The Kurdistan Region of Iraq (KRI) was recognised by the Iraqi constitution of 2005 as a federal region within a sovereign and independent Iraq, however, the decades-long quest for self-determination through independence played a crucial role in Kurdistan Regional Government (KRG)’s state-building process. A core component of any state-building drive is securing an independent revenue stream to achieve financial independence. The dilemma for the KRI, whether as an autonomous federal region within Iraq or an independent entity, is that while the region holds considerable oil and gas assets whose monetisation could secure an independent revenue stream, yet that was beset by major challenges. Key among them was the ambiguity of the Iraqi constitution regarding the development of the country oil and gas resources which led to a significant conflict between the KRG and the Government of Iraq (GoI) with major effects on their development. A second major challenge was that in the early years following the invasion of Iraq in 2003, the region was largely unexplored and with high potential, but while being mostly a mountainous complicated and raised the costs of oil and gas exploration. Moreover, the KRI being landlocked substantially raised these costs as the monetisation of oil and gas resources required export routes through, and a dependence on, either federal Iraq, Turkey, or Iran. Despite these challenges, the KRG pursued an independent policy for the development of the region’s oil and gas sector, secured in 2014 an independent export route through Turkey that promised to bring about financial independence and with that a foundation for state building. This piece draws upon the author’s work on the subject and ultimately argues that the pursuit of financial independence for the KRI through an independent oil policy was not a viable or sustainable endeavour. It does so by reviewing each of the pieces of the jigsaw that allowed the KRG to establish its independent oil and gas policy, and how the compromises and decisions made to secure each of these pieces have ultimately made the jigsaw both unstable and unsustainable. However, this does not mean the loss of a crucial foundation of state building for the KRI, but achieving this requires a paradigm shift in the relationship between the KRG and the GoI based on a shared vision for nature of the country’s federal structure.

1. 1.

   The conflict is much broader than a conflict between the GoI and KRG as official entities, but between Kurdish politicians whether as officials of the KRG, members of the Kurdish parliament, federal Kurdish MP’s or Kurdish members of the federal government on the one hand versus non-Kurdish politicians, mostly Arabs, whether as members of the federal parliament or the federal government.

2. 2.

   The KRG’s website notesIn 2008, the KRG received an expert independent legal opinion (PDF) that confirms the KRG’s constitutional authority to manage the Kurdistan Region’s oil and gas resources. The KRG asked for a formal independent legal opinion from Professor James R. Crawford, a professor of international law, through Clifford Chance, a multinational legal firm. Professor Crawford concluded, “The Kurdistan Region Oil and Gas Law is consistent with the Constitution of Iraq”.

   https://gov.krd/mnr-en/publications/laws/

3. 3.

   The Iraqi constitution of 2005 refers to “Kirkuk and other disputed territories”, yet it does not specify them apart from Kirkuk, but they include some areas with Kurdish majorities. The constitution envisioned a mechanism for their resolution by 2007 but successive Iraqi governments and the KRG failed to resolve their differences over its interpretation and the issue was not resolved.

4. 4.

   The Green Line was marked by the unilateral withdrawal of Iraqi forces after the establishment of the safe haven and no fly zone by Western powers in response to the suppression of the 1991 Kurdish uprising following the First Gulf War.

   The 2004 Transitional Administrative Law (TAL), also referred to as the interim constitution, in article 53A, defined the Green Line as the line that marked the official borders of the areas administered by the KRG prior to the 2003 invasion. The 2005 constitution incorporated article 53A of TAL, and as such it and thus it denotes the official KRI area and its borders.

   For more details on the Green Line (ICG,2012: 22).

   Also see (Fig. 1 in link) for the 1996 UNICF map.

   https://www.usip.org/sites/default/files/resources/PW69.pdf

5. 5.

   To reflect the interest in the field at the time it’s worth noting that the IEA estimated in (2012) that the Kirkuk super giant field held about 9bn barrels out of a total of recoverable oil of 23bn barrels but since 14bn barrels of oil have been pumped from it since the 1920’s, the recoverable remaining is 9bn barrels. Production from the Complex peaked at 1,000,000 bbl/d in the 1980s, severely dropped after the Kuwait invasion, got back to around 700,000 bbl/d in the 1990s, and then declined again after the US-invasion.

6. 6.

   However, the Iraq Oil Report reported that the agreement is not a bilateral agreement between the KRG and Turkey, but a commercial agreement with the likely counterpart to the KRG being the state pipeline company BOTAS or its newly acquired subsidiary, Turkish Petroleum International Joint Stock Company (TPIC). (Van Heuvelen, 2013).

7. 7.

   The KRG benefited from the oil production and export of these filed for under half of 2014, all of 2015 and 2016, and about 3/4 of 2107 as it lost these fields in October 2017 after the federal authorities reasserted control following the independence referendum in September 2017.

8. 8.

   For a brief review of oil traders see “The changing world of the oil trader” at.

   https://fueloilnews.co.uk/2013/11/the-changing-world-of-the-oil-trader/

9. 9.

   Among other oil traders, Gelencore announced a week earlier, that it had reached agreements with the KRG. It is believed that other traders included Trafigura, Vitol, and Petraco. (Zhdannikov, 2017).

10. 10.

    There was no official figure provided, but media coverage suggested that the figure was up to $3.0 billion—of which $1.8 billion was converted to a 60% equity stake in the KRG’s pipeline in return in return for expanding the pipeline’s capacity to 1,000,000 bpd.

11. 11.

    KRG exports based on the Deloitte audits of the KRG’s oil exports, while total world exports are based on the BP Statistical Review of World Energy for 2022.

12. 12.

    Formula Pricing has become the basis of the oil pricing system, which in simple terms—crudes are priced with reference to a benchmark crude plus or less differentials reflecting crude quality differences, transport, and insurance costs as well other factors such as competitive offerings or political and or legal risks.

13. 13.

    These are prices realised by the KRG for KBT from its sale of oil to oil traders, and not the prices that KBT was sold at afterwords to international buyers by these oil traders.

14. 14.

    Based on the author’s calculations.

15. 15.

    A view on the constitutionality of the FSC is provided by an article by the President of Supreme Judicial Council, Dr. Faiq Zaydan, on 2021 04, that goes over the history of the FSC, and argues that parliament’s legislation of the amendment to law no. (30) of 2005 has addressed the issues of its constitutionality and gave it the powers of the FSC that was mandated by the constitution.

    https://www.iraqfsc.iq/news.4663/

    English translation at:https://www.iraqfsc.iq/news.4771/

16. 16.

    See earlier section on the constitution. Constitutional scholar Zaid Al Ali argues that the international legal option was: “based on a reading of the Constitution’s unofficial English language translation and on common law (meaning foreign) rules of interpretation”. And that: “… all that ever mattered was whether the investments were legal under Iraqi law, which required an understanding of Iraqi legal principles (and the ability to read Arabic)” (Ali Ali,2023a ).

17. 17.

    Iraq’s commitment to its obligations under OPEC were complicated by the KRG’s oil production and exports. OPEC views Iraq in totality in setting its production quota, i.e. both federal Iraq oil and KRI oil production. But Iraq in the past had no control over the production of oil in the KRI. Thus, the burden on compliance with oil production cuts fell on federal oil fields.

18. 18.

    This come from a possible implication of the FSC ruling, which is that the KRG might not be the holder of the legal title to the gas that it might sell, then the KRG cannot sell the gas to the buyers, who in turn have no ownership to the gas that they buy.

    “Iraqi Supreme Court Casts Doubt over Legitimacy of Kurdistan’s Oil and Gas Sector”, Norton Rose Fulbright, March 2022.https://www.nortonrosefulbright.com/en/knowledge/publications/0af5e6a5/iraqi-supreme-court-casts-doubt-over-legitimacy-of-kurdistans-oil-and-gas-sector

19. 19.

    International Covenant on Economic, Social and Cultural Rights, UN Human Rights office of the high commissioner,https://www.ohchr.org/en/professionalinterest/pages/cescr.aspx

Authors and Affiliations

1. The Institute of Regional and International Studies (IRIS), American University of Iraq (AUIS), Sulaymaniyah, Iraq

   Ahmed Tabaqchali

Corresponding author

Correspondence toAhmed Tabaqchali.

Editors and Affiliations

1. Lincoln, UK

   Marianna Charountaki

2. Leicester, UK

   James R. Moore

3. Dayton, OH, USA

   Liam Anderson

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