The Iraqi Ministry of Oil has sharply criticised the Kurdistan Regional Government (KRG) for its persistent failure to hand over crude oil revenues, a standoff that Baghdad claims is inflicting “substantial financial losses” on the country and damaging its international standing.

In a strongly-worded statement that was shared with the official Iraqi News Agency (INA), the ministry accused the semi-autonomous northern region of flouting constitutional and legal duties, specifically the General Budget Law, which mandates the transfer of all regionally produced oil to the federal government for export.

“The Ministry of Oil emphasises the necessity for the Kurdistan Regional Government to comply with the Constitution, the rulings of the Federal Supreme Court, and the applicable laws,” the ministry said. It confirmed that numerous “formal communications and delegations to the Regional Government … [had been] to no avail.”

This long-running dispute has left hundreds of thousands of barrels of oil per day shut-in, depriving the federal treasury of vital income. The impasse stems from the shutdown of the Iraq-Turkey pipeline in March 2023. The conduit, which once handled approximately 0.5% of global oil supply, was halted after the International Chamber of Commerce ruled in favour of Baghdad, affirming that Turkey had violated a 1973 treaty by allowing the KRG to export oil independently.

Negotiations to resume flows have since stalled over commercial terms and contractual details with international oil companies operating in Kurdistan.

Baghdad’s frustration is palpable. The ministry warned: “The continued failure to deliver oil results in substantial financial losses to Iraq and negatively impacts the country’s international reputation and its oil-related obligations.”

The situation creates a “twofold loss,” according to the ministry. Not only is the revenue from Kurdish output lost, but Baghdad is also “compelled to reduce production from other oil fields outside the region in order to remain within Iraq’s production quota under OPEC.” The production from Kurdistan is counted towards Iraq's international total by the producer group, regardless of who controls the sales.

Adding a further layer of acrimony, the ministry is “monitoring reports indicating the continued smuggling of oil from the region to destinations outside Iraq,” and holds the KRG “fully legally responsible for these actions.” Baghdad has reserved its right to pursue further legal measures to resolve the intractable dispute.