BY : Shatha kalel
Recently, the U.S. capital Washington, D.C. hosted the signing of two energy agreements between the Kurdistan Regional Government (KRG) and two American oil companies, HKN Energy and Western Zagros. The signing ceremony took place at the U.S. Chamber of Commerce, attended by KRG Prime Minister Masrour Barzani. The deals are reportedly worth over $110 billion, a figure many economic observers believe is greatly exaggerated considering the size of the companies involved and the confirmed reserves of the contracted oil fields.
The Oil File Between Baghdad and Erbil: A Necessary Background
These agreements come amid a longstanding and unresolved dispute between Baghdad and Erbil over the management of natural resources—particularly oil and gas. While the Kurdistan Region has long pursued independent control over its oil sector, the federal government in Baghdad insists that all natural resources are national property, constitutionally under the supervision of the Ministry of Oil. This position was reinforced by a 2022 ruling from Iraq’s Federal Supreme Court, which declared the Kurdistan Oil and Gas Law unconstitutional.
Purely Economic Dimensions: Between Ambition and Risk
Putting the legal and political context aside, these agreements raise several important economic implications:
Attracting Foreign Investment: The KRG aims to stimulate investment in its energy sector and secure alternative financial channels to strengthen its economic infrastructure. If implemented in a stable legal environment, this could drive local economic development.
Legal and Commercial Risks: Signing contracts without federal approval exposes the companies involved to legal uncertainty and may hinder practical implementation, especially as oil exports via the Iraq-Turkey (Ceyhan) pipeline have remained suspended since March 2023.
Shared Financial Losses: The halt in Kurdistan oil exports has led to significant monthly revenue losses for both Baghdad and Erbil, estimated in the hundreds of millions of dollars.
Outstanding Debts: The Association of the Petroleum Industry of Kurdistan (APIKUR) reports that over $1 billion in dues remains unpaid to international companies operating in the region—posing a serious challenge to Iraq’s investment climate.
Doubts About the Announced Investment Value
The figure of over $110 billion has raised significant skepticism among economic analysts. Such a volume of investment far exceeds typical spending for oil field development projects in the region, and likely includes long-term estimates or undisclosed infrastructure and financing components.
Toward a Rational Economic Approach
Resolving these disputes requires a comprehensive economic framework that goes beyond political maneuvering and focuses on optimizing Iraq’s resource potential. Continued conflict between the federal government and the KRG disrupts investment, destabilizes markets, and undermines Iraq’s credibility as a major oil producer.
Conclusion
The newly signed energy agreements between the KRG and U.S. companies reflect legitimate economic ambitions, but they also introduce serious legal and commercial risks. For these deals to truly benefit the Iraqi economy, a foundation of institutional coordination and transparency between Baghdad and Erbil is essential. Only through such cooperation can Iraq fully leverage its energy resources for national economic growth, rather than allow them to become a source of division.
Economic Studies Unit / North America Office
Al-Rabetah Center for Strategic Research and Studies