Iraq government reaches oil deal with Kurds

Kurds to sell 300,000 barrels per day and continue to receive 17 percent share of the national budget.

Iraq’s government has reached a temporary agreement with authorities in the Kurdish region to end a dispute over oil exports and budget payments to the semi-autonomous region.

Under the deal, the Kurds will be allowed to sell 300,000 barrels per day (bpd) to Turkey from Kirkuk via a pipeline running through their territory, in addition to 250,000 bpd from the region’s own fields.

The crude will be sold by Iraq’s state oil marketing organisation (SOMO), representing a compromise by the Kurds, who have long insisted the constitution entitles them to sell oil on their own terms.

In return, Baghdad will resume payments to the Kurds of 17 percent share of the national budget, and will disburse $1bn towards salaries and equipment of the Kurdish peshmerga forces, who are fighting the Islamic State in Iraq and the Levant (ISIL) in the north.

The Kurds have suffered a financial crisis since the federal government cut funding early this year as punishment for their move to export oil independently.

The agreement will help Iraq increase oil exports at a time when its budget is strained by low oil prices and the cost of financing the war against ISIL fighters who control much of the country. It will last at least for the budget year if neither side defaults.

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