ERBIL, Kurdistan Region of Iraq – The Iraqi Council of Ministers on Tuesday approved an agreement to resume the Kurdistan Region’s oil exports through the State Organization for Marketing of Oil (SOMO).

During a regular Council meeting on Tuesday, the details of a previously agreed-upon structure for the mechanisms of exporting the Region’s oil were read out to the Iraqi cabinet, which was approved by the council and referred to a committee of advisors of the country’s oil ministry, The New Region’s Baghdad correspondent reported.

The agreement was agreed on previously in July, with negotiating delegations from both sides signing the draft. The terms of the contract will see the Kurdistan Regional Government (KRG) retain 50,000 barrels of oil for domestic consumption, with the rest of the oil, regardless of production capacity, being handed over to SOMO to be exported to global markets.

The KRG's Ministry of Natural Resources in mid-August said it had "reached an agreement on the mechanism of oil exports" with the Iraqi oil ministry, noting that "the agreement was signed by 23 members of the delegations of both sides, including 17 members of the delegation of the Iraqi Oil Ministry.”

A top source in the Iraqi government told The New Region on Tuesday that a tripartite agreement between Erbil, Badghdad, and the International Oil Companies (IOCs) regarding the resumption of the Region's oil exports and the handover of non-oil revenues to Baghdad should be announced in the next two days if the Iraqi oil ministry approves the current proposal.

The dispute between Erbil and Baghdad over oil exports, in addition to the mechanism of sharing the KRG’s non-oil revenues, has propped up a budgetary conflict between the two sides, leading to years of sanctions on the KRG by the Iraqi government, the latest of which came in May, when Iraqi Finance Minister Taif Sami notified Erbil that the federal government will suspend funding the Region’s civil servant salaries.

Civil servants in the Region received their salaries for June in September, while July and August salaries have yet to be funded by the Iraqi government. The KRG has time and again reiterated that they have “more than fulfilled” their obligations relating to finding solutions with Iraqi authorities.

The New Region’s Baghdad correspondent further clarified that the main point of contention in the agreement is currently a proposal for the IOCs to receive their 16 US dollar compensation in oil instead of cash, which they can then sell in the international markets. The oil ministry’s committee of advisors is set to study the feasibility of the request and refer their findings back to the Iraqi cabinet, according to our Baghdad reporter.

The Iraqi government had previously refused to guarantee the 16 dollar per barrel compensation package for the IOCs. The New Region has reached out to the Association of the Petroleum Industry of Kurdistan (APIKUR), a conglomeration of international oil companies working in the Region’s oil sector, but has yet to receive a response as of the time of writing this article.

The KRG has reportedly expressed its support of the IOCs receiving their 16 dollar compensation in the form of oil.

A solution to the oil disputes will leave the Iraqi federal treasury’s share of the Kurdistan Region’s domestic revenues as the only major point of difference between Erbil and Baghdad in the outstanding budget dispute. The New Region understands that Iraq’s State Council is set to convene a meeting on Wednesday to address the domestic revenue issues between the two governments.