KRG’s Energy Deals Will Likely Proceed Without a Turkish Route

KRG’s Energy Deals Will Likely Proceed Without a Turkish Route

The Kurdistan Regional Government (KRG) has announced a landmark deal with two American companies, HKN Energy and WesternZagros, to develop oil and gas fields in northern Iraq. The agreements were welcomed by the United States government, and Secretary of State Marco Rubio stated that “the linchpin of our approach towards Iraq is that autonomy that the Kurdish population has… and part of that is allowing them the economic lifeline that allows them to prosper and succeed.” Nonetheless, the government in Baghdad promptly declared the deal null and void, while the KRG maintained that it was both legal and legitimate under Iraq’s constitution.

This deal, reportedly worth 110 billion USD over its lifetime, promises to modernize the KRG’s energy infrastructure and help deliver 24-hour electricity to millions. According to KRG officials, the first phase of the deal focuses on meeting domestic energy needs by using natural gas production to power electricity plants. Iraq, including the territory administered by the KRG, has long struggled with electricity shortages, particularly during the scorching summer months when demand surges. While strong political backing from Washington has enabled these agreements, exports to international markets, especially through Turkey, remain off the table for now without Baghdad’s consent.

A Standoff Over Resource Control

This is not the first time Baghdad and the KRG have clashed over control of natural resources. In previous years, the KRG exported oil independently through Turkey, bypassing the federal government. The legality of these exports was hotly contested, and most international buyers stayed away, with the notable exception of Israel. In mid-2015, Israel imported up to 77% of its oil from the KRG. While the KRG denied selling to Israel directly or indirectly, the shipments were handled through intermediaries and trading firms. The revenue from these sales provided a crucial financial lifeline for the KRG.

Turkey, which earned transit revenues from the trade, attempted to broker a settlement between Erbil and Baghdad. But Baghdad stood its ground and took legal action. The ruling of the International Chamber of Commerce in 2023 in Baghdad’s favor resulted in hefty financial penalties against Turkey, and a second arbitration case is still pending. In retaliation, Ankara suspended all Iraqi oil exports through its territory to pressure the parties toward a compromise. That compromise, however, has yet to emerge. Without a broader settlement, it is highly unlikely that Turkey will unilaterally reopen the valves.

A Turkish Energy Firm Fades from the Picture

Secondly, this latest deal pushes Turkish energy companies out of the picture, and for good reason. The Miran and Topkhana gas fields, now assigned to WesternZagros and HKN Energy, were originally awarded to Genel Energy and Repsol. Genel Energy, although headquartered in London, is a Turkish-linked company with close ties to former Turkish top diplomat Feridun Sinirlioğlu. In 2011, Genel Energy became the leading oil and gas operator in the KRG, aiming to export gas to Turkey and the wider region. Genel announced ambitious plans to invest 2.5 billion USD in the development of these fields, including building a large gas processing facility. Yet little progress was made, and the KRG terminated Genel’s licenses in 2021. In December 2024, the London Court of International Arbitration ruled in favor of the KRG in its dispute with Genel Energy over the termination of contracts for the Bina Bawi and Miran gas fields. Genel's subsidiary was ordered to pay $26.8 million in compensation for failing to meet its contractual obligations.

The replacement of a Turkish company with good diplomatic and political connections with American companies signals more than just a commercial decision. It may reflect a broader recalibration of the KRG’s political alliances, particularly as its energy partnership with Ankara did not yield results.

Without Baghdad, Energy Exports Remain Stalled

Thirdly, natural gas infrastructure demands long-term commitments to justify the investment. Legal disputes over ownership and uncertainty about export routes are major concerns for potential investors. Baghdad remains hostile to any unilateral energy deals by the KRG, fearing that the resulting revenue could fuel separatist ambitions. The federal government has acted decisively before to shut down such moves, and will likely do so again. Meanwhile, although the KRG cannot legally export its oil and gas, smuggling to neighboring countries is common and can be profitable, but not enough to ensure economic self-sufficiency.

U.S. backing gives the deals political legitimacy and could help the KRG meet local energy demands. Yet Baghdad has proven it can block such deals through legal and diplomatic channels beyond Iraq. Without a political settlement with Baghdad, the KRG’s energy ambitions will likely remain confined to domestic consumption.

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