Oil firms operating in the Kurdistan Region have stopped production or reduced output and diverted it into storage after a Paris arbitration court last week ruled that Turkey had violated an agreement with Iraq by allowing the Kurdistan Region to begin independent oil exports in 2014.
“We have urged the governments of Turkey and Iraq to resume the flow of oil through the Iraq-Turkey pipeline,” a US State Department official told Rudaw on Friday.
Prior to the court ruling, the Kurdistan Region was exporting about 450,000 barrels per day. The stoppage contributed to a rise in oil prices.
“Disruptions to the global energy supply would not serve anyone's interest,” said the State Department official.
The Kurdistan Region’s independent oil exports have been a constant source of tension with Baghdad. Kurdish officials, however, sounded optimistic that recent headway on a federal oil and gas law could mean that the stoppage would be short-lived.
“Our recent understandings with Baghdad have laid the groundwork for us to overcome the arbitration ruling today,” Kurdistan Region Prime Minister Masrour Barzani tweeted after the court’s decision was announced.
The United States has a large role in reaching a resolution between Erbil and Baghdad, according to Matthew Zais, vice president of HKN Energy, which has operations in the Kurdistan Region.
“I think that the US is going to have to take a firm stand on a resolution that does two things for the industry. One is that [it] preserves contract sanctity and the second is surety of payment. We have contracts and we’ve been operating in the Kurdistan Region for 15 years and so any solution beyond the current impasse has got to protect both of those things,” Zais told Rudaw on Thursday.
The Kurdistan Region owes some $6 billion to oil firms, according to Reuters.
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