Under Article 112 of the Iraqi Constitution, the Iraqi federal government is legally required to distribute oil and gas revenues from present fields “in a fair manner in proportion to the population distribution in all parts of the country.”
Under Article 112, the Kurdistan Regional Government (KRG) is entitled to 17% of all proceeds from oil sales by the Federal Oil Ministry and the State Oil Marketing Organisation (SOMO) (or any other division of the Iraqi federal government).
The KRG has the right, in circumstances where the Iraqi federal government is not sharing revenues in accordance with the Iraqi Constitution, to take such action as the KRG considers appropriate to obtain all entitlements the Iraqi federal government is required to pay to the KRG under the Iraqi Constitution. This right is reflected in Kurdistan law.
Since at least 2005, the Federal Oil Ministry has failed to comply with its constitutional and legal duties to the KRG, including under Article 112. The Federal Oil Ministry and SOMO continue to sell and to seek to sell oil, gas and other petroleum products to third parties, and to retain the full proceeds of such sales, all in violation of the KRG’s express constitutional and legal rights, and without the participation or approval of the KRG.
In these circumstances, and until further notice, Article 112 legally precludes the Federal Oil Ministry and SOMO (or any other division of the Iraqi federal government) from selling oil from Iraq without the approval of the Kurdistan Region, as a producing Region. Oil sales by the Federal Oil Ministry, SOMO, or any other division of the Iraqi federal government are therefore in violation of the Iraqi Constitution and international law, and may be outside the scope of their authority.
The KRG notifies all persons that have purchased or may purchase oil or gas from any division of the Iraqi federal government, including the Federal Oil Ministry or SOMO, that the KRG will consider such buyers and those who have facilitated shipments on their behalf or on behalf of SOMO as colluding in, supporting, or facilitating violations of the KRG’s rights (including under the Iraqi Constitution and/or international law), unless such buyers pay the KRG 17% of the purchase price, reflecting the share to which the KRG is legally entitled.
Buyers who fail to make such payments to the KRG will be facilitating the Iraqi federal government’s breach of the KRG’s rights and passing to the Iraqi federal government monies that rightfully belong to the KRG. Such buyers will also run the risk of paying funds to the Iraqi federal government pursuant to arrangements that may be outside the authority of the Iraqi federal government under the Iraqi constitution.
The KRG will take such legal action against buyers of oil from the Federal Oil Ministry and SOMO (or any other division of the Iraqi federal government) as may be necessary to protect the KRG’s constitutional and legal rights.