While accusations of smuggling operations through the region persist, officials and politicians assert that crude oil is under strict surveillance, and what might typically be smuggled are oil derivatives. In the absence of definitive solutions, this issue has become a mutual pressure card between the two parties, leaving its economic and political repercussions casting a shadow over the complicated relationship between the central government and the region.
A few months ago, the Iraqi Ministry of Oil stated that it holds the Kurdistan Regional Government legally responsible for the continued smuggling of oil from the region to outside the country, affirming its right to take all legal measures in this regard. Iraq is under increasing pressure from the Organization of the Petroleum Exporting Countries (OPEC) to reduce its production, compensating for its previous excesses over the specified quotas. The organization’s calculations include oil flows from the Kurdistan region within Iraq’s total quota.
In 2022, the Supreme Federal Court issued a ruling declaring the oil and gas law that regulates the energy sector in the Kurdistan Region unconstitutional, demanding the regional government hand over its crude exports to the federal authorities. Former Iraqi politician and minister Mohammed Tawfiq Allawi stated that the issue of citizens’ salaries is a fundamental matter that should not be part of the political disputes between the federal government and the Kurdistan Region, emphasizing that the constitution stipulates that oil is a central commodity and its revenues should be distributed fairly and systematically.
Allawi highlights that “salaries for simple families are the only source of livelihood, and when they stop, their lives are threatened,” adding that “the central government is obliged to fulfill its commitments to the region to ensure citizens’ rights.” He continues by saying that “oil smuggling operations represent a significant flaw that harms the Iraqi economy as a whole,” pointing out that “the smuggled quantities are counted within Iraq’s quota in OPEC without their revenues entering the state treasury, resulting in double losses for the country.”
Shabandar explains that “Washington might resort to imposing sanctions on Iraq concerning certain files, but this will not change the reality of ongoing oil smuggling operations,” noting that “these operations are carried out by armed gangs, groups, and countries within Iraq, making confronting them a complex and difficult issue.” According to previous statements circulated in Iraqi media, the Ministry of Natural Resources in the regional government opened bank accounts for oil revenues in five banks in November 2023, including Abu Dhabi Islamic Bank.
Jabari adds that the province has faced similar accusations in the past years, noting that these issues reflect the depth of political and economic disputes between Baghdad and Erbil. According to Jabari, the ongoing disagreements between the federal government and the region remain without radical solutions, making the mutual accusations part of this conflict that the parties have not yet succeeded in containing.
Despite the Kurdistan Regional Government’s announcement on February 23, 2025, of reaching an agreement with the Ministry of Oil to resume exporting the region’s oil through the Ceyhan pipeline, export operations have been halted for more than two years. This occurs through the sale of over 300,000 barrels of oil per day to Turkey and other countries at prices less than half the global rate, with the revenues being shared by oil companies and influential parties within the region, without any portion reaching the Ministry of Finance and Economy in the Kurdistan Government.
