Iraq has been ordered by the International Chamber of Commerce (ICC) to pay compensation to Ankara in a longstanding arbitration case related to oil exports from the country's semi-autonomous northern region via Türkiye, a statement said Tuesday.
The Turkish Energy and Natural Resources Ministry’s statement came after Iraq halted crude oil exports Saturday from the Kurdistan Regional Government (KRG) through Türkiye after Baghdad said the ICC had ruled in its favor.
The Turkish statement said the ICC had recognized most of Türkiye’s demands.
The Energy Ministry said the chamber ordered Iraq to compensate Türkiye for several violations concerning the case regarding crude oil exports from the KRG.
The case relates to Iraq’s claim that Türkiye violated a joint agreement by allowing the KRG to export oil through a pipeline to the Turkish port of Ceyhan in 2014.
Baghdad deems the KRG exports via the Ceyhan port as illegal.
The ICC ruled in favor of Iraq on Thursday in the arbitration case and ordered Türkiye to pay Iraq damages relating to the transport of KRG oil through the export pipeline and the discount at which KRG oil was sold, a source familiar with the case told Reuters.
Türkiye won a counter-claim for Iraq to pay a pipeline throughput fee, the source said.
Iraq on Saturday halted crude exports of 450,000 barrels per day (bpd) from the semi-autonomous region and northern Kirkuk.
In its first official statement on the issue, the Turkish Energy Ministry said that the ICC overruled four out of five demands from Iraq.
“(The ICC) ordered Iraq to pay a compensation to Türkiye,” the ministry said, without revealing the amount of compensation.
Around 450,000 barrels per day (bpd) of crude exports, or half a percent of global oil supply, to Türkiye from the semi-autonomous Kurdistan region and northern Kirkuk fields, were halted following the verdict.
The ministry said the issue was “a reflection of a yearslong dispute” between the Iraqi central government and the KRG about sharing oil revenues.
“Türkiye has always respected the unity and territorial integrity of Iraq and has been working relentlessly for the political and economic stability of Iraq and the KRG government,” it said.
“This case is a reflection of disagreement between Iraq’s central government and Iraq’s Kurdish Regional Administration,” the ministry noted.
Despite instability in the region, it said Türkiye had undertaken billions of dollars in expenditures to keep the Iraq-Türkiye oil pipeline system operational since 1973, which also helped maintain stability in global oil markets.
“It has conducted intensive diplomacy with both parties and relevant countries to arrive at an amicable settlement of the dispute,” it noted.
“Türkiye is ready to fulfill the requirements of international law and to contribute to finding a permanent solution between parties of disagreement.”
With its proven oil reserves of approximately 145 billion barrels, Iraq is the fifth-largest producer in the world and the second-biggest OPEC producer, with a daily production of more than 4.5 million barrels.
The country has been in a deadlock for years due to the misuse of resources and the unfair distribution of oil revenues.
Oil firms in the region have been left in limbo, with production in the Kurdistan region at risk. The pipeline stoppage is set to continue until Ankara, Baghdad and the KRG settle to resume shipments.
At least three oil licenses in the KRG were shut down or running at reduced rates on Wednesday following a halt to the northern export pipeline, company statements showed, with more outages on the horizon.
The stoppage has recently helped boost oil prices to nearly $80 per barrel.
Oil firms operating in the region are forced to halt output or move production into storage, which many say will reach capacity within days, as talks drag between Türkiye, Baghdad and the KRG to resume exports.
On Wednesday, Norwegian oil firm DNO said it had begun shutting down production at its Tawke and Peshkabir fields, where production averaged 107,000 bpd last year. This represents a quarter of total Kurdish region exports, DNO said.
Genel Energy, a field partner, said: “Peshkabir production was halted last night, and plans drawn up to conduct deferred maintenance. Tawke production shutdown has started but will take an additional day or so.”
Canada-based Forza Petroleum, formerly Oryx Petroleum Corp, was forced to shut in production earlier this week from the 14,500 bpd Hawler license, which produced an average of 13,700 bpd in January and February.
The firm said that Genel Energy’s remaining regional assets continue to flow into storage. For example, a company spokesperson said that production from its Sarta field can flow into storage until the end of the week, while tanks can hold presentation from Taq until around April 21. The fields produced a respective 4,710 bpd and 4,490 bpd last year.
Gulf Keystone has reduced production at the Shaikan oil field, which previously produced around 55,000 bpd and said on Monday it would suspend production after a few days.
Dallas-based HKN Energy, which operates the Sarsang block, said on Monday it would shut down operations “within a week if no resolution is reached” as its storage facilities approach capacity. The union produced 43,048 bpd in the fourth quarter of last year.