Iraqi FM, U.S. Diplomat Hold Talks on Kurdistan’s Oil Exports and Role of International Companies

ERBIL (Kurdistan24) – Iraq's Deputy Prime Minister and Minister of Foreign Affairs, Fuad Hussein, met with the top American diplomat in Baghdad on Sunday to address the critical and unresolved issue of resuming oil exports from the Kurdistan Region, a move that directly involves the operations of U.S. energy firms. The high-level discussion took place just as another senior Iraqi official announced a significant breakthrough in revenue-sharing talks, suggesting that technical and political obstacles to restarting the crucial exports may be clearing.

According to a formal readout from the Iraqi Ministry of Foreign Affairs, Foreign Minister Hussein received the American Chargé d'Affaires, Ambassador Steven H. Fagin, on Sunday, August 17, 2025. The statement specified that their conversation centered on "the course of bilateral relations between Iraq and the United States, particularly with regard to the role of American oil companies operating in Iraq."

Crucially, the ministry’s statement highlighted that the talks explicitly addressed "the outstanding issues between the oil companies operating in the Kurdistan Region, and ways to address them in a manner that allows for the resumption of oil exports from the oil fields in the Region."

This focus signals ongoing international engagement in a dispute that has paralyzed a significant portion of Iraq’s energy sector for over a year. The two diplomats also touched upon broader regional developments, with Ambassador Fagin reviewing the U.S. government's position on recent events in the Middle East, the foreign ministry concluded.

Signals on a Breakthrough

The meeting between Minister Hussein and Ambassador Fagin comes at a pivotal moment, with complementary signals emerging from senior Kurdish officials in Baghdad. 

In a recent detailed interview, Foreign Minister Hussein himself, a senior member of the Kurdistan Democratic Party (KDP) Politburo, characterized the state of negotiations as yielding a "temporary" agreement to manage the handover of the Kurdistan Region's oil, stressing its limited scope and precarious nature.

"There is now a clear understanding to reach a solution for the oil handover issue," Hussein stated in an interview with Al-Shams channel, before adding a critical qualifier: "It is a temporary solution. This solution is until the end of the year." He explained that this stopgap measure is not a permanent fix, stating unequivocally that "next year it will have to be resolved differently."

However, in a more optimistic and immediate development, the Deputy Speaker of the Iraqi Parliament, Shakhawan Abdullah, announced on Sunday that tangible progress had been made.

"There are no obstacles regarding oil exports from the Kurdistan Region," Abdullah declared, revealing that other key concerns have been resolved. He disclosed that the Kurdistan Regional Government (KRG) and the federal government "have reached an agreement on non-oil revenues over the past two days."

This development is significant, as it reportedly paves the way for progress on the pressing issue of public employee salaries in the Kurdistan Region, with Abdullah indicating movement on the file "next week."

According to Abdullah, the KRG’s cooperation on both oil exports and non-oil revenues, in line with Iraq's Financial Administration Law, has eased pressure on Baghdad. Oil exports via the crucial Iraq-Turkey Pipeline have been suspended since March 2023, following an International Chamber of Commerce (ICC) arbitration ruling that effectively halted the KRG's independent oil sales, severely impacting its economy.

The Constitutional Chasm: Federalism vs. Centralism

Despite the positive momentum described by Deputy Speaker Abdullah, the underlying issues that have fueled the dispute for years remain.

 At the heart of the conflict is what Foreign Minister Hussein described as a foundational clash between the federalism enshrined in Iraq’s constitution and a deeply ingrained "centralist culture" in Baghdad. "In Baghdad, I deal with centralism daily," he candidly remarked to Al-Shams channel. "The culture that exists in Baghdad is a centralist culture... The laws are also centralist, and here we see the major problem."

This sentiment was echoed by Abdullah, who noted, “We have a federal system in Iraq, and if you look at the constitution, many articles related to federal revenue collection and redistribution have yet to be legislated by parliament.” He stressed that centralist approaches have long hindered lasting agreements.

Hussein argued that while the Kurdish political movement has historically championed a democratic and federal Iraq, the legal and political infrastructure to support such a system has never been fully built.

He explained that a critical legislative failure has allowed centralist tendencies to prevail legally.

"In the constitution, there are more than 50 constitutional articles that need to be turned into laws," he revealed. "As a result of not legislating these articles, which is a problem of the parliament, a legal vacuum has been created." This vacuum, he detailed, triggers a constitutional clause that reverts to outdated, centralist laws, creating a systemic conflict between Erbil's constitutional rights and Baghdad's operational laws.

Legislative Paralysis and Shifting Security Dynamics

This legislative inertia is not accidental, according to Hussein. The political agreement that formed the current government of Prime Minister Mohammed Shia al-Sudani included commitments to pass key legislation, such as a federal oil and gas law, within six months.

"But it was not passed," Hussein noted. Similarly, a law to establish the Federation Council—a second parliamentary chamber designed to represent regions and provinces—has never materialized, leaving the Kurdistan Region without its designated voice in federal lawmaking.

This diplomatic engagement on energy also unfolds as the broader U.S.-Iraq relationship undergoes a historic transformation.

The Iraqi government recently announced a definitive timeline for the end of the U.S.-led international coalition's mission in the country. Hussein Allawi, an advisor to Prime Minister al-Sudani, stated that the coalition’s presence in Baghdad and at the Ain al-Asad airbase will conclude in September 2025, with a final withdrawal stage to be completed by September 2026.

This planned withdrawal marks the end of a security framework that has defined Iraq for over a decade since the rise of ISIS in 2014. According to Allawi, Iraq aims to transition its security ties with coalition members into stable bilateral defense arrangements.

This shift is driven by pressure from powerful political factions who have long called for a full withdrawal of foreign troops. The move to end the coalition's mission redefines the strategic context of American influence in Iraq, adding another layer of complexity to its role in mediating sensitive internal disputes like the Erbil-Baghdad oil file.

As the U.S. military footprint recedes, its diplomatic and economic leverage—particularly concerning American energy companies—becomes an even more critical tool in its engagement with both Baghdad and Erbil.