Baghdad intends to establish a new oil company in Kurdistan
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Baghdad intends to establish a new oil company in Kurdistan

The Iraqi Oil Ministry said in a statement, Saturday, that the federal government aims to establish a new oil company in the Kurdistan region, in the midst of ongoing disputes with the regional government over oil revenues in the north of the country.

The statement said that the goal of the new company is to enter into new service contracts with the oil companies currently operating there under the Kurdistan Regional Government.

Oil Minister Ihsan Abdul-Jabbar said on May 7 that the ministry would begin implementing a federal court ruling issued in February that deemed the legal foundations for the oil and gas sector in the Kurdistan region unconstitutional.

Iraq then asked oil and gas companies operating in the Kurdistan region to sign new contracts with the state-owned marketing company SOMO instead of the regional government.

This was the first direct contact between the ministry and the oil companies operating in the Kurdistan region. The move follows years of attempts by the federal government to control regional government revenues, including local court rulings and threats of international arbitration.

Foreign oil companies operating in the Kurdistan region of Iraq, including Genel Energy, Chevron and Gulf Keystone, as well as Cleary Gottlieb, declined to comment on the Iraqi Oil Ministry's steps.

An official in the Oil Ministry said Thursday that the ministry has not yet received responses from the companies concerned, and if it does not receive a response, it will take further legal measures, without giving further details at the time.

A representative of the oil companies spoke to the media that foreign oil companies would not likely communicate with Baghdad directly without coordination with the Kurdistan Regional Government.

These developments are expected to lead to more tensions between the central government and the regional government, which has faced in recent years a severe financial crisis manifested in the failure to pay public sector employees' salaries, as well as those affiliated with the Peshmerga forces and others.

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