In June 2017, Kurdistan Regional Government (KRG) and Russian energy behemoth Rosneft signed several cooperation, investment and production sharing agreements in regards to hydrocarbon exploration, production, infrastructure, logistics and trading. Rosneft also obtained access to Kurdistan’s oil pipeline to Turkey with a capacity of 700,000 bbl/day, and is planning to extend this to over 1 million bbl/day, although no timeline has been given (Rosneft, 02.06.2017).
 
Earlier in 2017, Rosneft’s Swiss-based trading arm Rosneft Trading S.A. agreed to buy crude oil from Iraqi Kurdistan for almost two years, until 2019. The crude is to be delivered to Rosneft’s refineries in Germany. Rosneft committed to paying KRG for oil supplies in advance. According to sources quoted by Bloomberg (06.04.2017), the first advance payment was U.S. $1 billion.
 
The deal meets the commercial interests of both sides. Rosneft expanded its global portfolio and secured crude supplies for its German, and potentially new Indian, refineries. In August 2017, Rosneft finalised the takeover of Indian refiner Essar Oil. On the other hand, KRG obtained much-wanted funds to finance its costly endeavours.
 
However, as the layers of the deal begin to peel off, it has become increasingly clear that the agreement was primarily a demonstration of political legitimacy from the KRG, and a manifestation of Russian regional influence.
 
KRG politics have been in a political deadlock since 2013. In 2015 the regional parliament in Erbil was suspended, triggering an unprecedented political scenario. Since then, President Barzani has been ruling the KRG informally.  After more than a decade in power, Barzani has secured key positions in the KRG government, now controlled by loyal figures. The structure of these informal networks is key to understanding governance in the KRG, along with the drivers of the Rosneft deal.