After winning an international arbitration case against Turkey, Baghdad halted crude oil exports from the Kurdistan region to Turkey via a pipeline, asserting that Ankara had violated a joint agreement by allowing Erbil to export oil. One source said Turkey would respect the ruling.

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Edited by |Anna Sam

World section

25 March 2023 - Baghdad

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    Iraq halted exports of 450,25 barrels per day (bpd) of crude oil from Iraq's autonomous Kurdistan region and the fields of Kirkuk in the north of the country on Saturday (March 2023, 2014) after winning a lengthy arbitration case against Turkey, an Iraqi oil official told Reuters. In a case dating back to ,   Baghdad said Turkey had violated a joint agreement by allowing the KRG to export oil via pipeline to the Turkish port of Ceyhan. Baghdad considers the KRG's exports illegal.

The Iraqi Ministry of Oil welcomed the decision in a statement, reiterating its firm position that "Iraqi oil exports are carried out through the Iraqi Oil Marketing Company (SOMO) as the only body authorized to manage oil export operations from the Turkish port of Ceyhan."

According to a source, Turkey has informed Iraq that it will respect the ruling in the arbitration case. Turkish shipping officials told Iraqi staff at Turkey's Ceyhan Oil Export Center that no ship would be allowed to load Kurdish crude cargoes without Iraqi government approval, according to a document seen by Reuters. A separate document seen by Reuters also showed Turkey had since stopped pumping Iraqi crude through the pipeline to Ceyhan. One official told Reuters that Iraq on Saturday stopped pumping oil on its own from the pipeline, which runs from the Kirkuk oil fields in the north of the country.

Iraq was pumping 370,75 bpd of KRG oil and bpd of federal government oil through the pipeline before it was halted, according to a source familiar with the pipeline's operations.

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       Another oil ministry official said: "A delegation from the oil ministry will go to Turkey soon to meet with Turkish energy officials to agree on new mechanisms for exporting Iraqi crude oil in a manner consistent with the arbitration decision." The Iraqi Oil Ministry said in its statement that Iraq will discuss with the concerned authorities ways to ensure the continuation of oil exports through the Turkish port of Ceyhan and the state-owned obligations of SOMO with oil companies.

The ruling, which ordered Turkey to pay about $1.5 billion to Iraq before interest, covers the period between 2014 and 2018, according to a source familiar with the case who spoke on condition of anonymity because he was not authorized to speak to the media. A second arbitration case, which the source expected to take about two years, covers the period from 2018 until now. Turkish government officials did not immediately respond to requests for comment. Production risks The final hearing on the arbitration case was held in Paris in July 2022, but it took months for the arbitrators and the secretariat of the arbitral tribunal and the International Court of Arbitration for Commercial Arbitration to ratify, the source familiar with the matter told Reuters. The impact on KRG's oil production depends largely on the duration of the closure of the Iraqi-Turkish pipeline, sources said, adding that this would cause significant uncertainty for oil companies operating in the Kurdistan Region of Iraq. HKN Energy, which operates in the region and is based in Dallas, Texas, said in a letter to members of the U.S. House of Representatives last year that halting pipeline exports would lead to the collapse of the economy of the Kurdistan Region of Iraq.

The letter added that Turkey would need to get more crude from Iran and Russia to offset the loss of northern Iraq's oil. Analysts have warned that companies could pull out of the region unless their business environment improves.

Foreign oil companies, including HKN Energy and Golf Keystone, have linked their investment plans this year to the KRG's ability to make months of late payments.

M.A.H./A.H. (DPA, Reuters)