The Iraqi government is considering a plan to market its crude oil through Iran if talks between the State Oil Marketing Organization and the Kurdistan Regional Government (KRG) fall through, Deputy Oil Minister Fayadh al-Nema said, Reuters reported Aug. 27. Negotiations between Baghdad and Arbil may begin as soon as the week of Aug. 29 and will center on crude oil that the KRG exports unilaterally through Turkey. Baghdad has been demanding that the Kurds export their oil through the State Oil Marketing Organization instead.
If the talks fail, the Iraqi government would need to strike an oil swap deal with Iran because no pipelines run to Iranian refineries on the Persian Gulf, according to an anonymous official. If talks succeed, the Iraqi government may increase its own volumes of crude oil sent to Turkey via the Kurdish-controlled pipeline from Kirkuk. Last week, the government resumed 75,000 barrels per day in flows through this pipeline after halting them entirely in March. An agreement may see this increase to over 100,000 barrels per day. Arbil has been pressing for this concession because it needs to fund fighting against the Islamic State and its own regional budget. The KRG and Baghdad have long been locked in a dispute over how to market crude oil and distribute revenue. And momentum may also be building to construct a KRG pipeline to Iran as well.