Iraq needs to resolve billions of dollars in financial claims with Turkey before resuming oil exports via a Mediterranean port, threatening more delays in bringing almost half a million barrels a day back to the market.
(Bloomberg) — Iraq needs to resolve billions of dollars in financial claims with Turkey before resuming oil exports via a Mediterranean port, threatening more delays in bringing almost half a million barrels a day back to the market.
On Tuesday, Iraqi Prime Minister Mohammed Shia Al-Sudani said he hoped flows of the country’s crude from Ceyhan could restart this week after being blocked by Turkey in late March.
But while Baghdad has struck a temporary deal with officials from Iraq’s Kurdish region to get the oil moving again, it’s yet to get Turkey’s approval.
Ankara will likely want to negotiate an international legal ruling that it owes Iraq $1.5 billion related to past exports from Ceyhan.
“This could drag on for months,” Robin Mills, founder of Dubai consultancy Qamar Energy, said. “The sticking point is the Turks.”
The Turkish government didn’t immediately respond to a request for comment.
The dispute is hurting Erbil and Baghdad alike, with oil worth hundreds of millions of dollars having been held back. While small in the context of the global market, it’s also another disruption for traders already grappling with OPEC+’s decision to cut production again and an outage in Nigeria.
Brent crude is down almost 4% this week to below $84 a barrel, though the market will tighten later this year as demand outpaces supply, according to analysis from Goldman Sachs Group Inc. to the International Energy Agency.
Paris Ruling
Turkey halted flows on the pipeline on March 25 after an international business tribunal said oil from the semi-autonomous Kurdish region shouldn’t have been shipped from Ceyhan without Baghdad’s approval.
Iraq brought the case against Turkey as part of a broader attempt to rein in the Kurdistan Regional Government, which ultimately wants independence, and take more control over its resources.
Baghdad filed a petition in a US court earlier this month to enforce the decision from the Paris-based International Chamber of Commerce, including the $1.5 billion award. It also has a separate arbitration case against Turkey at the ICC.
Iraq and the KRG have wrangled for nearly a decade over revenues from crude produced in the region. The federal government says its oil-marketing company, known as SOMO, should handle Kurdish shipments from Ceyhan.
The KRG exports as many as 400,000 barrels a day from Ceyhan, while the figure for the federal government is 75,000 barrels.
Northern Iraq accounts for around 10% of the 4.4 million barrels a day pumped in the country. Most of that oil is exported from southern terminals on the Persian Gulf.
Oil is the lifeblood of the Kurdish economy, accounting for more than half the KRG’s revenues.
The shares of Western oil companies operating in Kurdistan, including Norway’s DNO ASA and London-listed Genel Energy Plc, have whipsawed since the shutdown started. Most firms have closed wells because their storage space is running low.
“This damage inflicts everyone,” said Al-Sudani, the Iraqi prime minister.
–With assistance from Firat Kozok and Selcan Hacaoglu.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.