State and substate oil trade: the Turkey‐KRG Deal

Abstract

After the U.S. withdrawal from Iraq, there has been increasing tension between the central government in Baghdad and the Erbil‐based Kurdistan Regional Government (KRG) in northern part of the country. Although KRG President Masoud Barzani supported Iraqi Prime Minister Nouri al‐Maliki in the federal elections of 2010, the two sides have been in open conflict over energy projects within the semiautonomous Kurdish region. The KRG is a substate actor in regional relations whose international legal status has not yet been determined. It is important to note that any future determination will undoubtedly hinge on oil and gas resources. Maliki's administration has consistently argued that the Federal Oil Ministry has primary authority over Iraq's oil sector. The KRG has claimed independent authority over energy resources in the region, including the right to sign oil‐field exploration and production contracts within its territory, govern oil fields, and export oil and natural gas. The federal constitution of Iraq regulates the oil revenue‐sharing mechanism and other features related to energy exploration and production. Following from this, all petroleum exported from Iraq should be marketed through the country's State Oil Marketing Organization (SOMO), with the KRG receiving 17 percent of the resulting revenues. However, the regulation of the energy sector in the KRG is unclear.