The Kurdistan Regional Government (KRG) has signed two major energy contracts with American companies—Western Zagros and HKN Energy—with a combined estimated value exceeding $100 billion. While both firms are already active in the region, and the fields in question were previously assigned to other companies that later withdrew, these agreements remain significant for several key reasons:

1. Although the Miran and Topkhana gas fields were originally awarded to Genel Energy and Repsol back in 2011 (and 2012 in Genel’s case), the context has drastically changed. The new deals come after a 2022 Iraqi Federal Court ruling invalidated the KRG’s oil and gas law, followed by a 2023 international arbitration ruling in Paris that led to the suspension of KRG’s oil exports. These new agreements are thus being signed in a fundamentally different legal and geopolitical environment.

2. These agreements come on the heels of a recent amendment to Iraq’s federal budget, raising the KRG’s oil production cost ceiling to $16 per barrel, intended as a step toward resuming oil exports. Despite months of negotiations, differences between the KRG and international oil companies on one side, and the Iraqi government on the other, remain unresolved. These new deals will likely further complicate and delay prospects for restarting KRG oil exports.

3. Energy in the Kurdistan Region is not just an economic issue; it is fundamentally geopolitical. The decision to sign these contracts in Washington, D.C., and while the KRG is engaged in oil export negotiations with Baghdad, is deliberate. It comes amid a shifting regional balance of power, with Sunni Arab states and Turkey reasserting themselves at the expense of Iran, the principal backer of Iraq’s Shiite ruling elite. The deals can be interpreted as both a symbolic and practical challenge to Baghdad, which currently lacks the tools to effectively respond.

To understand how politically charged the KRG’s energy sector is, consider this: Prior to the export halt, nearly a third of all oil reaching Israel came from the KRG, while Baghdad maintained staunchly pro-Iran positions. The KRG has long operated under a distinct geopolitical alignment. These deals are also opportunistic, betting that Iraq’s internal fractures, which have only intensified since the fall of Bashar al-Assad. Sunni political actors in Iraq have become noticeably more assertive, buoyed by the rise of a Sunni-led order in Syria that now borders Iraq’s western flank, home to many Iraqi Sunnis.

4. Currently, Baghdad’s primary leverage against the KRG is control over salary payments. However, with U.S. pressure mounting, amid broader tensions between Iran and Israel and Trump’s threats of regional escalation, Baghdad is unlikely to risk further destabilization. A senior KRG official recently suggested that salary transfers are now largely occurring under American pressure. With Iraq’s national elections scheduled for November, KRG may also be counting on internal divisions within the Shiite camp. Prime Minister Mohammed Shia al-Sudani may be keen to preserve ties with the KDP in hopes of securing post-election alliances to retain his position.

5. There is a clear U.S. policy footprint in these developments. In 2024, the U.S. Assistant Secretary of State for Energy Affairs visited the Kurdistan Region, touring power stations and encouraging the KRG to prioritize domestic gas development to meet electricity needs and sell excess to Iraq. The current agreements reflect that push, focusing heavily on ramping up gas production for power generation.

6. Unlike earlier contracts, the Patriotic Union of Kurdistan (PUK) appears to have been more actively involved in these negotiations, as both contracts concern fields in Sulaimani province under PUK control. The political choreography is telling: while KRG Prime Minister Masrour Barzani and his team were in Washington, PUK President Bafel Talabani was also in the US, and Deputy Prime Minister Qubad Talabani has been more enthusiastically emphasising Sulaimani’s economic revival.

The timing and location of these deals suggest a deeper shift. By significantly expanding the role of U.S. companies in Sulaimani – a province traditionally seen as within Iran’s sphere of influence – the PUK may be repositioning itself, possibly seeking U.S. political backing and signaling a break from its perceived alignment with Tehran.