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Iraq's crucial northern oil export route through Turkey is on the brink of resuming operations following extensive maintenance and the resolution of legal disputes, according to the Turkish Energy Minister, Alparslan Bayraktar.
The interruption of oil flows through Iraq's northern export route into Turkey dates back to March 25 when an arbitration ruling by the International Chamber of Commerce (ICC) instructed Ankara to compensate Baghdad for unauthorized exports conducted by the Kurdistan Regional Government (KRG) between 2014 and 2018. As a response, Turkey initiated essential maintenance work on the pipeline, which traverses a seismically active region and had suffered damage due to floods.
The latest update indicates that a comprehensive survey of the oil pipeline has been successfully completed, rendering it "technically" ready for operation. However, Bayraktar did not specify a precise date for the resumption of oil flows, revealing this information during an embargoed press briefing held by the Ministry of Energy.
The pause in oil exports through this crucial route has significant implications, as it contributes approximately 0.5 percent of the global oil supply. Sources suggest that oil flows are not likely to restart before October, causing a substantial financial setback for the KRG, which stands to lose an estimated $4 billion in lost exports.
Turkey is also embroiled in a legal battle with Iraq, claiming that Iraq owes $950 million as a result of the ICC arbitration ruling, once damages that Turkey has to pay to Iraq are accounted for. In addition, Ankara intends to file a "set-aside case" in a Paris court, further complicating the legal landscape.
Bayraktar emphasized the need for an amicable solution between the two neighboring countries while safeguarding their respective interests from a legal perspective. He acknowledged the possibility of facing more court challenges in the future but reassured that the pipeline is technically prepared for operation.
Beyond the legal disputes, Turkey aims for Baghdad to withdraw a second arbitration case related to the period from 2018 onward and seeks to engage in negotiations for a reduced payment. Additionally, Turkey is advocating for Irbil and Baghdad to reach a consensus on the continuation of the pipeline agreement, which is set to expire in 2026.
The developments surrounding the resumption of Iraq's northern oil export route through Turkey reflect a complex interplay of legal, economic, and diplomatic considerations as both countries navigate their shared energy interests.