By Sarah Kent

LONDON—Senior officials from Iraq’s semiautonomous Kurdish region said Wednesday they want to reset acrimonious political and economic relations with Baghdad with both Kurds and the Shiite-led national government facing serious threats from Islamic State.

Negotiations between Baghdad and the Kurdistan Regional Government have revived in recent weeks, amid heavy U.S. diplomatic pressure to patch up the decadeslong political dispute that has seen the Kurds press for more control over the immense oil resources in traditional Kurdish lands inside Iraq.

In a letter read aloud Wednesday at the start of an energy conference in London, Kurdish Prime Minister Nechirvan Barzani declined to make the Kurdish traditional appeal for outright independence. Instead, he made an appeal for accommodation with Baghdad, saying in the letter that he felt the new government there had “pressed the reset button” with the KRG.

The infighting between the Kurds and the central government, which controls budget revenues and much of the nation’s oil sales, has nearly bankrupted the Kurdish government and hobbled international efforts to fight the Sunni jihadist movement Islamic State, which has seized territory in Iraq and Syria with the aim of building a new caliphate there.

But in a step toward cooperation against a common foe, an interim agreement reached between the central government and the Kurds this month states that Baghdad would take control of a portion of oil exports from fields located in the Kurdish territories and restart frozen budget payments to the region starting in 2015.

The deal has set the stage for further negotiations, but the Kurdish minister of natural resources cautioned that many hurdles still exist.

“There is nothing guaranteed apart from good will and the fact everyone recognizes there is a win-win opportunity,” said minister Ashti Hawrami.

The KRG is also pursuing closer ties with its neighbors. A deal with Turkey last year facilitated independent oil exports there, and Prime Minister Barzani said in his letter that the semiautonomous region is also continuing to increase its ties with Iran.

Mr. Hawrami said he is hopeful that a political solution can be found for outstanding areas of contention with Baghdad, including the KRG’s right to export oil independently, the issue of revenue sharing and the KRG’s share of the Iraqi budget.

The KRG has ramped up oil exports this year, in defiance of Baghdad, with volumes from Kurdish field to the Turkish port of Ceyhan now at almost 400,000 barrels a day, the minister said.

A wider agreement with Baghdad over the control of oil exports and revenue could facilitate a quick jump in exports, Mr. Hawrami said. The interim deal in place could help exports potentially double by the end of the first quarter of next year.

Such a jump would be positive news for Iraq as a whole, as it struggles to make up budget shortfalls amid the decline in global oil prices. Some of Iraq’s oil fields are under the control of Islamic State and others are shut.

Additional Iraqi production is seen as crucial to meeting global oil demand in the coming years, but the government’s previous predictions of 9 million barrels a day by the end of the decade were viewed by many as overly optimistic.

“We have to recalculate the amount we can produce, the amount we can export,” Iraq’s Deputy Prime Minister Rowsch Shaways said on the sidelines of the conference.

The World Street Journal