The International Chamber of Commerce arbitration body issued a decision to halt the export of crude oil from northern Iraq via Turkey, resulting in oil prices rising again to $80 per barrel.
What is the origin of the dispute? The Kurdistan Regional Government began exporting crude oil from the semi-autonomous northern region independently of the federal government in 2013, an action deemed illegal by Baghdad. The Kurdistan Regional Government exports oil through its own pipeline to the "Fish Khabor" area on the northern Iraqi border, where the oil enters Turkey and is pumped to the Turkish port of Ceyhan on the Mediterranean coast. The Iraqi federal government asserts that the state-owned oil marketing company (SOMO) is the only entity authorized to manage crude exports through the Ceyhan port.
In 2014, Iraq filed an arbitration case with the International Chamber of Commerce based in Paris to examine Turkey's role in facilitating the export of oil from Kurdistan without the approval of the federal government in Baghdad. Iraq claimed that Ankara and the Turkish state energy company (Botas) violated the terms of the pipeline agreement made between Iraq and Turkey in 1973 by transporting, storing, and loading oil from Kurdistan at the Ceyhan port without Baghdad's consent.
How has the case progressed? The International Chamber of Commerce ruled on March 23 that Iraq has the right to control the loading of oil at the Ceyhan port and to know the quantities loaded, as reported by sources to Reuters. The Chamber requested Turkey to pay 50% of the discount at which oil shipments extracted from the Kurdistan region were sold. Turkey indicated that the International Chamber of Commerce rejected four out of five claims made by Iraq and ordered Baghdad to compensate Turkey, though the amount was not specified. A source stated that Turkey also won a claim for Iraq to pay pipeline production fees. Based on all judgments, the net amount owed to Iraq from Turkey was about $1.5 billion before interest calculations, while a Turkish source noted that Iraq initially requested approximately $33 billion.
Why did Turkey halt oil exports? On March 25, Turkey stopped the flow of about 450,000 barrels per day of Iraqi oil through the pipeline to the Ceyhan port. This quantity included 370,000 barrels of crude from the Kurdistan Regional Government and 75,000 barrels from the federal government. Turkey closed the pipeline because the Iraqi federal government now has the right to control oil loading at the Ceyhan port. The Iraqi SOMO company will need to issue instructions to Turkey regarding oil shipments on vessels, otherwise, the crude oil will remain stored without being loaded anywhere.
