After months of deadlock and oil tensions, the Iraqi central government has made a historic decision by taking full control of Kurdistan’s oil exports and resuming northern oil exports with a $16 per barrel prepayment.
According to Iraq Business News, in an extraordinary cabinet session chaired by Prime Minister Mohammed Shia al-Sudani, key decisions were made to end the oil stalemate with the Kurdistan Regional Government (KRG). Based on this resolution, oil exports from the Kurdistan Region will resume through Iraq’s State Oil Marketing Organization (SOMO), and in return, the federal government will pay the KRG a $16 prepayment per barrel.
In recent days, the Iraqi government, led by Mohammed Shia al-Sudani, held an emergency meeting and approved a set of binding decisions on oil production and financial coordination with the KRG. The most significant provision stipulates that all crude oil produced in the Kurdistan Region must be immediately delivered to SOMO to enable export resumption.
Under this agreement, the central government will pay the KRG $16 per barrel (in cash or kind), with a minimum of 230,000 barrels per day to be delivered to SOMO.
The KRG’s current production stands at 280,000 barrels per day, of which 50,000 barrels are allocated for local consumption within the region. Any surplus production will also be subject to the same mechanism. In case of any export disruption, the KRG is obligated to deliver the agreed volume directly to Iraq’s Ministry of Oil.
Moreover, the KRG will bear the costs of production and transportation of oil consumed locally (50,000 barrels), and the revenues from the sale of refined petroleum products, after deducting expenses, will be transferred to the federal government’s treasury.
Other financial provisions of the agreement include:
-
- The KRG must pay 120 billion Iraqi dinars for its estimated share of non-oil revenues for May.
-
- A joint auditing team will verify and classify these revenues starting from May 2025.
-
- A joint committee will, within three months, oversee the localization and payment of the KRG employees’ salaries (in line with the federal court’s ruling).
-
- An independent team will evaluate any potential overspending by the KRG relative to its share of the federal budgets from 2023 to 2025.
-
- The payment of May salaries to KRG employees is conditional on SOMO’s confirmation of receiving 230,000 barrels of oil via the Ceyhan terminal.
All deadlines and provisions are binding as of the cabinet's approval date.