Iraq and Oil Firms Trade Blame Over Shut Turkey Pipeline

The Iraq-Turkey oil pipeline (ITP), which once handled about 0.5% of global oil supply, has been halted since March 2023 due to legal and financial issues. The shutdown follows a ruling by the Paris-based International Chamber of Commerce in a longstanding arbitration case, stating that Ankara had violated provisions of a 1973 treaty by facilitating exports without the consent of the Iraqi federal government. The situation has led to a blame game between Iraq’s oil ministry and foreign oil firms operating in the Kurdistan region.

Iraq and Oil Firms Trade Blame Over Shut Turkey Pipeline

Failure to Submit Contracts for Revision

Iraq’s oil ministry has stated that foreign companies, alongside the Iraqi Kurdish authorities, have not submitted contracts for revision to the ministry. This comes after a court ruled that deals signed with the Kurdistan Regional Government (KRG) were invalid. The government seeks to revise these deals in light of a 2022 federal court ruling that deemed the oil and gas law regulating the Kurdistan region’s oil and gas industry unconstitutional.

APIKUR’s Statement and Demands

The Association of the Petroleum Industry of Kurdistan (APIKUR) released a statement on Saturday, claiming that the government of Iraq had not “taken the required actions” to reopen ITP and that there had been no real progress despite meetings in Baghdad in January between representatives of the Iraqi government, the KRG, and international oil companies.

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APIKUR emphasized that its member companies’ “current commercial terms and economic model must be maintained” and called for payment assurances for past and future oil exports. The association also noted that Iraq owes Turkey minimum payments as long as the pipeline is technically operational, estimated at around $25 million per month or $800,000 in daily penalties.

Upcoming Meeting Between Iraq’s Prime Minister and U.S. President

Iraq’s Prime Minister Mohammed Shia al-Sudani is scheduled to meet U.S. President Joe Biden in Washington on April 15 to discuss various issues, including:

  • The future of the U.S.-led coalition in Iraq
  • Iraqi financial reforms
  • A U.S. push to wean Iraq off Iranian power and gas

APIKUR has conveyed to members of Biden’s administration and Congress that the White House should not proceed with the planned visit unless:

  1. Flows through ITP resume
  2. International oil firms get payment assurances
  3. The Iraqi government fully implements the Iraqi federal budget for the KRG
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OPEC+ Compliance Concerns

Reports from OPEC and international secondary sources have shown that crude production in the Kurdistan region was approximately 200,000-225,000 barrels per day (bpd) without the knowledge or approval of the Iraqi government. In March, Iraq stated it would reduce its crude exports to 3.3 million barrels a day in the coming months to compensate for having exceeded its OPEC+ quota since January, a pledge that would cut shipments by 130,000 bpd from last month.

The OPEC+ grouping of oil-producing nations has highlighted the importance of compliance even as oil prices have rallied this year. The Iraqi oil ministry emphasized that “the lack of compliance with the oil policy approved by the federal government risks Iraq’s reputation and endangers its international commitments.”

Conclusion

The ongoing dispute between Iraq’s oil ministry and foreign oil firms operating in the Kurdistan region has led to the prolonged shutdown of the Iraq-Turkey oil pipeline, impacting global oil supply and causing financial losses for the parties involved. The situation has been further complicated by the upcoming meeting between Iraq’s Prime Minister and the U.S. President, with APIKUR lobbying for the resumption of ITP flows and payment assurances as prerequisites for the visit.

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As the blame game continues, it is crucial for all parties to work towards a resolution that addresses the legal and financial issues at hand while ensuring compliance with OPEC+ quotas and maintaining Iraq’s international commitments. The successful resolution of this dispute will not only benefit the Iraqi economy but also contribute to the stability of the global oil market.

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  • Subin Gurung

    Subin Gurung, the Anime Category Expert at gmsrentertain.com, blends years of anime-watching expertise with insightful reviews. The platform, encompassing a blog, review site, and anime database, benefits from his deep understanding of genres, directors, and series. Subin's diverse interests, including organizing anime conventions, reflect his multifaceted persona, enhancing the overall experience for the anime community on the site.

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