Seeking to Resolve the Crisis: What Does the U.S. Get From the Resumption of Iraqi Oil Flow Through Turkiye?

In a new development regarding the halt of the Kurdistan Region of Iraq's exports through the Ceyhan Port pipeline in Turkiye, members of the U.S. Congress have called on Secretary of State Antony Blinken to engage in high-level talks with Baghdad and Ankara to swiftly resume oil exports.

On March 25, 2023, Turkiye suspended exports from northern Iraq, totaling 450,000 barrels per day, following a ruling by the International Chamber of Commerce in Paris, which ordered Ankara to pay $1.5 billion in compensation to Baghdad for unauthorized exports by the regional government between 2014 and 2018.

 

Urgent Need

The urgent message from the U.S. Congress to Secretary of State Blinken on June 15, 2023, comes in the context of pushing for the implementation of the agreement between Baghdad and Erbil, reached on April 4, 2023.

The agreement, signed in the presence of Kurdistan Regional Government Prime Minister Masrour Barzani and Iraqi Prime Minister Mohammed Shia' al-Sudani, stipulates that revenues from approximately 450,000 barrels of oil exported by the Kurdistan Region will be deposited into a designated bank account under the authority of the Kurdistan Regional Government, supervised by the Iraqi government, in exchange for the Kurds' share in the national budget, ranging from 12.7 to 13 percent.

According to the Iraqi network Rudaw, a letter sent to Blinken on June 15, 2023, by several members of Congress, including Michael Waltz, Seth Moulton, and Don Bacon, stated that the suspension of oil flow through the Iraq–Turkiye pipeline since March has resulted in an 80 percent loss of Kurdistan Region's revenues.

The letter expressed concerns to the U.S. Secretary of State, stating that this problem may lead to a major humanitarian crisis if not resolved soon, and emphasized the essential need to resume oil exports.

The Congress members also noted that the parliamentary delay in approving the budget could jeopardize the agreement reached between Barzani and al-Sudani earlier in 2023 regarding the resumption of oil exports.

On June 12, 2023, the Iraqi Parliament approved a three-year financial budget law with increased expenditures and investments driven by the rise in oil prices, granting Baghdad greater control over the oil file in the Kurdistan Region.

Members of Congress expressed their belief that "the U.S. government will have an opportunity to find a solution to this problem and emphasize the importance of respecting this agreement and the federal system of Iraq, as well as ensuring the access of Kurdistan's oil to global markets.

In their message to their country's Secretary of State, they pointed out that the Kurdistan Region is currently working on developing gas production, which could lead to increased gas supplies to Iraq and Europe, affirming that the Kurds were "important partners" to the United States in the war against the Islamic State.

In response to this, Iraqi affairs researcher Uday al-Azzawi stated that "Turkiye holds many cards, and if Washington intervenes as a mediator in the issue of resuming the pumping of Iraqi oil through the Ceyhan Port, Ankara will use this card to end the presence of the Kurdistan Workers' Party in Iraq."

The researcher explained to Al-Estiklal that "the United States supports this party in Syria and turns a blind eye to its expansion in Iraq, so it is in Turkiye's interest to exert pressure with the card of resuming oil pumping on Washington and Baghdad."

He noted that "Iraq is trying in every possible way to resume the pumping of its oil through the Ceyhan Port because the losses are in billions, but Ankara is holding the strings and trying to impose its conditions, and the issue is not only about Baghdad paying the fine of the Paris court."

The researcher believed that "U.S. mediation may bring positive results in this file if it agrees to Ankara's conditions regarding the Kurdistan Workers' Party and curbing its expansion in northern Iraq."

As of June 23, 2023, there has been no official response from the Iraqi authorities to the message from the members of Congress to the U.S. Secretary of State to mediate between Baghdad and Ankara regarding the resumption of pumping Iraqi oil through the Ceyhan Port in Turkiye.

 

Two options for Iraq

In light of the delay in oil exports through the Ceyhan Port, the Oil, Gas, and Wealth Committee in the Iraqi Parliament proposed two options for implementation.

These proposals can be implemented if Turkiye insists on preventing oil exports through the Ceyhan pipeline.

In light of the delay in oil exports through the Ceyhan port, the Iraqi Parliamentary Oil, Gas, and Wealth Committee proposed two options for implementation.

These proposals can be implemented if Turkiye insists on blocking oil exports through the Ceyhan pipeline.

During a statement on June 19, 2023, committee member Ali al-Mashkoor stated that "the committee suggested to the Minister of Oil, Hayan Abdul-Ghani, the export of the Kurdistan region's oil share through the Southern Oil Marketing Company (SOMO)."

He also mentioned that "the second proposal is to continue the operation and maintenance of the Iraq–Baniyas pipeline (Kirkuk–Baniyas pipeline) that passes through Syria and exports the extracted oil."

He emphasized that "Iraq is pursuing all diplomatic avenues with Turkiye to resume oil pumping through the Ceyhan pipeline."

Al-Mashkoor confirmed that "if Ankara insists on not implementing the decision of the International Arbitration Court and continues to close the oil pipeline, which costs Iraq millions of dollars daily, then it will proceed with the implementation of these two proposals."

In the same context, Turkish analyst Ali Asmar stated during a television interview on June 19, 2023, that the visit of the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, to Iraq will have a positive impact on the negotiations between Turkiye and Iraq regarding the transfer of Iraqi oil through the Turkish Ceyhan port.

Emir Sheikh Tamim bin Hamad Al Thani visited Baghdad on June 15, 2023, for several hours, during which numerous agreements were signed between the two countries in various fields, with a total value of around 9.5 billion U.S. dollars.

Asmar added that Turkiye respects international laws, but the bill should not be cut or sanctions imposed on only one party; everyone should bear responsibility because the transfer of Kirkuk oil through the Turkish Ceyhan port was public, and Baghdad was aware of it, as this has been discussed for years, not days or hours.

Iraqi observers anticipate that the involvement of the United States in the crisis between Iraq and Turkiye regarding the halt of oil exports through the Ceyhan pipeline may solve the problem and contribute to its resolution.

They stated that the United States may serve as a guarantor for Turkiye, not requiring it to pay the full amount demanded by the Iraqi side based on a decision by the Paris court. This may lead to a satisfactory agreement between the two parties, and Washington could expedite the resolution of the dispute between both sides.

 

Negotiations failed

On June 19, 2023, a meeting between a Turkish energy delegation and Iraqi officials in Baghdad concluded without reaching a final agreement on the resumption of oil exports from northern Iraq through the Ceyhan Turkish port.

According to Reuters, the disagreements between the two sides seem to be more political than technical.

Turkiye primarily aims to resolve its predicament of paying around $1.5 billion to the Iraqi side, as mandated by an international arbitration decision. Turkiye seeks to negotiate with the Iraqi government, which also needs to resume crude oil exports from northern Iraq.

Iraqi officials stated that further discussions would be necessary to resume exports, which were halted due to an international arbitration ruling that requires Ankara to pay fees and compensations to the Iraqi federal government for the quantities exported by the Kurdistan Region through Turkiye, bypassing the authority of the Iraqi oil administration represented by the state-owned SOMO oil company.

"We are discussing all technical aspects regarding the restarting of oil exports. A decision to resume flows will not happen today, and more meetings are expected," an oil official familiar with the meeting said on condition of anonymity.

"A decision to restart oil flow needs political talks on higher levels. Issues blocking the resumption of oil exports are more political than technical," said a second oil official.

Efforts to reactivate the pipeline were delayed due to the Turkish presidential elections in May 2023 and ongoing discussions between the Iraqi government's State Oil Marketing Organization (SOMO) and the Kurdistan Regional Government regarding an export deal that has now been reached.

Reuters estimates that the Iraqi Kurdish region has lost more than $2.2 billion over the 87 days of the pipeline outage, based on exports of 375,000 barrels per day and the KRG's historical discount against Brent Crude.

In a Facebook post on April 11, 2023, Iraqi economist Nabil al-Marsoumi highlighted the significant financial impact caused by the delay in resuming oil exports through the Ceyhan port. According to al-Marsoumi, the country is losing approximately $1 billion per month due to the halt of Kurdistan's oil exports.