Iraq halts northern crude exports after winning arbitration case against Turkey – ET Auto

Turkey subsequently halted the pumping of Iraqi crude from the pipeline that leads to Ceyhan.

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 Turkey.

The decision to stop shipments of 450,000 barrels per day (bpd) of crude relates to a case from 2014, when Baghdad claimed 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 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.

Turkey 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.

Turkey 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 Turkey 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 Turkey 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 Turkey 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.


The final hearing on the arbitration case was held in Paris in July 2022, but it took months for the arbitrators, the secretariat of the arbitration court and the International Chamber of Commerce to approve the verdict, the source familiar with the process said.

The impact on the KRG’s oil production depends heavily on the duration of the Iraqi Turkish Pipeline (ITP) closure, sources said, adding this would cause significant uncertainty to oil firms operating in the Kurdistan Region in Iraq (KRI).

A cessation of exports through the pipeline would trigger a collapse of the KRI economy, according to a letter last year to U.S. representatives from Dallas-based HKN Energy, which operates in the region.

Turkey would need to source more crude from Iran and Russia to make up for the loss of northern Iraqi oil, the letter said.

Analysts have warned that companies could withdraw from the region unless the environment improved.

Foreign oil firms, including HKN Energy and Gulf Keystone, have linked their investment plans this year to the reliability of KRG payments, which face months of delays.

  • Published On Mar 26, 2023 at 10:51 AM IST

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