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Efforts to resume oil exports from Iraq's Kurdistan Region to Turkey's Ceyhan port have encountered fresh obstacles, despite earlier optimism from Iraqi officials that shipments could restart next year. Political disputes, disagreements over production costs, and challenges in reconciling different contract models have left key issues unresolved, prolonging the halt that began in March 2023.

The suspension of northern exports—once around 450,000 barrels per day—followed an international court ruling in Paris that found Turkey had breached a 1973 agreement by permitting the Kurdistan Regional Government (KRG) to export oil independently since 2014. Since then, Baghdad, Erbil, and their international partners have collectively lost billions of dollars in revenue.

Hopes that the stalemate might ease were dashed this month when Iraq's parliament went into recess on 9 December without holding a second reading or vote on a cabinet proposal to amend the 2025 budget law. The amendment was intended to pay Kurdistan's oil-producing companies, but the delay has pushed any resolution into the new year as soon as possible.

Wrya Hussein, head of the Door Organisation for Petroleum Information of Kurdistan, told °®Âþµº that the dispute is far from straightforward, as there is no concrete agreement among the Iraqi government, the KRG, and the international oil companies (IOCs).

" is not an easy task," he said. While IOCs working in the region seek around $24 per barrel to reflect higher extraction costs in rugged terrain, Iraq's government has proposed $16.

"The topographic hurdles in the KRG's fields make production more expensive," he added, noting that even $16 per barrel may fall short of IOC expectations.

Hussein emphasised that politics is at the heart of the problem. Baghdad wants to convert the KRG's current production-sharing arrangements with foreign firms into service contracts, in line with federal standards.

However, both the IOCs and the KRG are reluctant. Foreign companies argue they would incur heavy losses, while the KRG's ruling factions risk losing "partisan and personal gains" from altering the contracts. Hussein expressed doubt that the Iraqi parliament would be able to pass the 2025 budget due to these ongoing political disputes.

"The Iraqi government led by Prime Minister Mohammed Shia Al-Sudani wants to settle the KRG oil issue before the upcoming parliamentary elections by the end of 2025, and Baghdad has shown flexibility," Husain said. "But other Iraqi politicians, namely former PM Nouri Al-Maliki and other Shia blocs in the Iraqi parliament, do not want the preliminary agreement between the Iraqi government and the KRG to see the light of day. I do not expect the parliament to make a second reading for the budget bill."

Budget deadlock, compensation disputes

Much of the current impasse revolves around the financial arrangements between Baghdad and the KRG. Article 12 of the budget law, which deals with compensation for the cost of producing and transporting oil in the Kurdistan Region, remains a sticking point.

Initial Iraqi estimates suggested costs of around US$6 per barrel, but foreign operators have argued the true figure could be as high as US$26 due to the region's challenging geography. Talks in September in Erbil, led by Iraqi Foreign Minister Fuad Hussein and involving senior KRG officials, failed to yield a firm agreement. Although both sides spoke of "progress," disputes over revenue-sharing, contract terms, and border controls remain unresolved.

Iraq's Deputy Prime Minister for Energy Affairs and Oil Minister, Hayyan Abdul-Ghani al-Sawad, insisted on 13 October that the KRG must hand over its oil to the State Oil Marketing Organisation (SOMO), the sole authorised exporter of Iraqi oil. Revenues would be placed in a special account, with production costs paid out as advances to participating companies. A consultant is to be appointed within 60 days to review and recalculate extraction costs, offering a potential path to compromise.

The delay in resolving the dispute has repercussions beyond export revenues. The KRG requires about 940 billion Iraqi dinars (about £600 million) a month to pay its 1.2 million civil servants, tens of thousands of whom have yet to receive October and November salaries. Payment shortfalls, an incomplete biometric payroll system, and ongoing political wrangling are increasing frustration among public sector workers.

At the same time, oil smuggling—estimated by Reuters in July at around 200,000 barrels per day—continues to undermine Iraq's compliance with OPEC limits and drain potential state income. Unofficial shipments sent to Iran and Turkey deprive Baghdad of revenue it urgently needs.

International oil firms press for action

International oil companies operating in the Kurdistan Region, represented by the Association of the Petroleum Industry of Kurdistan (APIKUR), remain eager to see the pipelines reopened. In a on 22 September, APIKUR spokesperson Myles B. Caggins III said they were encouraged by Iraqi Prime Minister Mohammed Shia' Al Sudani's comments on Bloomberg's Horizons Middle East and North Africa programme in September, in which he suggested the Iraq-Turkey Pipeline (ITP) could reopen by the end of 2024.

APIKUR argues that the suspension costs around US$1 billion in monthly losses and has already amounted to a US$20 billion shortfall since March 2023. The group demands direct payment arrangements and the preservation of commercial terms before agreeing to resume exports. "We are encouraged by the prime minister’s remarks," Caggins said, calling for immediate, three-way talks between Baghdad, Erbil, and Ankara to restore the flow of oil.

APIKUR supports direct sales agreements between IOCs and SOMO to provide the financial guarantees investors seek. With oil a critical source of revenue for both governments, the common interest is clear, but reaching an accord remains elusive.

TNA contacted Caggins for further comments on the issue, but he was not immediately available to comment.Ìý

In the face of complex legal, financial, and political challenges, Iraqi and Kurdish officials have pledged to continue discussions. Joint committees have been proposed, and the appointment of a consultant could help clarify actual production costs and revenue allocations.

Until a concrete deal emerges, uncertainty looms. Baghdad grapples with budgetary constraints, Erbil struggles to pay its civil servants, and international investors await clearer contractual conditions. Meanwhile, the global market watches closely, wondering if and when Kurdish oil will flow again through the pipeline to Turkey's Ceyhan port.