The federal government in Baghdad and Iraq's semi-autonomous region of Kurdistan have reached a tentative agreement to resolve a dispute over payments to foreign companies that has shut down most crude oil exports from the region, Iraqi officials said.
The tentative deal was reached during a meeting earlier this week between federal Prime Minister Nouri al-Maliki and the Kurdistan Regional Government Premier Nechirvan Barzani, the officials said.
If the agreement comes into effect, Kurdistan could resume oil exports of nearly 250,000 barrels a day via the Baghdad-controlled export pipeline, potentially raising Iraq's oil exports to nearly 2.9 million barrels a day, from around 2.55 million barrels a day.
"The two sides have agreed to find a solution to payments to oil companies in Kurdistan," Mr. Maliki's spokesman Ali al-Mawsawi said.
The deal comes after Kurdish negotiators concluded Tuesday their highest-level visit to Baghdad in nearly two years, embarking on talks that diplomats said could signal progress toward ending a worsening feud between the Kurds and Arab Iraqis.
The talks were held against a backdrop of distrust between Baghdad and the semi-autonomous region - which escalated over the weekend when Kurdish military forces expanded southward into the northern region of Kirkuk amid sectarian fighting there.
Tensions between the sides, which have simmered since Iraq's reorganization following the 2003 U.S.-led invasion, plumbed a low in March, when Kurdish politicians walked out of parliament, formally withdrawing from Iraqi politics in Baghdad.
Baghdad and Erbil, the Kurdish capital, have been at loggerheads over scores of oil contracts that the KRG signed with international oil companies. Baghdad says these deals are invalid because they haven't been approved by the central government, while the Kurds argue that they are in line with the new constitution.
In December, the KRG suspended crude oil exports through the Baghdad-controlled pipeline, principally over the issue of the lack of payments of oil export revenues collected by Baghdad, owed to firms operating in Kurdistan. There was a separate dispute over production in November, with the Kurds unable to reach the export level of 250,000 barrels a day, as agreed with Baghdad.
In March, Kurdish parliamentarians and cabinet ministers walked out after Iraq's parliament passed a budget that KRG lawmakers said didn't adequately compensate them for some 4 trillion Iraqi dinars ($3.5 billion) in payments to oil companies that operate in the Kurdish semi-autonomous region. The budget allocated only $650 million to the firms.
The Patriotic Union of Kurdistan, or PUK, which with Kurdistan Democratic Party form the strong Kurdish alliance in the Iraqi federal government and parliament, said Thursday on its website that the two sides agreed to amend the 2013 budget to include payment for companies producing oil in Kurdistan.
Following the new agreement this week, "perhaps the central government will not pay that entire amount, but they may reach a compromise," Ali Hussein Bellu, an advisor to the Kurdish oil ministry told Dow Jones Newswires. Mr. Bellu said he thinks that payment could be made when the government and parliament discuss an additional budget for 2013, which usually happens in June.
Among other issues agreed by the two sides is the acceleration of the process to enact a long-awaited draft oil and gas law.
"They have agreed to set up a joint committee to end the dispute on the oil and gas law, based on the version of the draft law reached agreed on in 2007," the PUK said.
The proposed hydrocarbon law, which would govern contracts and regulation in Iraq, has idled in the Iraqi parliament since 2008 because of differences between the various political blocks, particularly the Kurds, over its provisions.
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