Kurdistan's Oil Sales Set to Resume Through SOMO

The Iraqi federal government mandated the Kurdistan Regional Government (KRG) to transfer its oil output to the state-run State Organization for Marketing of Oil (SOMO) for sale on the international market. The government has approved a budget measure to compensate the KRG for production and transport costs at $16 per barrel for foreign oil companies operating in the Kurdistan Region.

This agreement comes after prolonged tensions between Baghdad and Erbil, resulting in over $20 billion in lost revenues due to halted exports via the Kirkuk-Ceyhan pipeline. Both sides previously blamed each other for delays and financial disagreements, but this deal could mark a turning point. The KRG stands to regain financial stability by increasing exports, assisting in debt repayments, and accessing higher international oil prices. International oil companies are eager to sell through SOMO, anticipating higher profits and prompt payments.

However, the federal government emerges as the primary beneficiary, gaining enhanced budgetary transparency and increased control over the semi-autonomous region's resources. The KRG, while securing economic benefits, faces reduced autonomy and potential production cuts in line with OPEC+ agreements. The political landscape adds further complexity, especially with Donald Trump's election signaling a potential shift in U.S. foreign policy. Ongoing challenges, such as oil smuggling, remain critical issues that the new administration's approach could significantly influence.