitration victory against Turkey for allowing independent KRG oil exports, the Karkh Court of Appeals simultaneously upheld the validity of KRG contracts with foreign companies, declaring them “binding and immune to external objections.” This legal contradiction underscores the complexity of resolving two decades of parallel governance structures.
The proposed federal law would establish Iraq’s oilfields under the management of a national oil company supervised by a federal council, potentially ending the KRG’s autonomous operations. However, success depends on bridging fundamental disagreements over revenue sharing, operational control, and the Kurdistan Region’s insistence on managing its own resources. Prime Minister Mohammed Shia al-Sudani’s recent agreement with the KRG to resolve contentious issues, including the implementation of Article 140 on disputed territories, suggests broader political momentum for compromise.
As Iraq’s parliament prepares to debate this crucial legislation, the country faces a defining moment. The draft Oil and Gas Law offers a path toward legal clarity and economic stability, but only if both Baghdad and Erbil can overcome the political mistrust and competing constitutional interpretations that have defined their relationship for the past two decades.
By Jawad Qadir