To resume oil exports, Turkey seeks revenue-sharing deal with Iraq
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Turkey steps in as a mediator to resolve a dispute between Baghdad and the semi-autonomous Kurdish administration over the resumption of oil exports through Turkey.
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New housing development oil seen in the town of Sulaimaniyah, Iraq, March 21, 2023 (AP)
In a bid to resolve a longstanding dispute, Turkey has taken on the role of mediator between the central Iraqi government and the semi-autonomous Kurdish administration regarding the resumption of Iraqi crude oil exports through its territory, two Turkish officials revealed on Friday.
According to Turkish officials, discussions are underway to find common ground and restore the flow of oil, which had been disrupted due to a legal dispute.
The conflict originated when an arbitration court ordered Turkey to pay approximately $1.5 billion in damages to Iraq for transporting oil without the approval of the Iraqi capital, Baghdad.
Refusing to pay the fine, Turkey has urged the Kurdish Regional Government (KRG) - the primary beneficiary of the exports - to cover the cost and transfer the funds to Baghdad.
The crux of the negotiations lies in finding a compromise between the divergent demands of Iraq and the Kurdish administration, particularly related to the distribution of revenue generated from oil exports.
The contention over oil sales rights has been a source of tension for years, reflecting Baghdad's efforts to assert control over the semi-autonomous Kurdish region.
Although officials from the Iraqi government and the KRG have refrained from commenting, the Turkish Foreign Minister Hakan Fidan has actively engaged in discussions. He met with the Kurdish government's president and prime minister in Erbil and held talks with his Iraqi counterpart in Baghdad earlier in the week.
Turkish Energy Minister Alparslan Bayraktar also participated in the diplomatic efforts, engaging in conversations with Iraqi Oil Minister Hayyan Abdul Ghani.
Ankara's initiative goes beyond the immediate dispute. Turkey is seeking to mend its relationship with Baghdad after a period of strained ties, as part of a broader effort to reestablish stronger connections with Arab nations.
Turkey has proposed extending its assistance to both the KRG and the central Iraqi government in developing power plants and other essential infrastructure.
The current impasse revolves around Baghdad's request for Turkey to collect oil export revenue and subsequently transfer it to Iraq after deducting 12.6% intended for the KRG. However, the KRG asserts its right to the full export revenue from its territory, contending that it has faced difficulties in receiving funds from separate Iraqi oil exports.
Although a specific timeline for resolution remains uncertain, Turkish officials have stated that the pipeline from Kirkuk to Turkey's Mediterranean port of Ceyhan is still operational. This means that Iraqi crude exports could quickly recommence upon reaching a mutually acceptable agreement.
The halt in oil exports has resulted in a disruption of nearly 500,000 barrels of crude oil in the global markets. The situation has significant implications, especially since Iraq's oil production is already close to its OPEC quota limit.
The Iraqi government and Erbil signed in April an agreement stipulating that Baghdad assumes full supervision over the export of oil from the Iraqi Kurdistan region's fields, which allows the resumption of oil exports again through the Turkish port of Ceyhan; the Iraqi-Turkish pipeline.
Oil from the Iraqi Kurdistan Region will be sold and exported through Iraqi state-owned firm SOMO, and sales returns will be deposited in Baghdad's central bank under Erbil's control, while the Iraqi government will have access to the account and auditing authority.
Last week, exports of nearly 450,000 barrels per day to Turkey were stopped due to a ruling by a Paris Court of Arbitration that Ankara violated a bilateral treaty with Baghdad by allowing Iraqi Kurdistan to launch independent oil exports in 2014.
Read more: US backing bipartisan severe corruption in Iraqi Kurdistan region: FP
Reuters reported earlier that Baghdad and Erbil finalized an agreement to restore oil flow into the Iraq-Turkey pipeline. Prime Minister of Iraq's Kurdistan Region Masrour Barzani then went to Baghdad and formalized the deal with Iraqi Prime Minister Mohammad Al-Sudani.
"Everyone must abide by this agreement and implement it," Al-Sudani said in a joint press conference with Barzani, adding that the agreement was temporary until the budget bill is approved by the parliament.
The bill "will cover all obligations and solve all problems," the Iraqi PM concluded.
