Ali Naji / Journalist specializing in economics
Oil constitutes Iraq’s most important economic resource, accounting for over 90% of the state’s general revenues and gross domestic product, and serving as the primary source for financing government budgets and infrastructure. Given this central economic role, a clear and escalating dispute has emerged since 2007 between the federal government in Baghdad and the Kurdistan Regional Government (KRG) regarding the management and investment of oil resources in the Kurdistan Region, following the Kurdistan Parliament’s approval of its own Oil and Gas Law.
At the core of this dispute is the interpretation of the Iraqi Constitution and federal legislation concerning the oil sector, particularly the question of whether the KRG has the constitutional right to contract directly with foreign companies and undertake independent oil projects, or whether such authority is exclusively vested in the federal government under existing laws.
This disagreement has had tangible economic, administrative, and political consequences. Oil exports were periodically halted along major export routes, particularly through Turkey, affecting Iraq’s flexibility in global markets and reducing national revenues. Furthermore, the payment of salaries to the Kurdistan Region employees was delayed at certain periods, exacerbating the economic crisis within the region. The dispute also generated international and legal conflicts with companies and countries involved in oil transportation, including arbitration cases, as the federal government described some KRG activities as “smuggling” outside the legal framework.
Different types of oil contracts, such as Production Sharing Contracts (PSCs) and Technical Service Contracts (TSCs), play an important role in the dispute by regulating relationships with foreign oil companies operating in Iraqi Kurdistan. However, these contracts are not the root cause of the conflict; rather, they constitute one of its practical manifestations within the broader political and constitutional disagreements. The KRG predominantly signs production-sharing agreements, whereas the federal government relies on technical service contracts, affecting profit-sharing, investment risk allocation, and the scope of national sovereignty over resources.
In this context, the present study aims to analyze the roots of the dispute between Baghdad and Erbil from a legal and constitutional perspective, focusing on the interpretation of the provisions related to oil and gas in the 2005 Constitution of the Republic of Iraq, particularly Articles 111 and 112.
The study also seeks to clarify the repercussions of this dispute on oil production and public revenues for both the federal government and the KRG, and to examine its impact on attracting foreign investment in the oil and gas sector. Additionally, it considers the role of oil contracts in managing resources within the broader political and legal conflict, and proposes practical solutions and implementable policies to reduce the intensity of the dispute and achieve more efficient and equitable management of Iraq’s oil wealth. Such measures include establishing joint mechanisms to enhance transparency in revenue distribution and re-evaluating the legal frameworks governing oil contracts.
By doing so, the study not only analyzes the current situation but also aims to contribute both academically and practically to the ongoing debate on the future management of Iraq’s natural resources, in light of the country’s current constitutional, political, and economic challenges
