Tuesday, November 7, 2023

Iraq-Turkey Oil Flows Unlikely to Resume Until October


Iraqi Oil Flows to Turkiye Expected to Resume in October

After a delay in the scheduled visit of Turkish President Tayyip Erdogan to Baghdad in August, Iraqi oil flows to Turkiye are not expected to resume before October, according to sources. The halt in oil exports from Iraq to Turkiye was initiated on March 25 following an arbitration ruling by the International Chamber of Commerce (ICC), which ordered Ankara to pay Baghdad $1.5 billion in damages for unauthorized exports by the Kurdistan Regional Government (KRG) between 2014 and 2018.

Iraq petitioned a US federal court in April to enforce the ICC arbitration award. However, the lack of progress in resolving this litigation was one of the reasons behind the postponement of Erdogan’s visit to Baghdad in August, as stated by sources. Despite the delay, Erdogan still intends to visit Baghdad and hopes to sign an agreement. However, concrete steps expected by Iraq have not been taken yet, resulting in slow progress.

Ankara is seeking a halt to the US litigation as one of the steps towards resolving the issue. As a result, Erdogan’s visit is now scheduled for October. However, there is no definite timeline from Ankara regarding the Turkish president’s visit, according to an Iraqi foreign ministry official. The official stated that the visit could take place at the end of this month or more likely in October, depending on the successful development of talks on energy issues, which require more time due to multiple thorny issues.

Energy officials from both Baghdad and Ankara are currently engaged in complicated discussions. The resumption of oil flows is considered the most difficult question in these talks, according to an Iraqi oil official with knowledge of the negotiations. The official added that it is unlikely that flows will restart this month.

In addition to resolving the issue of oil flows, Turkiye has also sought a compromise to reduce the damages it needs to pay to Iraq under the ICC arbitration. Two Iraqi oil officials close to the talks have revealed that Turkiye wants Iraq to drop a second arbitration case on exports covering the period from 2018 onwards. However, the Turkish energy ministry has not provided any immediate response or comment on the matter.

The Kurdistan Regional Government (KRG) has suffered significant financial losses due to the halt in oil flows to Turkiye’s Ceyhan Port through a pipeline. It is estimated that the KRG has lost approximately $4 billion since the halt, according to sources familiar with the matter.

In conclusion, the resumption of Iraqi oil flows to Turkiye is expected to take place in October. The delay in Erdogan’s visit to Baghdad was caused by a lack of progress in resolving the US litigation related to the ICC arbitration award. Both countries are engaged in complex discussions, with the resumption of oil flows being the most challenging aspect. Turkiye is also seeking a compromise to reduce the damages it needs to pay to Iraq. The halt in oil flows has resulted in significant financial losses for the KRG.

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