Iraq’s Northern Oil Export Route Through Turkiye Set to Resume Operation Soon
The northern oil export route in Iraq, which passes through Turkiye, is expected to be ready for operation soon. The Turkish energy minister, Alparslan Bayraktar, announced that the survey of the oil pipeline has been completed and it will soon be “technically” ready for operation.
Background
The flow of oil through Iraq’s northern export route was halted by Turkiye on March 25. This decision came after an arbitration ruling by the International Chamber of Commerce (ICC) ordered Ankara to pay damages to Baghdad for unauthorized exports by the Kurdistan Regional Government (KRG) between 2014 and 2018. Turkiye took this opportunity to conduct maintenance work on the pipeline, which passes through a seismically active zone and had also been damaged by floods.
Current Status
Bayraktar stated that the independent surveyor has completed their assessment and is preparing their report. Although he did not provide a specific date for the resumption of oil flows, it is expected that operations will restart in October. This delay has resulted in significant losses for the KRG, with approximately $4 billion in lost exports. Additionally, Turkiye claims that Iraq owes $950 million as a result of the ICC arbitration ruling, after deducting damages that Turkiye has to pay Iraq.
Legal Proceedings
In response to the arbitration ruling, Turkiye plans to file a “set-aside case” in the Paris court. This move aims to challenge the ruling and protect Turkiye’s interests. On the other hand, Iraq has initiated an enforcement case against Turkiye in a US federal court to enforce a $1.5 billion arbitration award.
Finding an Amicable Solution
Bayraktar emphasized the importance of finding an amicable solution between the two neighboring countries. While Turkiye wants to protect its interests from a legal perspective, it also acknowledges the need for a mutually beneficial resolution. Turkiye hopes that Baghdad will withdraw a second arbitration case covering the period from 2018 onward and engage in negotiations for a reduced payment. Furthermore, Turkiye urges both Irbil and Baghdad to reach a common position and negotiate the extension of the pipeline agreement, which is set to expire in 2026.
The Impact on Global Oil Supply
The northern oil export route through Turkiye plays a significant role in global oil supply, contributing approximately 0.5 percent of the total supply. The halt in operations has not only affected the economies of Iraq and Turkiye but has also had implications for the global oil market. As such, the resumption of oil flows will be a welcome development for all stakeholders involved.
Conclusion
The completion of the survey for the northern oil export route through Turkiye is a positive step towards resuming operations. While the exact date for the restart of oil flows remains uncertain, it is expected to occur in October. Both Iraq and Turkiye have legal cases pending against each other, but they recognize the importance of finding a mutually beneficial solution. The resumption of the pipeline will not only benefit the economies of both countries but will also contribute to global oil supply. As the situation continues to unfold, all eyes will be on the progress made in negotiations and the eventual restart of operations.