Iraqi government wins $1.5 billion lawsuit against Turkey over Kurdistan Region oil exports but ruling is mixed

BAGHDAD — The Iraqi government has emerged victorious in a legal battle against the Turkish government concerning the sale of crude oil for Kurdistan Region of Iraq (KRI) between 2014–2018. The ruling also pertains to the misuse Iraq-Turkey Pipeline (ITP) agreement, signed in 1973 to govern the export of Iraqi oil to Turkey via the port of Ceyhan.

The lawsuit was initially filed by Iraq before the International Chamber of Commerce arbitral tribunal in Paris in 2014, during the tenure of Iraqi Prime Minister Nuri al-Maliki.

Zainab Jumaa al-Moussawi, a member of the Oil, Gas, and Natural Resources Committee in the Iraqi parliament, disclosed that the ruling mandates Turkey to pay $1.5 billion to Iraq for exporting Kurdish oil through the port of Ceyhan without Baghdad’s consent.

Following this decision, Iraq has halted exports totaling 450,000 barrels per day of crude oil from the KRI and the fields of Kerkeslokh (Kirkuk), located in the north of Iraq. A source also confirmed that Turkey has notified Baghdad of its intention to abide by the ruling.

It is expected that a delegation from Iraq’s Oil Ministry will meet with Turkish energy officials to establish new mechanisms for exporting Iraqi crude oil consistent with the ruling.

According to western and Turkish sources who spoke with Middle East Eye, however, the outcome of the case is a win for neither party.

The court considered whether Ankara overcharged transportation fees to Iraq and whether it received an unfair discount on oil prices, and awarded damages to Baghdad. However, the court ruled that 50% of the loss of income due to the discounted oil price must be borne by the Iraqi government because the KRG, as part of the Iraqi government, used the profits for state spending.

The decision has already raised tensions between Turkey and the KRG, which relies on oil income for government services.

Last year, Iraq’s federal court ruled that the law governing the oil industry in Iraqi Kurdistan was unconstitutional and ordered the Kurdish authorities to surrender their crude supplies.

The pipeline linking Iraq and Turkey has the capacity to pump 900,000 barrels per day, representing roughly 1% of the daily global demand. Currently, only 500,000 barrels are being pumped from northern Iraq’s oil fields.