Iraq’s parliament has approved a budget amendment aimed at compensating international oil companies (IOCs) operating in the semi-autonomous Kurdistan region, setting the compensation rate at $16 per barrel. The move is expected to expedite the resumption of northern oil exports, which have been halted since March 2023. Under the amendment, lawmakers confirmed that oil from Kurdistan will be exported through Iraq’s State Oil Marketing Organization (SOMO), ensuring that exports remain under federal oversight.

The suspension of Kurdistan’s oil exports stemmed from a legal dispute between Iraq and Turkey. In March 2023, a Paris-based arbitration court ruled in favor of Baghdad, stating that Ankara had violated a 1973 pipeline agreement by permitting Erbil to export oil independently since 2014. As a result, Turkey ceased allowing oil shipments from Kurdistan through the Iraq-Turkey pipeline, causing significant economic disruptions for the Kurdistan Regional Government (KRG) and international investors.

Shakhawan Abdullah, Iraq’s second deputy parliamentary speaker, welcomed the approval of the amendment, stating that it removes any remaining obstacles to resuming Kurdistan’s oil exports and ensuring the transfer of its budget allocation. "Thank God, today the parliament voted on amending the budget law. There are no excuses left to resume the Region’s oil exports and not to send the Region’s budget," Abdullah said in a Facebook post.

The decision to amend the budget follows months of negotiations between Erbil and Baghdad. In November 2023, the Iraqi government proposed changes to the federal budget to authorize compensation for IOCs operating in Kurdistan, setting the rate at $16 per barrel to cover production and transportation costs. The amendment was met with approval from both the KRG and international oil companies, who had previously faced uncertainty due to the export halt.

Beyond oil exports, the Kurdistan Region has been grappling with a broader financial crisis, particularly regarding civil servant salaries. For over a decade, the KRG has struggled to pay its employees on time and in full due to financial constraints. The situation worsened after the halt of oil exports, as the region heavily relies on local revenues and federal budget allocations to meet its financial obligations. The continued economic strain led to protests and mounting pressure on both regional and federal authorities to reach a resolution.

With the compensation plan now approved, the next step involves ensuring the swift resumption of oil exports and finalizing outstanding budget-related discussions between Erbil and Baghdad. If successfully implemented, this plan could restore economic stability to the Kurdistan Region while reinforcing Iraq’s control over national oil exports. The move also signals a step toward improving relations between the federal government and the Kurdistan Regional Government, addressing one of Iraq’s most persistent economic and political challenges.