Citing constitutional violations, Iraq rejects KRG's $110 billion gas deals with US firms

The Iraqi Ministry of Oil on Tuesday rejected recent energy agreements signed by the Kurdistan Regional Government (KRG) with two US firms to develop major gas fields in the northern Kurdistan region, warning that the deals violate Iraq's constitution and federal court rulings.

In a statement on Tuesday, the ministry expressed "strong objection" to what it described as unlawful contracts inked by the KRG's Ministry of Natural Resources for the development of the Miran and Topkhana-Khurdamir gas fields. The ministry said the agreements breach a 2022 ruling by Iraq's Federal Supreme Court, which deemed all KRG oil and gas contracts signed without Baghdad's approval as "unconstitutional".

"Despite the country's urgent need to enhance domestic gas investment and supply power stations, the KRG's actions represent a flagrant breach of Iraqi law," the ministry said. "Iraq's oil and gas wealth belongs to all its people, and any contracts concerning this national resource must be executed through the federal government."

The contracts, announced on 18 May, involve a joint venture named Miran Energy, formed by US investors HKN Energy and ONEX Group. The companies say the Miran field, located West of Sulaimaniyah province, contains up to 8 trillion standard cubic feet of recoverable natural gas, with development expected to generate more than $40 billion in long-term value.

A second agreement was signed with WesternZagros, granting the US company rights to develop the Topkhana–Khurdamir block in southwest Sulaimaniyah for oil and gas production.

Sulaimaniyah is under the de facto control of the Patriotic Union of Kurdistan (PUK), which has not issued any official statement on the matter. However, observers believe the deals likely received prior PUK approval—possibly in return for political concessions, such as the reappointment of Qubad Talabani as Deputy Prime Minister and an expanded role for the PUK in the 10th KRG cabinet.

KRG Prime Minister Masrour Barzani welcomed the deals on X, describing them as a "new phase of Kurdistan-USA ties" that will "power millions, create jobs and strengthen Kurdistan’s economy".

Speaking from Washington, Kurdistan's Minister of Natural Resources, Kamal Mohammed, defended the contracts, insisting they are in "Iraq's national interest" and suggesting the gas will partially supply power to federal provinces.

However, he noted that the Iraqi government had not been consulted. "The agreements were not discussed with Baghdad," Kamal told reporters. "Still, they serve both Kurdistan and Iraq as a whole."

The remarks provoked criticism in Baghdad. Kurdish MP Dara Sekaniani, a member of Iraq's parliamentary legal committee, told The New Arab the lack of federal coordination violates constitutional provisions requiring joint management of oil and gas resources.

"These deals contradict previous rulings by the Federal Supreme Court and raise questions about whether they truly serve Iraq's economic stability," he said, adding that caretaker governments—both in Baghdad and Erbil—are barred from signing long-term contracts.

In March 2023, Turkey suspended flows through the Iraq-Turkey pipeline following an international arbitration ruling that Ankara had unlawfully allowed KRG oil exports without Baghdad's consent. The tribunal ordered Turkey to pay $1.5 billion in damages. The resulting disruption contributed to an estimated $19 billion in lost revenues for Iraq.

The KRG's Ministry of Natural Resources, in a clarification on Tuesday, defended the legality of the agreements, stating the deals build on existing contracts upheld by Iraqi courts and involve new operating companies with long-standing US investors.

Outcry over energy management

Locals in the Kurdistan Region told TNA that the oil and gas business primarily serves the two ruling parties—the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK). They claimed revenues generated are not returned to federal or regional treasuries, but instead funnelled into patronage networks and personal fortunes linked to the Kurdish ruling parties.

Public frustration surged after the caretaker KRG cabinet approved a new 24-hour electricity tariff scheme called the Runaki project.

The KRG buys one kilowatt-hour of electricity from private-sector power plants—reportedly owned by ruling parties—at 42 Iraqi dinars and resells it for over 350 dinars. These plants receive free gas to generate electricity, turning the sector into a lucrative business.

On Wednesday, residents in Sulaimaniyah protested the sharp increase in electricity prices. A Kurdish MP announced plans to challenge the decision at Iraq's Supreme Federal Court.

Negotiations to resume Kurdish oil exports through Turkey remain stalled, with foreign firms demanding guarantees on billions of dollars in unpaid dues from 2022 to 2023.

To ease tensions, Iraq's parliament in February endorsed a budget amendment subsidising production cost for international oil companies operating in the Kurdistan Region. The amendment increased compensation to $16 per barrel for transport and production costs. In exchange, the KRG must transfer 400,000 barrels of oil per day to Iraq's State Oil Marketing Organisation (SOMO), securing 12.6 percent of the total federal budget, estimated at 210 trillion Iraqi dinars.

As political and legal disputes deepen, Sekaniani cautioned that "the Kurdish people still remember the painful consequences of past unilateral decisions that ultimately hurt public employees and the region's economy".