OVERVIEW
On May 20, the Kurdistan Regional Government (KRG) signed two major energy deals with U.S. firms HKN Energy and WesternZagros, valued at around USD 110 billion, to develop the Miran and Topkhana–Kurdamir gas fields in Sulaymaniyah province. The KRG claims the contracts extend existing agreements upheld by Iraqi courts. However, Iraq’s federal government declared the deals “null and void,” citing constitutional violations and a 2022 court ruling against the KRG’s oil and gas law. Baghdad’s Oil Ministry has filed lawsuits seeking cancellation, asserting that natural resources require central approval. The KRG defends the contracts as constitutionally valid under regional authority provisions. APAC Assistance assessed the potential Strategic and Legal Risks to US Energy Investments in Iraqi Kurdistan.
LEGAL AND POLITICAL TENSIONS
Baghdad cites Articles 111–112 of the Iraqi Constitution and past court rulings to assert exclusive authority over oil and gas contracts, while Oil Minister Abdul Ghani insists resource development must be managed federally and transparently. In contrast, the KRG references Articles 115 and 121, claiming regional rights over resources not explicitly assigned to Baghdad. Kurdish officials argue the recent energy deals simply replace existing operators and predate restrictive laws. The legal dispute is deeply political, with Baghdad’s Iran-aligned coalition viewing the deals as a threat to national unity. In response, Baghdad has imposed financial and regulatory pressure on Erbil, including withholding budget transfers and enforcing customs controls. The KRG defends the agreements as essential to Iraq’s energy stability, warning that delays could increase gas imports and strain the national budget and power supply.
OPERATIONAL, LOGISTICAL & INFRASTRUCTURAL BOTTLENECKS
Foreign energy companies operating in Iraqi Kurdistan are facing growing operational challenges, primarily due to Baghdad’s control over export infrastructure. The Iraq–Turkey oil pipeline has been shut since March 2023 following a legal ruling against unauthorized Kurdish exports, causing over a billion dollars in lost revenue. Export resumption remains stalled over unresolved issues like fees and contracts. Meanwhile, transport bottlenecks have worsened—Baghdad has seized Kurdish cargo trucks over customs violations and imposed strict documentation rules, causing widespread delays and financial losses for traders and infrastructure firms. Baghdad retains control over key pipelines, refineries, and power infrastructure, and has intensified pressure on Erbil through legal, financial, and regulatory means. Measures include threats of blacklisting officials, potential World Bank funding blocks, and a new USD 16 per barrel transport fee on Kurdish oil.
Source: Gulf States Newsletter
IMPLICATIONS & ADVICE
The dispute is significantly impacting Iraq’s energy and investment climate. The U.S. has publicly supported the KRG’s energy deals, with officials like Secretary of State Marco Rubio endorsing them as steps toward Iraqi energy independence. The U.S. urges cooperation between Baghdad and Erbil to boost domestic gas production. While this backing offers some diplomatic protection for U.S. firms, it also complicates U.S.–Iraq relations. American companies operating in Kurdistan must carefully assess their legal positions, as the environment remains challenging. Ongoing transport disruptions—driven by Baghdad’s customs enforcement and cargo seizures in contested areas—continue to affect logistics and operations.