Key facts
- Iraq and Turkey have agreed to a one-year temporary arrangement to resume oil exports via the Iraq-Turkey Pipeline.
- The deal aims to restore flows of over 200,000 barrels per day through the Ceyhan port.
- This arrangement is crucial for Iraq's economy, especially after the closure of the Strait of Hormuz.
- Previous oil flows were halted for over two years following an international arbitration ruling that fined Turkey $1.5 billion.
- The agreement comes as Turkey seeks to optimize its benefits from the deal and offset the arbitration fine.
Iraq's critical oil exports through the Iraq-Turkey Pipeline to Ceyhan have been temporarily secured for one year, averting immediate economic disaster. This arrangement is vital for Iraq, particularly after the closure of the Strait of Hormuz, which had previously forced production shutdowns due to full storage tanks. The pipeline, carrying over 200,000 barrels per day, was previously halted for over two years following an International Chamber of Commerce (ICC) ruling that fined Turkey $1.5 billion for breaching a 1973 agreement by allowing the Kurdistan Region of Iraq (KRI) to export oil independently.
The KRI's attempts at independent oil sales, dating back to a 2013 bill, were driven by a desire for financial and political independence from Baghdad. Baghdad's opposition stemmed from fears that unmonitored revenue streams could fund a Kurdish breakaway state. Following a 2017 independence referendum that failed to gain significant U.S. support, Baghdad's influence grew, aligning more with China and Russia, while the KRI maintained ties with the West.
However, Baghdad's stance towards the West has shifted, particularly since the second term of U.S. President Donald Trump. This shift, coupled with Turkey's recent tilt back towards the West due to pragmatic alignment with Washington and NATO reliance, has facilitated the current temporary agreement. Turkey is seeking to optimize its benefits through multi-layered joint ventures in Iraq's energy sector and wants to offset the $1.5 billion fine it technically still owes Baghdad.