"[Erbil should] knit up the problems with Baghdad by doing the back and forth: Baghdad goes to Erbil and Erbil comes down to Baghdad," Leaf said at the Iraq Forum in Baghdad. She is visiting Iraq and Jordan from 29 April to 5 May, the US state department said earlier, to discuss a range of US priorities in the region.
"Do not sit up on the mountain and wait for things to get solved," Leaf added, in a signal to the Kurdistan Regional Government (KRG) in Iraq's norther semi-autonomous region, known for its mountainous terrain.
Leaf's visit to both Baghdad and Erbil is a first by a senior US official since Turkey halted exports of around 470,000 b/d of crude on 25 March. About 400,000 b/d of KRG crude normally flows through the Kirkuk-Ceyhan pipeline along with an estimated 70,000 b/d of federal Iraqi oil.
The decision was triggered by an international arbitration ruling that said Turkey had breached a 1973 pipeline agreement by allowing KRG oil to be exported without Baghdad's consent between 2014 and 2018.
"In this day and age we want economic growth," Leaf said. "We are looking for a well-supplied market. We do not want shocks to the market, be it from oil coming off the market — 400,000 b/d — or other disruptions."
The oil pipeline that runs from Iraq's Kirkuk region to Ceyhan is the only export route for crude produced by northern Iraq's oil fields.
"This issue of oil from KRG being exported by the Turkish pipeline is a perfect example that required hard-nosed negotiations that I think have come to fruition with the resolution," she added.
"We hopefully have transparency of oil, funds and finances," Leaf said, in reference to the terms of the temporary deal signed between Iraq's federal government and the KRG (KRG) 4 April.
"The KRG will have predictability in terms of financing for its budget. So it is a stop-gap measure that is being done but it is a problem coming to a solution," Leaf said.
The deal between Baghdad and the KRG stipulates that crude from the Kurdish region will now be jointly exported by the KRG's natural resources ministry and Somo. The technical sticking points relate to Somo's new role as marketer of KRG crude, which from now on will be subject to Baghdad's official formula prices. The deal also stipulates that an account will be set up at Iraq's central bank for Kirkuk oil revenues. The account will be managed by the KRG but Baghdad will have access to monitor and audit it. Erbil, meanwhile, will start regularly receiving its share of the funds.
The spokesperson for Iraq's federal government Basem al-Awadi told Argus on 26 April the resumption of Iraqi crude exports from Turkey is being delayed by "technical" issues between Baghdad and Erbil. Flows from Ceyhan are yet to restart and field operators in the Kurdistan region, such as London-listed Gulf Keystone and Norway's DNO, have had to shut or sharply reduce production due to their limited storage capacity.