Iraq's oil sector faces dual crisis: KRG export deal stalled amid warnings of US sanctions risk

Iraqi News

10 hours ago

Baghdad (IraqiNews.com) – Iraq's vital oil sector, the lifeblood of its economy, is facing a perilous dual crisis. Negotiations between the federal government and the Kurdistan Regional Government (KRG) to resume northern oil exports have stalled, while simultaneously, a parliamentary committee has raised alarms over what it calls a 'structural collapse' within the Ministry of Oil that could expose the country to devastating US sanctions.
The Iraqi Parliament's Oil and Gas Committee hosted Federal Oil Minister Hayyan Abdul Ghani and other senior officials on Monday (July 14, 2025) to address several 'dangerous' files. Following the meeting, committee member Bahaa Al-Din Nuri confirmed that negotiations with the KRG to restart oil exports through the Ceyhan pipeline in Turkey have reached a dead end.
According to Minister Abdul Ghani's testimony, key points of disagreement remain over local consumption figures and the mechanism for handing over oil revenues to the federal government. Nuri added that while the Ministry of Oil has completed all technical preparations to export the oil, the KRG has not complied with the agreement stipulated in the budget law and has refused entry to a designated international consulting firm. A KRG delegation is expected in Baghdad within 24 hours to attempt to break the stalemate.
In a more alarming development from the same meeting, committee spokesperson Ali Shaddad warned of a potential 'structural collapse within the Ministry of Oil,' citing indicators of influence from external parties, including an individual identified only as 'Omed' who has allegedly gained control over sensitive areas of the ministry.
Shaddad issued a grave warning that Iraq now faces the risk of direct US sanctions on the Ministry of Oil itself due to 'transgressions and mismanagement' that could be interpreted as a breach of international obligations. This comes after the U.S. Treasury recently sanctioned networks involved in smuggling fuel and illicit financing in the region, with international reports cautioning that official Iraqi institutions could be targeted if complicity is found.
For Iraq, whose national budget is almost entirely dependent on oil exports, any sanctions targeting the Ministry of Oil or its marketing arm (SOMO) would represent a direct threat to the nation's economic stability, potentially leading to 'widespread economic paralysis,' according to Shaddad.
As Iraq's leadership grapples with both a critical internal political dispute with the KRG and the looming threat of international sanctions due to alleged internal failures, the stability of the country's most crucial economic sector hangs in the balance. The outcome of the upcoming Baghdad-Erbil talks and the parliamentary committee's investigation will be critical in determining whether Iraq can navigate this perilous period.