Source of photo: medyanews.net

Executive summary: On April 4, 2023, Iraqi Prime Minister, Mohammed Shia Al-Sudani, and the Prime Minister of the Kurdistan Regional Government (KRG), Masrour Barzani, agree to temporarily resume oil exports from the Kurdistan region in a joint press conference, after the success of an arbitration case against Türkiye.

On April 4, 2023, the two leaders held a press conference, in which they expressed their agreement to reopen the export of oil from the Kurdistan semi-autonomous region in Iraq through the Iraq-Türkiye oil Pipeline.

The decision to resume the export of oil is only temporary, until the approval of the national budget, as the stoppage of oil exports to Türkiye greatly affect the budget predictions for the following period. Not only does the agreement improve the budget calculations, but it also strengthens the relation between Kurds and Iraqis.

On March 23^rd, the International Chamber of Commerce (ICC), located in Paris, France, ruled in favour of Iraq, in an arbitration case dating from 2014. The case was brought upon the ICC, as the Iraqi government claimed that Türkiye has breached the Iraq-Türkiye Pipeline agreement of 1973, by allowing the BOTAS Petroleum Pipeline Corporation to import oil from the Kurdish region in Iraq, without the authorisation of the Iraqi authorities, in particular of the State Organisation for Marketing of Oil (SOMO).

Two days after the ICC ruling, the Government in Baghdad halted the export of oil produced in the Kurdish region to the Turkish port of Ceyhan on the Mediterranean, severely hurting the global oil supply, around 0.5% of the global oil production, raising the price of oil to 80 USD per barrel, and also disrupting the local Kurdish economy, which is heavily reliant on the revenues generated by the trading of oil and gas.

Prior to the stoppage, Iraq was exporting roughly 3.3 million Barrels of Crude Oil per day, out of which 450,000 were comprised of Kurdish Crude Oil. Mohammed Shia Al-Sudani hopes that temporarily resuming the export of oil produced in the Kurdish territory would avoid a budgetary deficit.

The agreement seeks to enable the Kurdish Autonomous Region to resume its exports of oil, under new circumstances, stating that both SOMO and the Kurdish region’s Ministry of Natural Resources will manage the flow of oil, but the revenues will be managed by the KRG, into an account which allows the access to the Iraqi government for audits.

The damages of the halting in production were seen throughout the Kurdish semi-autonomous region, as DNO (Norwegian oil and gas operator) stopped production at its Northern Iraqi wells, the Kurdish Regional Government has been struggling to pay the salaries of civil servants.

With more control over the Kurdish produced oil in the Iraqi’s Government hands, the region can seek more stability between the two sides, as well as the opportunity for better budgetary spending in both regions, with an influx of cash provided when Türkiye proceeds to pay the biding award decided by the ICC, amounting to 1.46 Billion USD before interest.

References:

Baghdad, Erbil agree to resume Kurdistan’s oil exports – Iraqi News

Iraq, Kurdish region sign accord to resume oil exports (france24.com)

Iraq’s gov’t signs deal with KRG to resume oil exports | Oil and Gas News | Al Jazeera

Iraqi federal and Kurdish officials reach oil export deal | AP News

The Urgent U.S. Role in Restarting Iraq-Türkiye Oil Exports | The Washington Institute

Iraq halts northern crude exports after winning arbitration case against Türkiye | Reuters