The crisis of the oil companies ’dues in the Kurdistan region of Iraq returned to float on the surface again after the House of Representatives was unable to pass the 12th part of the amendments to the Federal Budget Law related to the dues of those companies and the subsequent data war and mutual accusations, to explode an old, renewed disagreement between the central government in Baghdad and the Erbil government .
Article 12 in the tripartite budget voted on by the House of Representatives on June 12, 2023, stipulated that the oil companies operating in the Kurdistan region are granted 6 dollars for each barrel of extractive, which was then rejected by foreign companies operating in the region.
These companies believe that calculating equal production costs for the oil barrel in the region and the oil barrel in southern Iraq is not possible, especially since the oil fields in Iraqi Kurdistan are located in difficult and mountainous areas and the cost of production is more than the cost of production in the south.
The container of Article 12 of the Iraqi Budget Law
On November 5, 2024, the Federal Government sent a proposal to amend Article (12/ second/ c), of the Triple Budget Law, which included the following:
- The Ministry of Finance compensates the region’s government from sovereign expenditures for the cost of production and transportation, for the quantities of oil produced in the region that are received by the Oil Marketing Company (Sumo), or the Federal Ministry of Oil.
- The fair speculation costs of production and transportation are calculated from a specialized international technical advisory authority, within (60) days of the entry into force of this law, and in the event of non -agreement during the mentioned period, the Federal Cabinet specifies the consulting authority referred to.
- The consultant provides the cost of productive production and transportation to the ministries of oil and federal finances, and the government of the Kurdistan Region of Iraq, and the Federal Ministry of Finance pays the amounts to the region’s government.
- Immediately direct delivery of oil produced in the region to the oil marketing company (Sumo), or the Federal Ministry of Oil, and the cost of production and transportation is compensated by the Federal Ministry of Finance as a predecessor, at a rate of ($ 16) per barrel.
The House of Representatives began steps to amend the law through the first and second reading, but he postponed the vote on amending the budget in its session held on Tuesday, January 21, due to the differences and objections of members of Parliament from representatives of the center and south and their demand to include their provinces with privileges.
Accusations
On January 23, a spokesman for the Kurdistan Regional Government, Bishawan Hawrami, accused the federal government of submitting a new proposal for the budget to the Iraqi parliament, without consulting the region’s government, instead of the agreed budget project between the two governments.
The Iraqi government responded, on the same day, to the statement of the Kurdistan Regional Government of Iraq regarding the amendment of the budget, and affirmed its commitment to the amendments and called on Parliament to pass it.
For his part, Fadi Al -Shammari, political advisor to the Prime Minister, stressed Baghdad’s keenness to adhere to the constitution and the laws in force, stressing the government’s continuous endeavor to contain any differences that may arise between political parties or government authorities and regions, especially the problematic problem with the Kurdistan region.
Al -Shammari said, in an interview with Al -Jazeera Net, that the government adopted a solid approach to resolving any differences in views, stressing the importance of constructive dialogue in achieving joint understanding and ensuring the rights of all parties.
Al -Shammari added that the government played its role by setting a clear vision that the Council of Ministers voted and sending the budget to the House of Representatives for its approval, stressing that the final decision is due to the representatives of the people in Parliament.
The federal government sent a book with a modified copy of Article 12 through its representative in the House of Representatives, Ahmed Abdel Zahra, on January 21, in which it confirmed that it does not support the proposed amendment because it reduces the treasury revenues compared to the government text, contrary to what is being implemented in the rest of Iraq according to The Law of Financial Management in force and does not correspond to the mechanisms of selling oil to the oil marketing company (Sumo).
It required the amendment of the article in a manner that gives companies $ 16 per barrel of extractive, provided that all the revenues of exporting oil belong to the federal government treasury as it is in the governorates of the center and the south, while paying the costs of extraction will be at a later time through the public treasury, which was the wall. Which ignited the crisis between Baghdad and Erbil.
Al -Shammari urged the deputies to adhere to what was stated in the budget, noting that they were formulated in a professional, professional and consensual manner between all parties.
Al -Shammari expected that delegations from the Kurdistan region visited the capital, Baghdad, to reach a final solution formula in accordance with the constitution and the federal court decisions, stressing the importance of constructive dialogue in achieving the supreme national interests of all parties.
Micro modifications
Representative Mahasin Hamdoun, a member of the Finance Committee in the Iraqi Parliament, confirmed – in an interview with Al -Jazeera Net – that the committee had made fundamental amendments to Article 12 of the Budget Law.
Mahasin Hamdoun explained that the preliminary formulation of the material included allocating the amount of US dollars for each barrel of oil that was extracted in the Kurdistan region, in order to compensate for production costs, noting that the proposal was to export the region’s oil through Sumo National, which was the subject of agreement between several political blocs .
She continued: “However, this proposal faced objections from some parliamentary blocs that asked about the reason for allocating a specific amount to the Kurdistan region without the rest of the provinces, as these objections resulted in the disruption of the budget vote in the last session.”
It expected that a new mechanism for exporting the region’s oil will be reached during the next few days, so that oil revenues will be transferred to the federal government, stressing that there is a great consensus on most of the items of Article 12, and that the current indicators indicate that the objections will not continue at the same level.
Regarding the most prominent amendments made by the committee, the Iraqi parliamentarian clarified that it was agreed to form an international joint committee to resolve the existing differences between the federal government and the Kurdistan region.
The proposed amount of oil extraction costs in the Kurdistan region was also kept, stressing that these amendments were convinced of many parliamentary blocs, given the importance of achieving financial revenues for the federal government.
International arbitration
In turn, a member of the Finance Committee in the House of Representatives, Jamal Koger, stressed in his interview with Al -Jazeera Net that “this article is very important to solve a total of problems, the first problem is the costs, production and transportation of the region’s government, which is due to the stopping of the export of the region’s oil through Sumo.”
He added that “this article will address this problem, as the costs of production and transportation will increase from 6 dollars to $ 16 in the first stage, and after that it adjusts according to the results of the consulting institution.”
He also said: “The vote on this article will solve the region’s problem with the companies operating in it, because these companies were not satisfied with the cost price specified by Baghdad in the 2023-2024 budget.”
He added that “with the passage of this article, another line of selling the region’s oil will be opened to Turkey through the Turkish port of Jihan and from there to the world, and this is very important, because without modifying this material the federal government has one port for selling oil through the PAO Port.”
He continued, “Any defect in this port or any security incident that occurs in this port, then Iraq will be in front of an economic catastrophe. This amendment will provide a solution to this point as well.”
On the repercussions of the failure of the vote on the article, Jamal Koger said: “It is very likely that if the export of oil continues through Turkey, it will resort to complaints against the Iraqi state and demand compensation, due to the existence of an agreement to pump oil between the central government and the Kurdistan region government with the Turkish state through the transportation pipeline from Kirkuk fields to the Turkish port of Jihan. “
Losers
For his part, Kovand Sherwani, an expert in economy and energy, said that “the export of the export of the Kurdistan region of Iraq, whose production was more than 400 thousand barrels per day since March 2023, has caused losses to the Iraqi economy ranging from 19 to 20 billion dollars, which is a value The oil that could have been sold during this period. “
He added that foreign production and transport companies operating in the region were also caused by tens of millions of dollars in this stop.
The export of Kurdistan Region Oil stopped in March 2023 after Iraq won a lawsuit for the arbitration filed in front of the jury of the International Chamber of Commerce in Paris against Ankara regarding the export of crude oil from the Kurdistan region of Iraq through the Turkish port of Jihan without referring to the Iraqi oil marketing company “Sumo “.
On the losses of the region, Sherwani said, “The region also had huge material losses because this dispute that occurred in the oil file led to the lack of receipt of its full share of the budget.”
“Now the share sent by the federal government (to the region) is limited to salaries, while the operational and investment budget of the region, which is supposed to be a total of 12.6% of a budget of 210 trillion Iraqi dinars, has been blocked, (the dollar equals 1310 dinars).
Sherwani confirmed to Al -Jazeera Net that there are also other parties to stop the flow of oil through the tube that connects the port of Jihan, and this party is the Turkish companies working on operating and maintaining pipelines and oil stations from the Iraqi border to the Turkish port of Jihan.
But according to the contract concluded with the Iraqi government as well, as Sherwani notes, Turkish companies deserve compensation and fines even in the event that this pipeline is not used by Iraq and no quantities of oil are pumped through it.
