Mohammed A. Saih writes: While a recent deal between Baghdad and Erbil to export oil from the northern fields is seen by many as a breakthrough after years of stalemate, the prospect of further progress on oil exports still remains uncertain.  Despite a breakthrough deal between the Iraqi federal government and the Kurdistan Regional Government to cooperate on oil exports from northern Iraq, thorny issues remain.

In return, the Baghdad government will possibly deliver as much as $1 billion to the KRG, which has been struggling to pay its employees and fund public projects ever since the central authorities in Baghdad cut its budget in February.

Saad al-Mutalebi, a member of the Shiite State of Law Coalition and a politician close to former Prime Minister Nouri al-Maliki, described the deal as “unrealistic.””

When the Islamic State (IS) swept through large parts of northern and western Iraq in June, the Kurdish peshmerga forces brought Kirkuk under their firm control as Iraqi army units deserted their posts there, fearing an IS onslaught. Ever since, oil exports from Kirkuk to the Turkish port city of Ceyhan have stopped, causing the Iraqi government a significant loss of revenue while it is locked in a brutal conflict with IS.because it leaves the KRG free to handle as it pleases the remainder of the oil it produces.

The Iraqi oil minister has said the deal “does not constitute a final solution” but is only a step toward a broader solution.  The challenge for Iraqi authorities is to justify the deal as it amounts to an acknowledgement of the KRG’s de facto control over the oil fields of Kirkuk, an anathema to many non-Kurdish Iraqis.

The KRG and Baghdad have been in deep disagreement for much of the past decade over controlling the production and export of oil from Kurdish territories.  Even though the KRG has had a difficult time selling its oil on the international market due to threats of legal action by the Iraqi government and strong opposition from the United States, it has adamantly refused to let the Iraqi national oil marketing company, SOMO, control oil exports from the Kurdistan region proper, which constitutes the three provinces of Erbil, Sulaimaniyah and Dahuk, in addition to smaller areas of Ninevah, Diyala and Kirkuk provinces.

Without a solid agreement over SOMO’s role in Kurdish oil exports, it will quite likely be difficult for the Iraqi government to maintain the current deal due to heavy pressure from non-Kurdish circles in Baghdad.

Another solution could be possible in the form of the KRG selling its oil and keeping the Iraqi government in the loop on its production and export activities. In that case, he said the KRG will still have to send the revenues to the federal government’s coffers in Baghdad to be redistributed nationally.