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Iraq halts northern crude exports after winning arbitration case against Turkiye

March 26, 2023 at 12:30 pm

Turkish President Recep Tayyip Erdogan (R) and Iraqi Prime Minister Mustafa Al-Kadhimi (L) hold a joint press conference after their meeting at the Presidential Complex in Ankara, Turkey [Ali Balıkçı – Anadolu Agency]

Iraq halted crude exports from the semi-autonomous Kurdistan region and northern Kirkuk fields on Saturday, an oil official told Reuters, after the country won a longstanding arbitration case against Turkiye, Reuters reports.

The decision to stop shipments of 450,000 barrels per day (bpd) of crude relates to a case from 2014, when Baghdad claimed that Turkiye violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil through a pipeline to the Turkish port of Ceyhan.

Baghdad deems KRG exports via Turkish Ceyhan port as illegal.

The International Chamber of Commerce ruled in favour of Iraq on Thursday, Iraq’s oil ministry confirmed on Saturday.

Turkiye has informed Iraq that it will respect the arbitration ruling, a source said.

Turkish shipping officials told Iraqi employees at the Ceyhan oil export hub that no ship will be allowed to load Kurdish crude without the approval of the Iraqi government, according to a document seen by Reuters.

Turkiye subsequently halted the pumping of Iraqi crude from the pipeline that leads to Ceyhan, a separate document seen by Reuters showed.

On Saturday, Iraq stopped pumping oil through its side of the pipeline which runs from its northern Kirkuk oil fields, an official told Reuters.

Iraq had been pumping 370,000 bpd of KRG crude and 75,000 bpd of federal crude through the pipeline, according to a source familiar with its operations.

“A delegation from the oil ministry will travel to Turkiye soon to meet energy officials to agree on new mechanism to export Iraq’s northern crude oil in line with the arbitration ruling,” a second oil ministry official said.

Iraq will discuss with the relevant authorities ways to ensure the continuation of oil exports through Ceyhan and state-owned SOMO’s obligations with oil companies, Iraq’s oil ministry said in a statement.

The KRG’s ministry of natural resources said the “arbitration ruling in favour of Iraq against Turkiye will not impede the relations with Baghdad’s government and dialogue to continue.”

A KRG delegation is to visit Baghdad on Sunday to discuss energy issues, the Prime Minister of Iraq’s Kurdistan region Masrour Barzani said in a tweet.

The ruling, in which Turkiye has been ordered to pay Iraq around $1.5 billion before interest, covers 2014-2018, according to a source familiar with the case who spoke on condition of anonymity because they were not authorised to speak with the media.

A second arbitration case, which the source expects to take around two years, will cover the period from 2018 onwards.

Turkish government officials did not immediately respond to requests for comment.

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