The impact of delayed oil exports in Kurdistan: a crucial issue for Iraq’s economy and future

The impact of delayed oil exports in Kurdistan: a crucial issue for Iraq’s economy and future

4-2-2025

Researcher Shaza Khalil*
In recent months, Iraq has faced a major dilemma regarding its oil exports, particularly from the Kurdistan region. Despite an agreement between the federal government and the Kurdistan region to resume oil exports more than a month ago, this agreement has yet to be implemented due to outstanding issues between the federal Ministry of Oil and international oil companies operating in the region. This delay raises significant concerns for the region, Iraq’s economy, and the future of its oil export strategy.

The Core of the Problem: Outstanding Issues and Contractual Disputes
The main reason for the delay in implementing the oil export agreement is the ongoing contract dispute between international oil companies (IOCs) and the Kurdistan Regional Government (KRG). The Kurdistan Oil Industry Association (APIKUR), which represents eight IOCs, has made it clear that the companies will not resume oil exports unless the Iraqi government complies with the terms of current contracts, including guarantees for payment of past and future oil export dues.

International oil companies have made several demands to resume exports, including not compromising contracts with the Kurdistan Regional Government (KRG) and clarifying the payment mechanism for each company based on the quantities of oil they produce and make available for export. These companies are also demanding payment of their previous dues, estimated at approximately $1 billion, a pending issue between the federal government and international oil companies in Kurdistan. However, the Iraqi Ministry of Oil has rejected these demands, further complicating the situation and delaying the resumption of oil exports.

Financial Consequences: Losses to Iraq and Kurdistan
The delays in resuming oil exports have had a significant financial impact. Iraq has incurred losses of more than $20 billion due to the disruption of oil exports from Kurdistan, which represent approximately 400,000 barrels per day. These losses represent a significant blow to Iraq’s economy, which is highly dependent on oil revenues.

The halt in exports coincides with a voluntary cut in Iraqi oil exports in 2023, in accordance with the OPEC+ decision to reduce global oil production. This cut has exacerbated financial pressure on the Iraqi economy, reducing revenues from oil exports and potentially harming the country’s position in the global oil market.

Impact on Kurdistan: Economic and Political Implications
For the Kurdistan Region, the impact of the delayed oil exports is particularly severe. The Kurdistan Regional Government (KRG) relies heavily on oil revenues to fund its budget and maintain public services. The halt in exports has placed enormous pressure on the region’s finances, leading to delays in public sector salary payments and mounting debt.

Moreover, the continued ambiguity surrounding the oil situation creates a political dilemma for the Kurdistan Regional Government (KRG). The Kurdish leadership has been forced to balance its relationship with Baghdad while managing the expectations of international investors. Kurdistan’s autonomy, particularly in the management of its natural resources, has been a major point of contention with the federal government. Any failure to resolve the oil issue could further erode trust between Erbil and Baghdad, with long-term consequences for political stability in both the Kurdistan Region and Iraq as a whole.

The role of international oil companies and global players
in the Kurdish oil sector further complicates the situation. These companies have invested billions of dollars in oil exploration and extraction in the region, and their role is crucial to the continued development of Kurdistan’s oil industry. However, without clear guarantees of payment and contractual compliance, these companies are reluctant to resume operations.

The United States has expressed interest in the situation, with the US Embassy in Iraq emphasizing the need to accelerate the resumption of oil exports, especially in light of Iraq’s commitment to complying with the production targets set by OPEC+. The US Secretary of State spoke with Iraqi Prime Minister Mohammed Shia al-Sudani, emphasizing the importance of adhering to the terms of contracts with US companies, which could attract more investment.

Future Implications: A Protracted Crisis or a Path to a Solution?
The oil and gas issue has been one of the most prominent outstanding issues between the Kurdistan Regional Government (KRG) and Baghdad since 2003. Despite numerous rounds of negotiations, a comprehensive solution has yet to be reached. The ongoing delay in oil exports has exacerbated tensions between the two sides, complicating efforts to pass an oil and gas law that would provide a clear framework for the management of Iraq’s oil resources.

Resolving the conflict will require significant concessions from both sides, particularly regarding the sharing of oil revenues between the Kurdistan Regional Government (KRG), the federal government, and other provinces. In the long term, Iraq’s ability to address the issue of Kurdistan’s independence in oil production, as well as the interests of international companies, will be crucial to stabilizing the country’s oil sector and ensuring its financial future.

Conclusion: The need for speed and cooperation
. As oil exports continue to be delayed, the economic and political importance of the issue for Iraq and the Kurdistan Region grows. The longer the delay, the greater the damage to the Iraqi economy, including lost oil revenues and investor confidence. Furthermore, continued disagreements between the federal government and the Kurdistan Regional Government over oil revenue sharing and contract terms will make it more difficult to achieve a sustainable and mutually beneficial solution.

Ultimately, the future of Iraq’s oil exports depends on cooperation between Baghdad, Erbil, and international investors. For Iraq’s long-term economic and political stability, urgent steps must be taken to resolve these issues and ensure the country can once again benefit from its valuable oil resources.

Economic Studies Unit / North America Office /
Al-Wabet Center for Research and Strategic Studies

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