The International Chamber of Commerce (ICC) arbitration court ruled on Thursday that Turkey had breached a 1973 pipeline agreement that obliges the Turkish government to abide by instructions issued by Iraq regarding the transport of crude oil exported from Iraq. Iraq welcomed the ruling, claiming to be triumphant.
Turkey’s Ministry of Energy and Natural Resources said in a statement late Tuesday that the court has rejected four of Iraq’s five claims without mentioning them.
“They have accepted most of Türkiye's claims and have ruled that - as a result of its violations - Iraq [should] pay compensation to Türkiye,” claimed the ministry.
In 2014, the Kurdistan Regional Government (KRG) began using the pipeline to send its crude oil to Turkey’s Ceyhan port, despite opposition from Baghdad. The ICC ruling sees the boarding of the KRG’s oil in Turkey as a violation of the 1973 agreement. Following the decision, Turkey informed Iraq that Ankara would no longer allow KRG crude to be loaded onto ships at Ceyhan port without permission from Baghdad.
The process of oil exportation from the Kurdistan Region was halted on Friday and is yet to be resumed.
“The case in question is essentially a result of the ongoing dispute on the right to manage oil resources between the Federal Government of Iraq and the Kurdistan Regional Government, a constitutional part of Iraq. Turkiye has always respected the unity and territorial integrity of Iraq and has been working relentlessly for political and economic stability of both Iraq and the region,” noted the Turkish ministry.
The production of around 450,000 barrels of oil per day in the Kurdistan Region has been jeopardized as a halt in exports has forced international oil companies (IOCs) operating in the region to store produce rather than allow it to flow to the pipeline – an inadequate measure as storage capacity is limited.
An unnamed Turkish source told Middle East Eye on Tuesday that Turkey will eventually pay nothing from its pocket because as per a long-lasting agreement between Erbil and Ankara “any award would be paid by the KRG.”
KRG has sent a delegation to Baghdad twice since the ICC ruling was publicized but the outcome of the discussions remains unclear.
The Kurdish government is heavily reliant on its revenues and an inability to sell its crude will severely impact its already struggling economy. The government has failed for years to pay its over a million civil servants on time and in full.
The US has urged Turkey and Iraq to resume KRG’s oil exportation process, and Iraq has announced that it “fully” supports the region’s exportation of oil as it might negatively affect the economy of the country.
Reacting to the verdict, the KRG’s Ministry of Natural Resources said it would not affect ongoing talks with the federal government, adding that they have reached a preliminary agreement on budget, oil and gas issues and will continue to pursue the matter until a constitutional solution is reached.
“The French court’s verdict in favour of the Iraqi government against Turkey will not be an obstacle in front of the ties with Baghdad’s government,” reads a statement from the ministry.
