The German government has refused to be drawn into the row over RWE's new gas agreement with the Kustdistan Regional Government.
The Iraqi oil ministry has said the agreement is illegal because the country's oil and gas are federal resources to be administered centrally.
Asked about the dispute, a spokesman for the German economy ministry said: "RWE is a consortium member of the Nabucco project, which is of central importance for the diversification of European gas supply. RWE is responsible for its own business decisions."
Germany and RWE hope the project can go forward but are reportedly taking a cautious line.
"It is not up to the German government to judge the legality of the aforementioned contract," Stefan Bredohl told a regular government news conference in Berlin.
In a statement, RWE said, "we are very much aware that we have to speak with all relevant authorities in Iraq, and are taking steps now to prepare for the dialogue with the government in Baghdad".