The Lawful Trade of Iraqi Crude Oil

Opportunities and Legal Considerations for Foreign Companies

Introduction

Crude oil constitutes the cornerstone of the Iraqi economy and represents the primary source of public revenue and exports. Due to its strategic importance, the production, marketing, and export of Iraqi crude oil are governed by a defined constitutional and institutional framework administered by the State through designated authorities.

For foreign companies, lawful participation in the Iraqi crude oil trade requires strict adherence to this official framework, engagement exclusively through authorized channels, and careful compliance with established procedures. Any deviation from the formal structure may expose a company to significant legal and contractual risk.

I. Constitutional Foundation of Ownership and Management

The Constitution of the Republic of Iraq (2005) expressly provides that oil and gas are owned by all the people of Iraq. It further stipulates that the federal government, in cooperation with the producing regions and governorates, shall manage oil and gas extracted from current fields and formulate the necessary strategic policies for their development.

This constitutional provision forms the highest legal basis for all activities related to crude oil production and export. In practical terms, it establishes that any lawful trade in Iraqi crude oil must derive from and operate within the authority of the State of Iraq.

II. The State Oil Marketing Organization (SOMO) as the Exclusive Marketing Authority

The State Oil Marketing Organization (SOMO), an entity operating under the Iraqi Ministry of Oil, publicly affirms that it is the official and competent authority responsible for the marketing and export of Iraqi crude oil.

According to SOMO’s published mandates and policies, the organization is responsible for:

• Marketing Iraqi crude oil to international markets

• Concluding crude oil sale contracts with qualified entities

• Organizing export operations in accordance with approved contractual and procedural frameworks

SOMO further states that it deals directly with qualified entities in accordance with its official policies and does not recognize informal intermediaries or unauthorized channels.

Accordingly, any foreign company seeking to purchase Iraqi crude oil must do so exclusively through SOMO and in compliance with its formal procedures.

III. Lawful Commercial Opportunities

Within this official structure, foreign companies may access lawful commercial opportunities, including:

1. Crude Oil Sale Contracts

SOMO enters into crude oil sale contracts in accordance with its standard contractual framework. These arrangements provide a legally structured mechanism for qualified companies to secure crude supply from the State of Iraq.

2. Structured Supply Relationships

Through formal engagement with SOMO, foreign companies—particularly refinery owners or integrated energy companies—may establish structured supply relationships under recognized contractual terms.

3. Direct Dealings with a Sovereign Authority

Transactions conducted through SOMO provide legal clarity regarding authority, representation, and contractual legitimacy, as the counterparty is a formally mandated state institution.

IV. Qualification and Official Recognition Requirements

SOMO requires foreign companies wishing to engage in crude oil transactions to complete formal qualification procedures. Officially published guidance indicates that:

• Companies must submit required corporate documentation and qualification forms.

• Submission of documents does not constitute approval unless confirmed in writing by SOMO.

• Only entities formally recognized by SOMO are eligible to enter into contractual arrangements.

For foreign companies, this underscores the importance of verifying official approval status before entering into negotiations or financial commitments.

V. Core Contractual Considerations

Officially disclosed contractual documentation within Iraq’s transparency framework reflects that crude oil sales are governed by structured contractual provisions addressing, among other matters:

• Identification of the authorized contracting entity

• Delivery terms and transfer point

• Payment mechanisms and documentary requirements

• Compliance with established export procedures

Such provisions are integral to ensuring legal certainty and enforceability. Foreign companies should therefore conduct thorough legal review of contractual terms, particularly with respect to delivery structure, documentation, and payment arrangements.

VI. Transparency and Public Reporting

Iraq participates in the Extractive Industries Transparency Initiative (EITI). Through official reporting mechanisms, data concerning the extractive sector—including export and revenue information—are periodically disclosed.

While such reports do not substitute for contractual due diligence, they contribute to the institutional transparency of the sector and provide contextual insight into the governance framework of Iraqi oil exports.

Conclusion

Lawful trade in Iraqi crude oil rests on a clear and unequivocal principle: strict compliance with the constitutional framework and exclusive engagement with the officially mandated marketing authority, SOMO.

The Iraqi State provides a defined legal pathway for foreign companies to purchase crude oil through structured contractual arrangements. However, successful and sustainable participation in this market depends not merely on commercial opportunity, but on careful legal structuring, formal qualification, verification of authority, and rigorous contractual review.

Foreign companies seeking to operate in this sector must therefore prioritize legal diligence at every stage of engagement.