Turkey ordered to pay $1.4bn to Iraq following Kurdistan oil arbitration case

Turkey has been ruled against by an international arbitration court in a long-standing dispute with the Iraqi government over crude oil exports from the autonomous Kurdistan region, according to Turkish sources. The court’s decision regarding the Kurdistan oil arbitration case confirms that the Iraqi national oil company SOMO is the only entity authorized to manage oil export operations through the Turkish port of Ceyhan. The Iraqi oil ministry welcomed the ruling, saying that it would discuss mechanisms for exporting Iraqi oil through the port with both the Turkish government and the Kurdistan Regional Government in Iraq to guarantee the continuation of shipments.

When did the Kurdistan oil arbitration case begin?

Iraq sued Turkey nearly nine years ago due to an oil deal between Ankara and Erbil concerning exports through the Kirkuk-Ceyhan pipeline. One source familiar with the lawsuit said that Iraqi authorities demanded $33bn from Turkey for the damage but couldn’t get that amount. Turkey was ordered to pay Iraq $1.4bn to cover the 2014-2018 period.

An industry insider said Ankara was making around $1bn as a transit country thanks to Iraqi shipments. Iraqi local media reported that Turkey halted the pumping of Iraqi crude oil through Ceyhan on Saturday morning. The case has been running for almost nine years and centers on Iraq’s claim that Turkey has violated a 1973 pipeline transit agreement by allowing crude exports from Iraq’s Kurdish region without Baghdad’s consent.

Iraq’s Kurdistan depends on crude oil exports through Turkey, and the Paris court ruling will further tighten the noose on Erbil, weakening its hand in negotiations with Baghdad over an authoritative legal framework for the country’s oil sector. The federal court also invalidated the KRG’s contracts with foreign oil firms. Baghdad has been trying to bring Kurdistan’s energy resources under federal control, and Trafigura severed ties with the KRG at the end of January, exacerbating the region’s challenges and complicating its ability to market its crude.

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