Paris court ruling bans KRG oil exports through Turkey without Iraq’s consent

SULAIMANI, Kurdistan Region — Turkey has notified Iraq that an international arbitration court in Paris has ruled in favor of Baghdad in the ongoing dispute over the Kurdistan Regional Government’s (KRG) oil exports through the Ceyhan port in Turkey, according to a report from Argus media.

The ruling is being viewed as a significant setback for the Kurdistan Region, as Turkey has indicated that it will no longer be able to permit the export of the Region’s oil to global oil markets via the Ceyhan Port without the consent of the Iraqi federal government.

The Kurdistan Region’s reliance on oil exports for revenue could be at risk following the potential outcome of a long-running case in which the Iraqi government is claiming that Turkey violated a 1973 pipeline transit agreement by allowing crude exports from Iraq’s Kurdish region without Baghdad’s consent.

A win for Iraq in the International Chamber of Commerce’s International Court of Arbitration in Paris could weaken the Kurdistan Region’s position in its ongoing disputes with Baghdad over budget share and oil revenues.

In 2014, the Kurdistan Regional Government (KRG) made a bold move by connecting its oilfields to the Turkish border crossing at Fishkhabor, bypassing the control of the Iraqi government in Baghdad.

This move allowed the KRG to tap into the existing Iraq-Turkey Pipeline, which was previously used to transport crude from Iraq’s northern Kirkuk oilfield to Turkey’s port of Ceyhan. However, this action led to a dispute between the KRG and Baghdad, which has yet to be resolved.

In a significant legal ruling, Iraq’s federal court declared in February 2022 that a key oil and gas law governing the petroleum sector in Iraqi Kurdistan was “unconstitutional.”

The court’s decision has resulted in Kurdish authorities being ordered to surrender their crude oil supplies, marking a significant blow to the semi-autonomous region’s economy and its long-standing dispute with the central government in Baghdad. However, there has been no action taken to enforce the court’s decision.

After nearly a year of economic uncertainty, the Iraqi council of ministers has finally approved a federal budget bill for the years 2023, 2024, and 2025 nearly two weeks ago. The long-awaited budget includes a share of 12.6 percent for the Kurdistan Region, as announced by the Iraqi Prime Minister Mohammed Shia al-Sudani.

This development marks a positive step towards resolving the longstanding disputes between the KRG and the federal government over budget allocation and oil revenue sharing.

However, the absence of an oil and gas law in Iraq’s constitution continues to pose a major hurdle for Erbil and Baghdad, to reach a consensus on oil exports. Despite the presence of a hydrocarbon draft law since 2007, it has yet to be approved by the Iraqi parliament due to several political and economic challenges. The recent Paris court ruling could further intensify the ongoing political disputes between the two regarding oil exports.

 

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