Turkey | Payment of 1.5 billion dollars in Baghdad for illegally exporting oil from northern Iraq
Defence Redefined
Published on 26/03/2023 at 11:03

Iraq has halted crude exports from the semi-autonomous Kurdistan region and fields in northern Kirkuk, according to Reuters, after the country won a long-running arbitration case against Turkey.

The decision to halt crude shipments of 450,000 barrels per day (bpd) is related to a 2014 case when Baghdad alleged that Turkey violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil through a pipeline to the Turkish port of Ceyhan.

Baghdad considers KRG exports through the Turkish port Ceyhan as illegal and the International Trade Court ruled in Iraq’s favor on Thursday, according to Iraq’s Oil Ministry.

Turkey has informed Iraq that it will respect the arbitration decision, while Turkish shipping officials told Iraqi officials that no ship would be allowed to load Kurdish crude without Iraqi government approval. Turkey then stopped pumping Iraqi crude from the pipeline, which leads to Ceyhan.

On Saturday, Iraq halted oil pumping from the side of the pipeline that runs from the northern Kirkuk oil fields. Iraq was sending 370,000 bpd of KRG crude and 75,000 bpd of federal crude through the pipeline before it was halted.

An Oil Ministry delegation will travel to Turkey soon to meet energy officials in order to agree on a new mechanism to export northern Iraqi crude oil in line with the arbitration ruling, an Oil Ministry official said.

Also read: Iraq | Sudani supports the indefinite presence of US troops in the country

Iraq will discuss with relevant authorities about ways to ensure continued oil exports through the Ceyhan Turkish port and the obligations of the state-owned company SOMO with oil companies, the Iraqi Ministry of Oil states.

The judgment, in which Turkey has been ordered to pay Iraq about $1.5 billion excluding interest, covers the period 2014-2018. The final hearing in the arbitration case was held in Paris in July 2022, but it took months for the arbitral tribunal secretariat and the International Trade Court to approve the decision. A second arbitration case, which is expected to last about two years, will cover the period from 2018 onwards.

The impact on the KRG’s oil production largely depends on the duration of the shutdown of the Iraqi-Turkish pipeline (ITP) and any development will cause significant uncertainty for oil companies operating in the Kurdistan region of Iraq. Halting exports through the pipeline will cause the collapse of the economy of Kurdistan in Iraq, according to a letter last year to US officials from Dallas-based HKN Energy, which operates in the region.

Turkey will need to source more crude from Iran and Russia to make up for the loss of oil from northern Iraq. Analysts have warned that companies could pull out of the region unless the environment improves.

Also read: Iran – Iraq | Sign agreement on “border protection”




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