Iraq Wins Key Kurdish Oil Arbitration Case Against Turkey

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Iraq tonight was officially informed by Turkey that an international arbitration court ruled in its favor in the long-running case against Ankara over Kurdish crude exports, a source with knowledge of the matter told Argus, in yet another blow to Iraq's semi-autonomous Kurdish region.

Turkey also said it will not allow shipments carrying crude from the Iraqi Kurdistan region to leave its coastal port of Ceyhan without the consent of the federal government in Baghdad, the source added.

The case at the International Chamber of Commerce's International Court of Arbitration in Paris has been running for almost nine years and centers on Iraq's claim that Turkey has violated a 1973 pipeline transit agreement by allowing crude exports from Iraq's Kurdish region without Baghdad's consent.

The dispute dates back to 2014 when the Kurdistan Regional Government (KRG), independent of Baghdad, connected its oilfields to the Turkish border crossing at Fishkhabor, tapping into the existing Iraq-Turkey Pipeline. The pipeline previously delivered crude from Iraq's northern Kirkuk oilfield to Turkey's port of Ceyhan.

Iraq's Kurdistan depends on crude oil exports through Turkey, and the Paris court ruling will further tighten the noose on Erbil, weakening its hand in negotiations with Baghdad over an authoritative legal framework for the country's oil sector. The government of prime minister Mohammed Shia al-Sudani and the KRG have held several rounds of talks to try and reach a solution.

Al-Sudani's government, however, is now armed with the Paris court ruling in addition to Iraq's federal court ruling from February 2022 that declared Kurdistan Regional Government's oil and gas legislation "unconstitutional". The federal court also invalidated the KRG's contracts with foreign oil firms.

Baghdad, ever since, has been trying to bring Kurdistan's energy resources under federal control. The country's oil ministry last year said US companies are in the process of liquidating and exiting tenders and contracts in Kurdistan to comply with the federal supreme court decision.

Additionally, major trading firm Trafigura at the end of January severed ties with the KRG, a step that will only exacerbate the Kurdistan region's challenges and complicate its ability to market its crude.