Kurdish Oil Exports in Limbo as Ankara ignores Baghdad’s request

Conflicting details and uncertainty cloud the potential resumption of oil exports from the Kurdistan Region through the Iraq-Turkey Pipeline (ITP), following news on Thursday that Baghdad has instructed Ankara to switch on the oil flow.

Speaking to the Kurdistan Democratic Party (KDP)-affiliated Rudaw TV, the Kurdistan Regional Government (KRG)’s acting minister of natural resources, Kamal Muhammed, denied reports that oil exports from the Kurdistan Region will resume on Saturday.

“No, I also heard that information in the media. I also asked the Iraqi oil minister about this, and he told me that they are ready to resume exports, but a date has not been set,” Muhammed responded when asked about the matter.

The export of over 400,000 barrels of oil per day has been at a standstill since March 25, following a verdict by the ICC International Court of Arbitration in Paris favoring Iraq over Turkey.

Ankara, which had previously facilitated independent oil exports from KRG without Iraq’s approval, was handed a bill of $1.5 billion in damages for violating a 1973 pipeline transit agreement.

On Thursday, the Ministry of Natural Resources (MNR) issued a statement saying that the necessary procedures to resume oil exports had been successfully completed. The MNR further mentioned that Iraq’s state-marketer, SOMO, had officially instructed Turkey to recommence oil export via the Kirkuk-Ceyhan pipeline.

Iraqi Oil Minister Hayan Abdul Ghani confirmed these developments in a brief statement later on Thursday, indicating SOMO had “informed the Turkish company Botas of the resumption of export operations… as of Saturday May 13.”

Nevertheless, Abdul Ghani was quoted today noting that Turkey has not yet responded to Baghdad’s request.

Following the ICC ruling by two weeks, Baghdad and Erbil reached a preliminary agreement on the recommencement of oil flow. Ever since, both governments have been busy ironing out the specifics, including updating agreements with oil traders.

Muhammed confirmed today that the oil sale contracts have been updated, yet they remain with the same companies for the same quantity of crude oil. The change lies in the price at which the oil is sold.

Owing to a variety of factors, such as the nature of the crude oil and the political risk it had carried over the years, KRG has been selling its oil at a price lower than SOMO. As per auditing firm Deloitte, in 2022, KRG sold its crude on average at around $10 less per barrel of oil.

The suspension of oil export has driven the Kurdistan Region’s already precarious budget to near-zero levels, leaving Erbil no option but to await funds from Baghdad to be able to disburse public sector salaries and pensions.

Moreover, the ICC ruling has cast a shadow over Erbil’s ambitions for greater financial independence.