The government of Prime Minister Nouri al-Maliki will no doubt do all it can to prevent the Kurds, who have their own semiautonomous enclave in three of Iraq's northern provinces, exporting oil independently of the federal authority.
But the stakes are high all round and Baghdad may be the eventual loser.
Relations between Baghdad and the Kurdish Regional Government in Erbil have been strained for several years over the Kurds' long-cherished dream of statehood.
In recent months, this led to an armed stand-off along Kurdistan's southern boundary, centered on the disputed city of Kirkuk and its oil fields which contain around one-third of Iraq's recently stated reserves of 150 billion barrels. The Kurds claim this is historically their turf.
That oil is separate from the 45 billion barrels that lie under KRG-controlled territory. Baghdad considers the Kirkuk oil belongs to the state and is unlikely to relinquish it without a fight.
But the legal position is blurred because an Oil Law designed to regulate the industry and determine revenue-sharing has been snarled in Iraq's fractious Parliament since 2007, with little sign it'll ever make the statute book.
If the KRG, encouraged by Turkey which wants to become the key east-west energy hub, goes ahead with the 300,000-barrel-a-day export pipeline through Turkey to the Ceyhan terminal in the eastern Mediterranean, it will have potentially important regional consequences.
Ankara's drive to gain access to the Iraqi Kurds' oil is linked to its efforts to restore Turkey's regional supremacy.
That includes pacifying its own Kurdish minority which has been fighting a separatist campaign since 1984. By linking with Iraq's Kurds, Ankara expects the KRG to stop helping Turkey's outlawed Kurdistan Workers Party, known by its Turkish-language initials PKK.
Turkish Prime Minister Recep Tayyip Erdogan's already negotiating a peace settlement with the PKK to end a war that has killed 40,000 people.
That would stabilize Turkey and allow Erdogan to transform his country into the regional power it was during the 400-year Ottoman Empire that ended after Turkey's defeat in World War I.
So Erdogan isn't going to be easily deflected by Maliki's ire -- even if, in one of the great ironies of regional politics, he has to help Iraq's Kurds achieve some form of statehood while convincing his own Kurdish separatists they should settle for less.
That's a neat trick if he can pull it off and right now all the indications are that things are going Erdogan's way.
The PKK's imprisoned leader, Abdullah Ocalan, seems eager for a settlement and in March called a cease-fire in the PKK's war. That's the strongest signal yet the process quietly initiated by Turkey's intelligence chief in October is gathering momentum.
If Erdogan can get his hands on the Iraqi Kurds' oil, a mouthwatering prospect for energy-poor Turkey, he can stop paying Russia around $2 billion a month for oil and gas.
The closer he gets to a peace deal with the PKK, the more he's going to want the Kurds' oil for his plans to restore Turkey's status in a region in upheaval.
Turkey's been quietly extending its economic and political influence in Iraqi Kurdistan for some time.
The Financial Times estimates that already "about one out of every two foreign businesses in the north of Iraq is Turkish-owned. But the economic interdependence between Turkey and the region could go much further.
"Ankara has been negotiating a large-scale deal in which state-owned companies could take big stakes in the oil and gas fields in the region, despite furious objections by Baghdad and warnings from the United States."
Turkey's energy strategy could even embrace the Kurdish enclave in war-torn Syria.
Most of Syria's oil reserves are there and the region borders Iraqi Kurdistan, pointing to a possible extension of the energy deals with Erbil.
And there's more. With Israel and Turkey apparently moving toward ending a three-year diplomatic rupture, there's growing talk of an undersea pipeline from Israel's newfound offshore gas fields to Turkey for export to Europe, as eager as Turkey to end its dependence on Russian gas.
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