Northern Iraq crude exports to resume today: Update

Crude exports from northern Iraq via Turkey will resume today after a deal was signed between the semiautonomous Kurdistan Regional Government (KRG) and the federal government in Baghdad.

Iraq's prime minister Mohammed Shia al-Sudani made the announcement during the signing ceremony with his KRG counterpart Masrour Barzani in Baghdad. Al-Sudani urged the technical authorities to immediately implement the deal, Iraq's state news agency Ina reported.

"Any delay in [Iraq's crude] exports will clearly impact forecast revenues in this year's [2023] budget, thus, increasing the deficit which will harm all Iraqis," al-Sudani noted.

But the agreement is temporary. It will remain in effect until Baghdad's budget and oil and gas bill are approved by parliament. This, in theory, could happen in the coming weeks.

Al-Sudani expressed his hope that the parliament approves the draft budget law submitted by his government "as fast as possible". The prime minister added, "the legislation of the oil and gas law [...] will address all the loopholes that have accompanied [it] since the adoption of the [post-2003] Iraqi constitution."

Around 400,000 b/d of northern Iraqi Kurdish crude has been kept from reaching international markets since 25 March, after Turkey closed the export pipeline that transports the oil to the Mediterranean port of Ceyhan — the only viable outlet through which the KRG can export its crude. Ankara's move followed a ruling by the Paris-based International Chamber of Commerce's court of arbitration, which said Turkey had breached a 1973 bilateral agreement with Iraq by allowing crude marketed by the KRG to be exported without Baghdad's consent.

With the deal concluded, Turkey now will facilitate the resumption of pipeline flows to Ceyhan.

The agreement stipulates that crude from the Kurdistan region will now be jointly exported by the KRG's natural resources ministry and Iraq's federal oil marketing firm Somo, according to sources. An account will be set up at the Iraqi Central Bank for oil revenues under the KRG's management, which Iraq's federal government will have monitoring access.

The resumption of crude exports comes on the heels of a unflagged decision by eight members of the Opec+ coalition, including Iraq, to collectively cut 1.16mn b/d from their oil production from May until the end of the year. That has increased June Ice Brent prices by around $5/bl to around $85/bl.

By Bachar Halabi