The Iraqi Parliament has approved a plan to increase payments to international oil companies operating in the Kurdish Regional Government (KRG), a crucial step toward resuming oil exports to Türkiye.
On February 2, the Iraqi Parliament passed amendments to the budget law, setting production and transportation costs at $16 per barrel for oil extracted from the KRG. This revision came after the KRG rejected a previous offer of $7.9 per barrel, calling it insufficient.
With the financial dispute seemingly resolved, attention now shifts to the Iraq-Türkiye oil pipeline, which has been inactive due to cost disagreements. On February 4, Iraqi Oil Minister Hayan Abdel-Ghani confirmed that KRG oil would be delivered to Iraq’s State Organization for Marketing of Oil (SOMO), and that discussions with Türkiye regarding exporting oil through the Ceyhan Port were ongoing.
KRG’s $23 Billion Loss from Halted Oil Exports
Oil exports from Iraq to Türkiye ceased on March 25, 2023, following an arbitration ruling by the Paris-based International Chamber of Commerce (ICC) regarding disputes between Baghdad and Ankara. Further disruptions came from the February 2023 earthquakes centered in Kahramanmaraş, Türkiye.
Despite Türkiye announcing on October 4, 2023, that the pipeline was ready for operation, political disputes between Baghdad and Erbil prevented its reopening. As a result, the halt in exports has cost the KRG approximately $23 billion in revenue.
Turkish Energy Minister Alparslan Bayraktar reiterated in April 2024 that Türkiye was not at fault for the delays, highlighting ongoing disagreements between the Iraqi central government and the KRG.
Expert Insight: ‘Strong Incentive to Make This Work’
Alberic Mongrenier, executive director of the European Initiative for Energy Security, emphasized that Baghdad’s payment revision is a key step in resuming exports.
However, Mongrenier noted that hiring an independent consultant to verify KRG’s production and transport costs remains a point of contention.
Despite this, the economic urgency of resuming exports provides a strong incentive for both Baghdad and Erbil to find common ground. Since KRG heavily relies on oil revenues, the restart of exports would ease economic pressure in the region.
Mongrenier also pointed out that while the $16 per barrel rate is nearly double the previous offer, it could challenge Iraq’s ability to comply with OPEC production cuts, potentially disrupting global oil markets.
Türkiye-Iraq Relations: A Boost to Diplomatic Dialogue
According to Francesco Sassi, a research fellow in energy geopolitics at Ricerche Industriali ed Energetiche (RIE), a successful resumption of oil exports to Türkiye could positively influence Ankara-Baghdad relations.
Sassi stated that stabilizing Iraq’s oil sector is crucial ahead of the country’s upcoming elections, especially in light of global economic uncertainties caused by trade wars and protectionist policies.
Furthermore, he suggested that resuming oil flows through Türkiye could ease tensions between Ankara and Baghdad, which have been strained due to geopolitical shifts in Syria.
Looking Ahead: Key Challenges and Opportunities
The agreement marks a potential turning point for Iraq’s oil sector, with implications for regional stability, Türkiye-Iraq relations, and global oil markets. However, lingering challenges—cost disputes, OPEC compliance, and geopolitical complexities—must be addressed to ensure a sustainable resolution.