KRG In Economic Limbo As Baghdad And Ankara Argue Over Using Turkey’s Oil Pipeline

(World Pipelines)

The Kurdistan Regional Government (KRG) is facing a brewing economic crisis which it has no ability to solve. In March the International Court of Arbitration ruled in Iraq’s favor against Turkey allowing the KRG to export oil through its pipeline. In response, Ankara shut down exports and has not been clear about what it wants in order to restart them. This is denying the Kurdistan region its major source of income.

 

Turkey originally said that if the KRG and Baghdad came to an agreement over oil exports the northern pipeline would be re-opened. That happened at the start of April when Prime Minister Mohammed Sudani and KRG Premier Masrour Barzani announced a preliminary deal where the region’s exports would be sold by the State Organization for Marketing Oil (SOMO) while the Kurds would control their profits. SOMO then said it had some technical issues to work out with the KRG but those were reportedly resolved. Despite that Ankara has still not budged and is not allowing any Iraqi oil to be shipped through its territory.

 

It appears that Iraq and Turkey are trying to gain concessions from each other which is holding things up. One main issue is the money both countries were ordered to pay each other by the arbitration court. Turkey owes Iraq $1.4 billion while Baghdad is to pay $527 million to Ankara. Iraq already went to a U.S. court over the issue and Turkey is thinking about doing the same. There might be other issues as well that have not been made public over Iraq’s oil industry.

 

The KRG is the victim of this stalemate. Kurdistan like the rest of Iraq has an oil dependent economy. Since the region attempted an independent energy policy it has run into a slew of economic problems from building up a huge debt to not being able to pay the energy companies working in the region as well as its government workers which is the main source of income for families. The KRG is now getting monthly budget payments from Baghdad once again, but if it cannot restart its oil sales through Turkey it will not have enough money to pay all its bills. In the past that has led to social unrest with strikes and protests. Those could quickly return.

 

SOURCES

 

Bas News, “Baghdad Yet to Ask Ankara to Resume KRG Crude Exports: Reuters,” 4/15/23

 

Dourian, Kate, "March oil exports slump by 200,000 bpd due to pipeline halt,” Iraq Oil Report, 4/10/23

 

eKurd, “Iraq, Kurdistan take step towards resuming northern oil exports,” 4/17/23

 

Reuters, “Iraq petitions US court to enforce oil export arbitration award against Turkey,” 4/11/23

 

Soylu, Ragip, “Turkey mulls seeking US court to enforce $527m oil award against Iraq,” Middle East Eye, 4/17/23

 

Van Heuvelen, Ben and Hussein, Mohammed, “Baghdad, Erbil sign temporary deal to resume northern exports,” Iraq Oil Report, 4/4/23