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Iraqi Court To Hear Oil Export Argument With Kurds In May

Baghdad Iraqi flag

Normalizing relations between the Iraqi central government and Iraqi Kurdistan will take a new twist beginning in May when Iraq’s top court starts hearings on the issue with officials from both sides.

Iraqi Oil Minister Jabar al-Luaibi has asked the court to ban independent oil exports from the Kurdistan Regional Government (KRG) through a pipeline to Turkey in what has been a bone of contention since 2014.

That year, companies with unilateral agreements with the KRG, including Exxon Mobil, Dana Gas, Genel Energy, DNO and Russian Rosneft, saw their oil exported to Turkey, bypassing the central government’s oversight in Baghdad.

While that exported Kurdish oil did not contribute to Iraqi federal coffers, the KRG maintains that the Iraqi Constitution does not specifically forbid it from developing oil resources on its own territory.

For years, the KRG has had the advance over Baghdad in this dispute, and not the least because Kurdish Peshmerga forces were instrumental is pushing back the Islamic State as it closed in on territory in Northern Iraq, around the Kirkuk oilfields, which lie outside of the official KRG territory.

Now that ISIS has been pushed back, the KRG has lost it advantage—particularly when it held an independence referendum in September, which backfired.

Related: Higher Oil Prices Boost Saudi Credit Rating

Following the Kurdish referendum, the Iraqi federal government took control of the Kirkuk oilfields in October, resulting in a halving of oil exports from the north. Some 350,000 barrels per day of crude were taken offline as a result.

During the first quarter of this year, talks between the two sides have progressed.

Baghdad is seeking to export oil from Kirkuk one way or another. If plans to get a pipeline up and running to Turkey, and in the meantime, is transporting 60,000 bpd of oil via truck to Iran in an oil-swap deal that will see Iran do the refining.

On Monday, Reuters reported that the Supreme Federal Court of Iraq said it would start hearing official opinions on May 6, including from the Iraqi prime minister and the KRG prime minister, along with the Iraqi oil minister and finance minister.

By Damir Kaletovic for Oilprice.com

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