A flare-up between the regional government in Kurdistan and Baghdad has added risk for the resumption of oil flows from the northern Iraqi region.
Rudaw reports that the spike in tension followed amendments in relation to Kurdistan that the Iraq government had made to the federal budget last week. The Kurdish government slammed the changes as unconstitutional.
The dispute will delay the approval of the budget and may destroy the delicate balance that Baghdad and Erbil achieved in the wake of the oil export halt from Kurdistan that prompted the shut-in of thousands of barrels in output.
"Jumping on understandings and agreements and trying to violate the constitutional rights of the Kurdistan Region is completely contrary to national responsibility and it won't yield anything other than disappointment and complicating the political stability of the country. It will harm the whole of Iraq," Kurdistan's president, Nechirvan Barzani said in a statement.
The Prime Minister of the semi-autonomous region, Masoud Barzani, went further, saying the budget proposal violated the agreement Erbil and Baghdad had reached on the resumption of oil exports from the region.
Kurdistan's crude oil exports - around 400,000 bpd shipped through an Iraqi-Turkey pipeline to Ceyhan and then on tankers to the international markets - were halted on March 25 by the federal government of Iraq.
The suspension of oil flows out of northern Iraq and Kurdistan via Ceyhan forced companies to either curtail or suspend production because of limited capacity at storage tanks.
A few days before the halt of exports in March, the International Chamber of Commerce had ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan.
Iraq argued that Turkey shouldn't allow Kurdish oil exports via the Iraq-Turkey pipeline and Ceyhan without approval from the federal government of Iraq. In response, Turkey shut down the pipeline to Ceyhan, cutting off Kurdistan oil flows from the market.
By Charles Kennedy for Oilprice.com
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