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Turkey is attempting to broker a deal between the central Iraqi government and the semi-autonomous Kurdish administration over how to resume Iraqi crude-oil exports via its territory, according to Turkish officials.
Turkey halted flows through a twin-pipeline in March after an arbitration court ordered it to pay about $1.5 billion in damages to Iraq for transporting oil without Baghdad’s approval. Ankara has no intention of paying the fine and is asking the Kurds to pay it to Baghdad as they were the benefactors, the officials said.
A compromise over competing demands from Iraq and the Kurdish administration over revenue-sharing from oil exports is being sought, the officials said. The two sides have been quarreling for years over rights to Kurdistan oil sales, part of Baghdad’s long-running attempt to rein in the semi-autonomous region.
Turkey sees the $1.5 billion fine handed down by Paris-based International Chamber of Commerce as Iraq’s internal matter and wants the KRG to settle it with Baghdad. Turkey’s loss of income from the suspension in oil flows — estimated at just over $1 billion a year — pales in comparison with what Iraq is losing, leading Turkish authorities to believe Baghdad and Erbil will have a strong motivation to find a solution to the stalemate, a senior official with direct knowledge of Turkey’s stance said, asking not to be identified, citing the sensitivity of the matter.
Officials from the Baghdad government didn’t comment, while the KRG declined to comment.
Turkey’s Foreign Minister Hakan Fidan discussed energy, economic and security relations both with the president and prime minister of the Kurdish government in Erbil on Thursday, after holding talks with his Iraqi counterpart in Baghdad earlier in the week. Turkish Energy Minister Alparslan Bayraktar also traveled to Erbil and has had discussions with Iraqi Oil Minister Hayyan Abdul Ghani.
Repairing Ties
Turkey is reaching out to Baghdad to repair ties after years of estrangement as part of a reset in relations with Arab nations. Ankara is offering the Kurdistan Regional Government, or KRG, as well as the central government in Baghdad help in building power plants and other infrastructure.
Baghdad has asked Turkey to collect the money from oil exports and transfer it to Iraq after deducting 12.6% of the share allocated to the KRG, said the officials, speaking on condition of anonymity. The KRG, however, has told Turkey that it wants to claim the entire revenue from exports via its territory, arguing that it has been unable to collect funds from separate Iraqi oil exports, they said.
The pipeline running from Kirkuk to Turkey’s Mediterranean port of Ceyhan remains operational and Iraqi crude exports could start quickly once there is a deal in place, the Turkish officials said, adding that Turkey aims to resolve the conflict as soon as possible.
The closure of the pipeline has cut off nearly half a million barrels of crude from global markets as Ankara refused to pay the $1.5 billion fine. Iraq had been exporting about 400,000 to 500,000 barrels a day from fields in the country’s north, including in the Kurdish region, via the now-halted pipeline.
It’s unclear how much of that oil would flow back onto world markets if there was a deal, since Iraq is already pumping at very close to the limit under its OPEC quota.
