ERBIL, Kurdistan Region - Iraq claimed last month that it had won the oil export arbitration case against Turkey, and while Ankara has been ordered to pay around $1.5bn in damages, Baghdad must also pay compensation for the cases it lost as stipulated by the court ruling seen by Rudaw English.
The Paris-based court ruling ordered Turkey to pay over $1.9bn in compensation to Iraq for buying oil from the Kurdistan Region at a discounted price and for charging higher transportation fees. Baghdad “claimed that the Respondent [Turkey] has been overpaid by the KRG for the transportation of oil,” the case file read.
In the case, Iraq had argued that the Kurdistan Regional Government (KRG) had paid transportation fees to the Turkish state-owned Turkish Energy Company. Baghdad also claimed that the KRG sold oil at a discounted price to what it would have been sold by Iraq’s State Oil Marketing Organization (SOMO).
In turn, Iraq is liable to pay over $527 million to Turkey in reimbursement claims related to equipment and personnel. The court “ORDERS the Respondent [Turkey] to pay forthwith to the Claimant [Iraq] the sum of USD 1,471,390,486.05 after set off of the amounts” before interest.
The ruling states that “the Respondent [Turkey] is obligated to act in accordance with instructions given by the Claimant [Iraq] in operating the Turkish portion of the Pipelines, as well as the related storage and loading facilities at Ceyhan,” and that Iraq has full authority over the utilization of the facilities.
Additionally, the Paris-based court blamed Turkey for violating Iraq’s “persistent and genuine” instructions and accused Ankara of willingly violating Baghdad’s position by loading oil coming through the pipeline on the instructions of the KRG and not Iraq’s Ministry of Oil.
Arbitration court ruling
The International Chamber of Commerce (ICC) arbitration court ruled late March 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.
However, Turkey’s Ministry of Energy and Natural Resources then issued a statement arguing that the court had in fact rejected four of Iraq’s five claims, without mentioning what these were, adding that Iraq should in fact pay Turkey compensation.
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.
With Kurdish authorities scrambling to intensify negotiations following the arbitration court ruling, Erbil and Baghdad struck an agreement in early April to resume the Kurdistan Region’s oil exports during Kurdistan Region Prime Minister Masrour Barzani’s visit to Baghdad to meet with Iraqi premier Mohammed Shia’ al-Sudani.
After the deal was signed, Sudani said that the Region was exploited by oil companies to enter unbalanced deals due to unfavorable conditions in 2014 with the war against the Islamic State (ISIS) at its peak.
However, sources told Reuters last week that KRG oil exports to Turkey under Iraq’s SOMO have yet to be resumed as Baghdad is still waiting for a response from Ankara to give pipeline operators instruction to restart flows.
Erbil’s independent oil sector has long been a source of tension between the Kurdistan Region and federal Iraq with Baghdad insisting the state has sole power to market the country’s oil and the KRG arguing the constitution gives them the authority.
