Shafaq News

After more than two years of suspension, crude oil from the Kurdistan Region resumed flowing through the Iraq–Turkiye pipeline at 6:00 a.m. on Saturday, with initial exports of around 180,000–190,000 barrels per day and a target of ~230,000 bpd in the weeks ahead.

The restart follows a tripartite understanding between Baghdad, the Kurdistan Regional Government (KRG), and producing companies that places federal authorities in charge of international sales while safeguarding the Region’s budget entitlements.

General Director of the North Oil Company, Amer Khalil, told Shafaq News the pumping began after “a series of negotiations and follow-up by the federal leadership,” adding that crude was received at the B3 station inside Turkiye and routed to Ceyhan. He said volumes would “increase gradually in line with the Ministry of Oil’s plans to support the federal budget and boost national revenues.”

The breakthrough ends an 18-month deadlock triggered by arbitration and deep constitutional disputes—and immediately tests whether Baghdad and Erbil can convert a transactional deal into a durable framework for sharing authority and revenue.

From Arbitration Shock To Political Reset

The original halt in March 2023 stemmed from an ICC arbitration ruling that Turkiye had breached its obligations by loading KRG-origin crude without Baghdad’s sign-off, prompting Ankara to close the line and exposing a long-running Baghdad–Erbil rift over who controls exports and how to divide proceeds. The case also ordered Turkiye to pay Iraq about $1.5 billion for earlier shipments.

In the new setup, federal marketer SOMO oversees sales from Ceyhan; participating producers and the KRG receive entitlements through a defined mechanism, including in-kind allocations that can be refined or sold. The aim is to re-add Kurdish barrels to global supply without reigniting the sovereignty showdown that froze flows for over two years.

Read more: Iraq-Turkiye pipeline dispute: Billions in damages unresolved

Voices From Baghdad and Erbil

Political researcher Ahmed Yousif told Shafaq News the deal is “a necessary step to resolve disputes between Baghdad and Erbil, especially since oil is the backbone of Iraq’s economy and its global exports are vital.” He called the restart “an economic breakthrough that ends a suspension which hurt the Region’s people through delayed salaries,” and “a decisive step toward stability.”

Wafa Karim of the Kurdistan Democratic Party said the Region “has suffered greatly from Baghdad’s failure to honor agreements since 2014, despite repeated delegations.” The current accord, he argued, “serves everyone: Baghdad regains centrally managed oil revenues, the KRG secures budget allocations including salaries, and companies benefit from resuming exports through the Turkish port of Ceyhan.” But he warned that without an overdue oil and gas law, no deal is immune to collapse.

Former Kurdish MP Abdul Salam Brewari described the restart as consistent with Article 111, which treats oil and gas revenues as belonging to all Iraqis and deposited in the national budget, while Articles 112 and 115 allow regional roles in managing extraction.

The core impediment, he said, was “the centralist mindset in Baghdad,” making the conflict “political rather than legal.”

On the federal side, Parliamentary Oil and Gas Committee Member Kazem al-Touqi underscored that Baghdad was bound by the budget law to settle terms, with the KRG required to deliver 450,000 bpd in exchange for its dues. Past deadlocks, he said, reflected “political, security, and technical factors,” from border-revenue transfers to payroll mechanisms.

Politician Mithal al-Alusi argued that “Iranian-aligned militias had clear influence on government decisions,” yet credited KRG Prime Minister Masrour Barzani with keeping channels open and “securing the right to negotiate despite pressure and attempts to undermine Kurdish constitutional rights.”

He said the deal “exposed efforts by some parties to cripple Kurdistan’s economy,” adding that Kurdish leadership “prevented plans to inflame internal conflict.”

Gains, Limits, and Lingering Risks

The Eco Iraq Observatory estimates that granting operating companies a defined crude share will generate roughly $3.36 million per day in additional state revenues—over $100 million per month—while giving Baghdad greater flexibility in export allocations.

The group says the arrangement strengthens the federal treasury, helps Erbil reduce chronic salary arrears, and confers added legitimacy on operators entitled to about 50,000 bpd for refining or sale.

It projects total regional output around 290,000 bpd, with a portion going directly to companies. The market reaction has been swift: shares of Gulf Keystone Petroleum and Genel Energy rose as the restart neared and was confirmed.

International reporting further noted a phased ramp-up: initial flows near 180,000–190,000 bpd with scope to reach ~230,000 bpd, under an interim commercial framework that channels proceeds via Ceyhan and SOMO and sets out compensation to producers.

What The Deal Changes—And What It Doesn’t

1) Federal leverage up, but so is responsibility: With SOMO in control at the point of sale, Baghdad achieves a long-sought legal and commercial consolidation. The responsibility now is to maintain predictable payments to Erbil and companies—on time and according to formula—to avoid a relapse into stop-start politics. (International producers have signaled participation while highlighting legacy arrears that still need resolution.)

2) The KRG gains budget visibility, not full autonomy: The agreement secures a pathway for salaries and operating finance, easing acute social pressure after long delays. But authority over exports is no longer unilateral. The KRG’s leverage will depend on faithful execution by Baghdad and on a legal settlement that recognizes regional roles envisioned in the constitution, as Brewari emphasized.

3) Companies get clarity—if the fine print holds: The in-kind entitlement model can stabilize cash flows and revive field investment; it also requires disciplined metering, transparent lifting schedules, and a workable escrow/payment mechanism. Early equity gains in Kurdistan-focused stocks reflect optimism—but investors will watch whether pledged volumes and payments materialize over the next quarter.

The Elusive Oil and Gas Law

All the interviewed voices converge on one point: Iraq still lacks a modern federal oil and gas law that codifies roles, revenue sharing, and dispute resolution across federal and regional institutions. That vacuum turned technical disagreements into existential political fights. A statute aligned with Articles 111–115, paired with budget-law implementation rules and automatic stabilizers for price swings, could lock in today’s truce and depoliticize allocations.

Without it, the current framework remains exposed to legal challenges, fiscal stress, and security shocks—from pipeline outages to cross-border tensions—that can once again turn barrels into bargaining chips.

Ninety Days, Three Tests

1)Payment discipline: Regular, auditable transfers to the KRG and to operators—whether cash or in-kind—will be the immediate barometer of trust. Slippage would quickly reignite recriminations.

2)Volume ramp-up: Moving from ~190,000 bpd toward ~230,000 bpd requires steady upstream operations and smooth scheduling at Ceyhan. Any disruption—technical, legal, or security—will undermine market and domestic confidence.

3)Legislative sequencing: Advancing an oil and gas law, even in modular form (metering, marketing, transfers, and dispute settlement), would transform this from a stopgap to a settlement. As KDP’s Wafa Karim put it, “without a clear oil and gas law, no deal is immune to collapse.”

Today’s restart is real and measurable—barrels are moving, markets are reacting, and salaries have a clearer path. Yet the accord’s durability will be decided not by engineering but by governance: whether Baghdad and Erbil can sustain rules and payments that are bigger than either side’s short-term politics. If they can, Iraq reclaims an important slice of export capacity for the global market and relief for its citizens. If they cannot, this moment will read, in retrospect, as one more interlude in a long battle over who controls the country’s most valuable resource.

Written and edited by Shafaq News staff.