LONDON Iraq's Kurdistan has increased the loans guaranteed by future oil sales to $3 billion in new deals with trading houses and Russian state oil firm Rosneft aimed at strengthening its fiscal position as the semi-autonomous region fights Islamic State. Kurdistan's natural sources minister Ashti Hawrami told Reuters new debt talks concluded in recent weeks gave the region grace periods of between 3 and 5 years for repaying the debt. The deals also increased total borrowing to around $3 billion. He did not give the size of the debt before the latest round of talks but some of it dates from 2014 and 2015. Trading houses have been pre-financing Kurdish oil exports for the past two years on a fairly short-term basis after the government in Erbil decided to start independent oil exports via Turkey's Mediterranean terminals. Now traders will loan money to Kurdistan for several years. Rosneft became a lender last week.. Kurdistan says it needs to export oil independently as Baghdad has not paid Erbil its budget share just as the region needs money to fight Islamic State and host Syrian refugees. Baghdad has said it would sue buyers of Kurdish oil, arguing that the central government was the only legal exporter. The new Baghdad government has softened its stance, however, as it cooperated with Erbil against Islamic State in Mosul. "This helps our economic independence although it is important to understand that this cannot be achieved just by oil revenues and higher oil prices. We also need to press on with our economic reforms," Hawrami said in an interview in London. "We have learnt a lot from the oil price shock, the costs of fighting ISIS, and the burden of some 1.8 million refugees coming to our territory... Reform is a must – we have a lot of debts to deal with." He declined to name the trading houses but market sources have previously identified Vitol, Petraco, Glencore (GLEN.L) and Trafigura as buyers of Kurdish barrels. Last week, Glencore confirmed it had concluded deals for Kurdish oil. The other trading houses do not comment on their dealings with Kurdistan and Rosneft did not give any details on the size of the deal. Hawrami said the deals would serve as a hedge against an oil price slide for several years. Previous deals with trading houses have usually lasted 6-12 months. "It is also positive for the traders as they don't have to renegotiate their contracts every six months," said Hawrami. "It strengthens our fiscal situation. It means we can pay more regularly to the international oil companies working in Kurdistan and we can invest some money in expanding our oil infrastructure," he said. Kurdistan's finances suffered badly during the oil price slump of 2015-2016 and it has accumulated several months of arrears to producers such as Genel (GENL.L), DNO (DNO.OL) and Gulf Keystone (GKP.L) due to tight revenues and supply glitches. The stocks of these companies rose on the news. "This year we want to avoid repeating this. I'm confident we will do better. We know the producers’ needs and plans. We are prioritizing not to fall behind again," Hawrami said. GROUND BREAKING DEAL Hawrami said the arrival of Rosneft in addition to trading houses to the marketing of Kurdish barrels was good news for the region as it gave Erbil its first big end-user and opened up new markets - Rosneft has refineries in Germany and India. "We hope Rosneft’s deal will become a ground breaker for other majors," he said adding Rosneft was also looking at exploration blocks in Kurdistan. He also said relations with Baghdad were improving. "We didn't hear any negative comments from them after the deal with Rosneft. They know we are selling our oil. And actually if we help each other rather than hindering progress, we can both achieve better prices as buyers will not be able to seek unreasonable discounts." He also said the fact that Erbil was now selling some barrels for Baghdad from the northern Kirkuk field was evidence of improving relations. "In reality, Baghdad has given us some share of oil to export. So we have an arrangement that we both honor. We have real cooperation and we hope to build on that," he said. INFRASTRUCTURE EXPANSION Kurdistan's existing pipelines can handle just over 650,000 barrels per day of exports and more investments are needed to bring that capacity to 1 million bpd, including upgrading of pumping stations, said Hawrami. He said pipeline capacity should be expanded by the year-end but production would not start rising until next year. "We have to be mindful about supply and demand. You tell me what the oil price is going to be and I will tell you when we could reach 1 million bpd of output. Investments have dried up in the last two years because of the oil price crash and attacks by ISIS," he said. Kurdistan is planning to offer some 20 blocks of land for exploration to investors. The region took some blocks back from investors after discovering they did little exploration, said Hawrami without naming the companies. Some operators relinquished blocks as they were disappointed with what they found, including U.S. oil giant Exxon Mobil (XOM.N) which has given back three blocks out of six over the past year. Hawrami said he did not see this as a set back. "Exxon has concluded that they will continue working on 3 blocks while on another three the potential reserves were simply not big enough for them. Those blocks could suit other firms. We are now looking to farm them out," he said.