Peregraf
In a significant policy shift, Iraqi Prime Minister Mohammed Shia' Al Sudani has withdrawn his earlier proposal to amend the oil clause in the national budget law. The Prime Minister now demands that the Kurdistan Regional Government (KRG) submit all revenues from the sale of oil, gas, and related products—both domestic and foreign—directly to the federal treasury without any deductions.
The revised proposal states: "Subject to paragraphs (a) and (b) of this article, the revenue from the sale of oil and gas and its products, both domestic and foreign, shall be submitted to the general treasury in full and without any reduction. According to the amended Financial Management Law No. 6 of 2019, costs must be calculated fairly."
In response, KRG Spokesman Peshawa Hawramani expressed strong opposition, stating, "We are against the new proposal and the old proposal must be put to a vote in the Iraqi parliament."
Hawramani further elaborated that the new proposal was introduced unilaterally, without consultation with the KRG or approval from the Federal Council of Ministers. He warned that such actions could exacerbate existing issues, saying, "These efforts will harm the whole of Iraq and deepen the problems and will not serve to resolve the issues."
KRG Prime Minister Masrour Barzani also reacted to the development in an interview with Bloomberg, expressing surprise at the unexpected changes to an approved plan for oil production costs. He noted that the Iraqi cabinet had previously approved a plan to pay $16 per barrel for oil production and transportation from the Kurdistan region. However, the parliamentary vote on this plan was deferred after last-minute alterations.
The timing of Prime Minister Al Sudani's new proposal coincides with ongoing challenges in resuming oil exports from the Kurdistan Region. Soran Omar, a member of the Iraqi parliament, told Peregraf, "After the evening of January 21, 2025, the new proposal of Al Sudani was brought to the Iraqi parliament, problems and tensions arose, so the approval of the article was postponed."
Omar added that with the current situation, the amendment to the oil clause in the budget law, aimed at resuming oil exports from the Kurdistan Region, will not easily return to parliament for approval.
Oil Smuggling Concerns
Amid these political developments, concerns about oil smuggling in the Kurdistan Region have intensified. Reports indicate that Kurdish oil smuggling to Iran and Turkey is flourishing, with over 1,000 tankers transporting at least 200,000 barrels of oil daily. This clandestine operation, which began after the closure of an official export pipeline last year, results in approximately $200 million per month in off-the-books transactions.
The smuggling activities have raised alarms over potential breaches of U.S. sanctions on Iran and the lack of transparency in oil revenues. The trade is seen as benefiting political elites within Kurdistan's ruling parties, contributing to the region's dependence on the black-market oil business despite its associated risks and accidents.
KRG Prime Minister Masrour Barzani has addressed these allegations, calling on accusers to present tangible evidence. He emphasized that the halt in oil exports, which began on March 25, 2023, following an International Court of Arbitration ruling in favor of Iraq in its lawsuit against Turkey, had devastating financial repercussions for the region.
As the situation unfolds, the KRG continues to advocate for the previously agreed-upon proposal to be put to a vote in the Iraqi parliament, aiming to resolve the ongoing disputes and resume oil exports under mutually acceptable terms.
Unreported Oil Sales in Kurdistan’s Domestic Market
In addition to smuggling concerns, significant volumes of crude oil from the Kurdistan Region are being sold on the domestic market. However, the KRG Ministry of Finance has reported zero revenue from these transactions, raising further concerns over financial transparency.
To address this issue, the Iraqi government has proposed the new amendment to the federal budget, aiming to close this loophole by requiring the KRG to return revenues from all oil sales, including those conducted within Kurdistan’s domestic market.
According to Ali Hama Saleh, a member of the Kurdistan Parliament, crude oil prices in local markets as of January 23, 2025, are as follows:
• Atrush
o Per ton: $290
o Per barrel: $39.56
• Khurmala
o Per ton: $272
o Per barrel: $37.11
• Tawke
o Per ton: $265
o Per barrel: $36.15
• Oryx
o Per ton: $235
o Per barrel: $32.06
• Sheikhan
o Per ton: $218
o Per barrel: $29.74
Ali Hama Saleh has criticized the lack of oversight in Kurdistan’s oil sales, arguing that crude oil should be sold through Iraq’s State Organization for Marketing of Oil (SOMO) to ensure proper revenue tracking. He emphasized that while oil is sold domestically at prices ranging from $35 to $40 per barrel, fuel prices for consumers remain high despite the low cost of crude oil in local markets.