A long-standing dispute between two sides has been temporarily resolved and oil exports through Turkey will resume, officials say.
Iraq’s central government has reached an agreement with the country’s semi-autonomous Kurdish region to resume oil exports from northern Iraq via a pipeline to Turkey.
Iraqi Prime Minister Mohammed Shia al-Sudani and Masrour Barzani, Prime Minister of the Kurdistan Regional Government, announced the deal at a press conference in Baghdad on Tuesday.
“Cutting oil exports from the region hurts Iraq’s revenues,” Sudani said, adding that the governments would work to pass a federal law outlining the sharing of funds from oil and gas exports.
Barzani said in a statement that while the deal is temporary, it is a “critical step towards ending the longstanding dispute” between Erbil and Baghdad and “creates a positive and safe atmosphere to finally get the national oil and gas law right.” to approve”.
The agreement was to be implemented “today,” a KRG government official said.
Iraq stopped sending nearly half a million barrels of oil through the pipeline last month after an arbitration process by the International Chamber of Commerce chose Iraq in a long dispute over the KRG’s independent export of oil.
The arbitration ruling urged Turkey to pay $1.4 billion to Baghdad for violating agreements by buying oil directly from the KRG.
Baghdad and Erbil have been at odds over oil revenues for years.
Iraq — the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC) — filed the arbitration in question against Turkey in 2014 after the KRG sidelined the Iraqi State Oil Marketing Organization (SOMO) and crude oil began to sell. export through the neighboring country. Iraq claimed that all oil exports should go through SOMO to state ownership, under a 1973 agreement with Turkey.
Al Jazeera’s Mahmoud Abdelwahed, reporting from Baghdad, said the Iraqi prime minister stressed the deal was made to ease tensions between the parties.
“It also aims to bypass any budget deficit,” Sudani said, adding that the deal would save the country about 400,000 barrels per day in exports.
Oil-dependent economy
The deal struck on Tuesday will allow SOMO to market the crude oil in coordination with the KRG, according to a Kurdish official aware of the arrangement quoted by the Associated Press news agency, who spoke on condition of anonymity because he was not authorized to speak in public. about the case.
The oil revenues will be under the full control of the KRG, but will be deposited into an account that the federal government can control, the official said.
According to the World Bank, Iraq’s economy is one of the most oil-dependent in the world. While most of the country’s oil reserves are in the south, the Kurdish region of northern Iraq is heavily dependent on the export of the oil from its fields.
With the halting of pipeline exports to the Turkish Mediterranean port of Ceyhan, foreign oil companies no longer had a place to pump oil from northern Iraq.
Norway’s DNO, one of the main companies operating in the KRG-managed area, announced it was halting production from its wells.
Prior to Ankara’s action on March 25, the semi-autonomous region exported about 450,000 barrels of crude oil per day (bpd).
Iraq, one of the world’s largest producers, exports an average of 3.3 million barrels per day.