Gas, Power, and Sovereignty: Will KRG’s $100B U.S. Energy Deals Trigger a New Crisis with Baghdad?

Peregraf

The Kurdistan Regional Government (KRG) signed two massive oil and gas contracts with U.S. energy companies HKN/Onex Group (operating as Miran Energy) and Western Zagros. Valued at over $100 billion and struck in Washington without consulting the federal government in Baghdad, the deals represent the most assertive move yet by the KRG in its long-running battle over energy sovereignty in Iraq.

The contracts will develop the Miran and Topkhana fields, which together hold an estimated 13 trillion cubic feet of gas and 9 million barrels of oil. This development is expected to address major domestic power shortages in Kurdistan and potentially supply parts of Iraq, raising hopes—and fears—of new leverage in a fraught federal relationship.

KRG Prime Minister Masrour Barzani presided over the signing ceremony in the U.S. capital, May 19, 2025, presenting the deals as a peaceful and strategic step toward regional development. “This billion-dollar agreement proves the Kurdistan Region’s commitment to peace and economic development in the region,” he stated. Barzani also emphasized the goal of delivering 24-hour electricity in Kurdistan and extending surplus power to other parts of Iraq.

Behind the diplomatic language, however, the move is a clear assertion of autonomy. Acting Minister of Natural Resources Kamal Mohammed said bluntly: “We have not consulted the Iraqi Oil Ministry and we are not waiting for Baghdad to agree or not.” He pointed to Kurdistan’s electricity infrastructure capacity—8,189 megawatts—but noted only 4,500 MW are being produced due to gas shortages. For the KRG, these contracts are framed as both necessary and urgent.

Baghdad’s Constitutional Red Line

The federal government in Baghdad has long opposed the production-sharing contract (PSC) model used by the KRG, favoring instead technical service contracts that maintain full state ownership of resources. PSCs, Baghdad argues, violate Iraq’s 2005 constitution and grant excessive control to foreign companies.

The most definitive expression of this stance came on February 15, 2022, when the Iraqi Federal Supreme Court ruled the KRG’s Oil and Gas Law No. 22 of 2007 unconstitutional. That landmark decision demanded the transfer of Kurdish oil operations to federal control and nullified the legal foundation for the KRG’s independent contracts.

Subsequent efforts to pass a unified federal oil and gas law have repeatedly failed due to entrenched political disagreements. President Abdul Latif Rashid acknowledged this impasse during the Delphi Forum in Sulaymaniyah—ironically held on the same day the KRG signed its new deals in Washington. “My priority is to find a solution to the oil and gas law in Iraq that will resolve the sources of conflict so that revenue sources benefit all Iraqis,” the president said, reiterating the need for a comprehensive legal framework.

The two gas fields are more than just energy assets—they are geopolitical flashpoints. The Miran field alone is projected to yield 50 to 70 million cubic feet of gas per day in its initial phase, expected within 18 to 20 months. HKN CEO Russell Freeman called Miran “one of the region’s most strategic gas resources,” underscoring the significance of the investment not just to the KRG, but potentially to the broader Iraqi energy landscape.

Kurdistan’s promise to export more than 1,000 MW of surplus electricity to Baghdad presents an ironic twist: while Baghdad rejects the deals’ legality, it may soon find itself needing the gas they unlock. Iraq’s national grid produces just 4,500 MW despite a capacity of 8,189 MW—almost the exact shortfall the KRG says it can bridge.

This paradox places Baghdad in a difficult position. Accepting the electricity would offer immediate relief to the national power crisis—but at the cost of tacitly recognizing the legitimacy of Kurdish contracts. Rejecting the offer may preserve legal and political consistency but exacerbate public dissatisfaction over ongoing blackouts.

U.S. Involvement: Diplomatic Shield or Political Flashpoint?

That the agreements were signed in Washington, with backing from the U.S. Chamber of Commerce, adds a layer of international complexity. Barzani spoke of shared goals with the U.S., presenting the agreements as part of a broader strategic partnership. This may afford the KRG some insulation from immediate federal pushback, particularly as American firms are involved.

Yet it also risks inflaming nationalist sentiment in Baghdad, where the optics of foreign-brokered, high-stakes energy deals conducted without federal involvement are politically sensitive. Critics may frame the move as another instance of foreign interference undermining Iraqi sovereignty.

The contracts come against a backdrop of suspended Kurdish oil exports. Since March 25, 2023, flows from the Kurdistan Region and Kirkuk to Turkey’s Ceyhan port have been halted following a ruling by the Paris-based International Chamber of Commerce in favor of Baghdad. That ruling found Turkey had breached a bilateral agreement by allowing the KRG to export oil independently, compounding the regional government’s fiscal crisis. More than two years later, exports have yet to resume.

Meanwhile, President Rashid’s renewed push for a unified oil and gas law remains stuck in legislative gridlock. Multiple parliaments over the past two decades have failed to broker a consensus between Erbil and Baghdad on control and revenue sharing. In the absence of such a law, every new contract risks becoming another battleground.

Whether these agreements trigger renewed confrontation or cautious cooperation will hinge on Baghdad’s next moves. Legal action, export restrictions, or bureaucratic obstacles could follow, as they have in the past. Yet the scale of the deals and the worsening electricity crisis may also force Baghdad to reconsider its rigid stance—particularly if Kurdish gas is the only viable way to bridge the country’s power gap.

Still, the tone from Erbil—“We are not waiting for Baghdad”—suggests the KRG is prepared for pushback, and perhaps even betting on it. For now, the balance tilts toward escalation rather than reconciliation.

Kurdistan has made its move, placing a $100 billion wager on energy independence backed by American capital and strategic gas reserves. The question now is whether Baghdad will resist, negotiate, or seek to reassert control through legal and economic countermeasures. One thing is clear: Iraq’s energy future—and its fragile federal framework—hang in the balance.