Iraq Prepares to Resume Oil Exports through Turkish Port Amidst International Arbitration
In a significant development in the global oil market, the Iraqi government has announced its readiness to resume oil exports from the Kurdistan Region and Kirkuk via the Turkish port of Ceyhan. The move comes after a hiatus induced by a ruling from the International Arbitration Court in Paris and various seismic-related issues. The pipeline, a crucial conduit for oil exports, is currently undergoing rigorous inspections and technical assessments by Turkish authorities.
The Historical Dispute
The contentious issue of the oil pipeline between Turkey and Iraq has been simmering for nearly a decade now. The controversy was sparked off when Kurdish oil was independently exported under a 2014 agreement between Ankara and Erbil, permitting oil from Iraqi Kurdistan to be sold through Turkey’s port of Ceyhan. Traditionally, the vast majority of Iraq’s federal oil exports are shipped through the southern Gulf coast.
In retaliation to the independent Kurdish exports, Iraq lodged an arbitration case with the International Chamber of Commerce (ICC), accusing Turkey of breaching a 1973 pipeline agreement by allowing oil exports from Iraqi Kurdistan without Iraq’s formal consent. The ICC’s decision in March was centered around a clause in the 1973 agreement’s annex, which stipulated that Turkey could only purchase oil via certain channels.
The Current Situation
Since the ICC ruling, the transfer of crude oil from Iraq to Turkey has been put on hold, creating a cloud of uncertainty over when and how the issue would be resolved. Despite whispers of a possible visit by Turkish President Recep Tayyip Erdogan to Iraq, there have been scant indications of an imminent agreement.
Adding to the complexities was a recent explosion near the town of Pazarcik in southeastern Turkey, which brought a temporary halt to the pipeline that transports oil from Iraq to international markets. The explosion, which triggered a significant fire, was reportedly caused by a falling electricity pole during severe weather. Kurdish rebels, known for targeting pipelines in the region in the past, have been ruled out as the cause of the incident.
Looking Ahead
According to Turkish Energy Minister Alparslan Bayraktar, the northern oil export route through Turkey is set to restart operations soon, following a thorough check on pipeline maintenance and repairs to damages caused by floods. However, oil flows are not expected to recommence before October, resulting in an estimated loss of approximately $4 billion in exports for the Kurdistan Regional Government (KRG).
Both Iraq and Turkey are actively working to safeguard their interests, both legally and diplomatically, as the situation continues to evolve. Ankara is pressuring Baghdad to retract a second arbitration case covering the period from 2018 onwards and negotiate a reduced payment. Simultaneously, Turkey is advocating for Erbil and Baghdad to arrive at a common stance and negotiate the continuation of the pipeline agreement, which is due to expire in 2026.
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