Iraq accuses Turkey of violating 1973 oil agreement

Iraq accuses Turkey of violating 1973 oil agreement
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Prime Minister Mohammed Shia al-Sudani highlights the significant economic impact of a halt to Kurdish oil exports.

A report by Rudaw has revealed that Iraqi Prime Minister Mohammed Shia al-Sudani has criticized Turkey for halting oil exports from the Kurdistan Region, claiming that it violates a 1973 agreement between the two countries. Addressing attendees at the Middle East Global Summit in New York, Sudani expressed concern about the economic consequences of the cutoff.

The background to this controversy began in March when Turkey decided to halt the transit of Kurdish oil through the Iraqi-Turkish conduit. This decision was prompted by a Paris arbitration court ruling in favor of Baghdad, which found Turkey violating the 1973 pipeline agreement. This breach occurred when Turkey allowed the Kurdistan Regional Government (KRG) to begin independent oil exports in 2014. As a result, the International Chamber of Commerce ordered Turkey to compensate Baghdad $1.4 billion for these unauthorized exports from 2014 to 2018.

Commenting on the current halt, Sudani shared that Turkey attributes the ongoing export pause to "technical challenges," even after an agreement was reached between his government and the KRG. Baghdad is now awaiting a full update on these technicalities.

The financial impact of this suspension is clear. Iraq has experienced a reduction in its daily oil exports of around 470,000 barrels, directly affecting its fiscal revenues. Before this interruption, Erbil facilitated the export of about 400,000 barrels per day through Ankara, supplemented by another 75,000 barrels from the Kirkuk fields.

In a July press conference, Turkish President Recep Tayyip Erdogan suggested that the halt was due to internal disagreements between the Iraqi federal government and the KRG. He claimed that Turkey faced no obstacles in processing the oil. Shortly after, the Iraqi Oil Ministry reaffirmed that Erbil and Baghdad had agreed to resume exports.

The KRG's financial health is primarily anchored to its oil revenues. The ongoing shutdown has cost the region billions since March. In addition, the KRG must channel 400,000 barrels of crude oil through the Iraqi National Oil Marketing Organization as part of Iraq's 2023 fiscal plan. In light of the ongoing export suspension, Iraq is considering diverting Kurdish oil for national needs.