The Iraqi Ministry of Oil on Thursday called on the Kurdistan Regional Government (KRG) to immediately hand over oil to the federal government in accordance with the amended federal budget law, which it said was passed in agreement with the KRG.

In an official statement, the Oil Ministry stressed that the KRG is required to comply with the constitution, Federal Court rulings, and relevant laws, including the Federal General Budget Law, which mandates the handover of oil produced in its fields.

The ministry further stated that the KRG’s failure to comply with the constitution and law has caused problems for Iraqi oil exports and damaged the public treasury, warning that continued non-compliance could result in “significant financial losses to Iraq and jeopardize its reputation and oil commitments.”

It also noted that it is looking into reports of ongoing oil smuggling from the Kurdistan Region outside Iraq and has held the Kurdistan Regional Government accountable for the issue.

The ministry’s remarks come amid renewed tensions between Erbil and Baghdad over energy policy and financial entitlements. The latest dispute follows Prime Minister Masrour Barzani's signing of two multi-billion-dollar agreements with U.S.-based firms HKN Energy and WesternZagros on May 19.

The deals aim to develop major natural gas fields in the Kurdistan Region and are expected to tap into trillions of cubic feet of gas. The KRG has defended the contracts as legal, essential for meeting domestic energy needs.