Baghdad-Erbil Agreement: Its Foundations and Economic Implications

Summary:
– The dispute between Baghdad and Erbil in the management of natural resources is due to the constitutional provisions concerning oil and gas management, which are among the most complex; because it was not professionally formulated. It needed to be clarified on the issue of the ownership of the people and the Iraqi State.
– In States that adopt a rentier economic approach, such as Iraq, legal or constitutional powers are not granted to territories by selling natural resources individually; Because this would create class disparities among the people of the same country because of the concentration of natural resources in specific geographical locations.
– The Kurdistan Regional Government will not unilaterally manage the oil file following the Agreement but through the oil marketing company SOMO.
– The decision will accelerate the interest of the parties to agree on annual budgets and the continuity of the flow of financial resources into the Territory, as well as the ability of the Territory to sell oil at the international market price away from preference in prices and to sell below the market price.
– Progress from this Agreement will inspire decision-makers in both governments to move forward by including more agreement procedures on outstanding issues.
– The central government, specifically the Central Bank of Iraq, will be able to track sales of exported oil from the region to international markets, and the region’s financial balances will be credited to the accounts of the Central Bank of Iraq.
– Agreement depends on the parties’ political will to the Agreement and the willingness and ability to withstand that Agreement for as long as possible. The real test for the parties to the Agreement will be to implement the terms of that Agreement properly.