Iraq’s government and oil companies operating in the northern region are at an impasse over the resumption of a crucial pipeline to Turkey, with each side blaming the other for the delays.
“The pipeline, capable of transporting nearly half a million barrels of oil daily to Turkey’s Mediterranean coast,” has been shut for a year, resulting in over $11 billion in lost revenue for Iraq.
The closure stems from a dispute over Kurdish crude deliveries and contract revisions, with the oil ministry demanding that previously signed contracts without Baghdad’s approval be submitted for review.
Turkey closed the pipeline in March last year following an arbitration court’s order to pay Iraq $1.5 billion for unauthorized oil transportation. Despite Ankara’s readiness to resume operations, financial and legal hurdles persist, complicated by the oil companies’ demands for higher fees and clearance of past dues.
OPEC+ Compliance and Financial Strains
The shutdown has compelled oil companies to market crude domestically, affecting Iraq’s production quotas within the Organization of Petroleum Exporting Countries (OPEC).
Reports suggest Kurdistan’s production ranges from 200,000 to 225,000 barrels per day, conducted without Baghdad’s authorization, thereby surpassing Iraq’s agreed output limit.
In response, Iraq has committed to scaling back its oil exports to 3.3 million barrels per day in the forthcoming months, seeking to offset its overages beyond OPEC+ constraints in January and February.
Legal and Financial Disputes
At the core of the matter are the legal and financial disputes involving the Iraqi government, the Kurdistan Regional Government (KRG), and the oil companies.
The companies are pressing for fees three times higher than what Iraq pays other producers and are insisting on the settlement of their outstanding dues, which include $1 billion for oil produced between September 2022 and March 2023.
These demands have brought negotiations to a standstill, with the Iraqi Prime Minister recognizing the intricacy of the situation and the absence of a clear-cut solution.
