Iraq’s Oil Compensation Plan Sparks Hope for Kurdish Oil Export Restart

Iraq’s parliament took a significant step toward resolving the long-standing dispute over Kurdish oil exports, voting on Sunday to implement a key compensation plan for oil companies operating in the semi-autonomous Kurdistan region. This decision aims to accelerate the restart of crude oil exports from the region, which have been suspended for over a year due to a deadlock between Baghdad and Erbil.

The approved plan includes a compensation rate of $16 per barrel produced in Kurdistan, significantly improving earlier proposals that only offered $6 per barrel. Although $16 per barrel is still lower than the $26 per barrel that oil field operators in Kurdistan were receiving prior to the suspension, it marks an important step forward. The agreed amount should help facilitate negotiations between the central government in Baghdad and the Kurdish Regional Government (KRG) in Erbil, helping to break the deadlock.

This move is essential for restarting Kurdish oil exports through the Iraq-Turkey pipeline, which has been halted due to a dispute over authorization between Baghdad and Turkey. This impasse followed an International Chamber of Commerce ruling in March 2023, which sided with Iraq, stating that Kurdish oil exports should require the approval of Iraq’s federal government. The lack of agreement over the distribution of oil profits between Baghdad and Erbil has further complicated the situation.

The suspension of Kurdish oil exports has been costly for Iraq. Earlier estimates put the losses at a staggering $37.5 million per day, amounting to a potential $25 billion in lost revenue during the period the pipeline has been inactive. With this new compensation agreement, there is hope that oil flows from Kurdistan will resume, potentially revitalizing the country’s economy.

In the broader oil market, crude prices have been on the rise. As of this week, Brent crude is trading at $76.16 per barrel, and West Texas Intermediate (WTI) at $73.75 per barrel, following President Trump’s announcement of 25% tariffs on Canadian and Mexican exports to the United States. This move, while controversial, is expected to disrupt refinery feedstock supply, putting upward pressure on oil prices. However, analysts suggest that the effect will be limited as Canadian oil remains crucial to U.S. refineries, and the price differential between Canadian and U.S. crude is likely to widen.

With these developments, both Iraq and global oil markets are poised for significant shifts, with hopes for stability in Kurdish oil exports and adjustments in the energy market due to the tariff impacts.