The central government of Iraq has reached a deal with the country’s semi-autonomous Kurdish region to resume oil exports from northern Iraq through a pipeline to Turkey.
Iraqi Prime Minister Mohammed Shia al-Sudani and Masrour Barzani, prime minister of the Kurdistan Regional Government, announced the deal at a press conference in Baghdad on Tuesday.
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“Halting the export of the region’s oil harms Iraq’s revenues,” Sudani said, adding that the governments would work towards passing a federal law detailing the sharing of funds from oil and gas exports.
Barzani said in a statement that while the deal is temporary, it is a “crucial step towards ending the long-standing dispute” between Erbil and Baghdad and “creates a positive and safe atmosphere to finally approve the national oil and gas law”.
The agreement was to be implemented “today”, a KRG government official said.
Iraq stopped sending nearly half a million barrels of oil through the pipeline last month after an arbitration process by the International Chamber of Commerce sided with Iraq in a long dispute over the independent export of oil by the KRG.
The arbitration ruling urged Turkey to pay $1.4bn to Baghdad for violating agreements by buying oil directly from the KRG.
Baghdad and Erbil have been at loggerheads over oil revenues for years.
Iraq – the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) – filed for the arbitration in question against Turkey in 2014 after the KRG sidelined Iraq’s State Oil Marketing Organization (SOMO) and began exporting crude oil through the neighbouring country. Iraq claimed that all oil exports had to go through state-owned SOMO under a 1973 agreement with Turkey.
Al Jazeera’s Mahmoud Abdelwahed, reporting from Baghdad, said that the Iraqi prime minister stressed that the deal was made to diffuse tensions between the sides.
“It is also aimed at evading any deficit in the budget,” Sudani said, adding that the deal would save about 400,000 barrels a day of exports for the country.
The deal struck on Tuesday will allow SOMO to market the crude oil in coordination with the KRG, according to a Kurdish official privy to the arrangement quoted by the Associated Press news agency, who spoke on condition of anonymity because he was not authorised to talk publicly about the matter.
Oil revenues will be under the full control of the KRG but will be deposited into an account that the federal government can audit, the official was quoted as saying.
Iraq’s economy is one of the most oil dependent in the world, according to the World Bank. While most of the country’s oil reserves are located in the south, northern Iraq’s Kurdish region is heavily reliant on exports of the resource from its fields.
The halt to exports through a pipeline to the Turkish Mediterranean port of Ceyhan had left foreign oil firms with nowhere to pump oil from northern Iraq.
Norway’s DNO, one of the main firms operating in KRG-administered territory, announced it was halting production at its wells.
Prior to Ankara’s action on March 25, the semi-autonomous region was exporting roughly 450,000 barrels per day (bpd) of crude.
Iraq, one of the world’s largest producers, exports an average of 3.3 million bpd.