Iraq has won a landmark case against Turkey over Kurdish oil exports, which the federal government in Baghdad has long considered illegal.
Iraq and its neighbor Turkey are locked in a nine-year dispute over the semi-autonomous Kurdistan Regional Government (KRG) oil exports, which flow from the Kurdish region to the Turkish port of Ceyhan.
In the case before the International Chamber of Commerce’s International Court of Arbitration, Iraq claimed that Turkey breached a 1973 pipeline transit agreement by allowing exports without Baghdad’s consent.
The Paris-based tribunal ruled in favor of Iraq on Thursday, according to a statement released by Iraq’s oil ministry on Saturday. Turkey was ordered to pay around $1.5 billion, according to a person familiar with the matter who asked to comment anonymously as she was not authorized to speak.
That’s far less than the sum originally requested by Baghdad, the person said.
In a statement, Iraq’s oil ministry said Baghdad, through its National Petroleum Marketing Organization (SOMO), was the “only party” that would handle exports through Ceyhan.
The ministry said it would discuss “mechanisms for exporting Iraqi oil through [Turkey’s] port of Ceyhan with the authorities concerned in the Kurdistan region as well as with the Turkish authorities” so as to guarantee the sustainability of exports and compliance with international commitments.
The Iraqi government and Turkish Energy Ministry did not immediately respond to requests for comment.
“Our recent agreements with Baghdad allowed us to overcome the arbitration decision,” KRG Prime Minister Masrour Barzani said. tweetedadding that a delegation will be in Baghdad for talks on Sunday.
Iraq is OPEC’s second largest producer, exporting about 3.3 million barrels a day. Of these, Baghdad sends 75,000 bpd to Ceyhan from Kirkuk. The ARK does not publish its production figure but industry experts estimate it at around 440,000 bpd, most of which is exported.
Iraq as a whole accounted for 27% of Turkey’s imports of petroleum and other petroleum products in December 2022, behind only Russia, according to the most recent data from Turkey’s Energy Market Regulatory Authority.
Enver Erkan, chief economist at Istanbul-based financial services group Dinamik Yatırım Menkul Değerler, said the ICC ruling would make Turkey “more dependent on Russia” and increase the country’s energy import bill.
Oil exports have been an economic lifeline for the Kurdistan region of Iraq. For years, the KRG has exploited the ambiguity of Iraq’s constitution to export crude and retain revenues in order to maintain some financial independence from Baghdad.
Tensions between the federal government and the KRG blazed last year as Baghdad sought to halt KRG exports. This follows a landmark ruling by the Iraqi Federal Supreme Court in 2022, which declared Iraqi Kurdistan’s energy industry unconstitutional.
These tensions preceded the presidency of Iraqi Prime Minister Mohammad Shia al-Sudani, who tried to ease them.