Ankara’s decision this week to exit the ITP treaty and its amendments sets the stage for negotiations on new terms with Baghdad for utilization of the oil export system. Turkey appears to favor an expansive energy framework that would include gas and electricity alongside oil. It could also seek flexible terms that would allow it to contract users other than Federal Iraq, potentially including the Kurdistan Regional Government (KRG). But the Iraqi government is likely to insist on exclusive rights to the ITP. Failure to agree amicable terms risks further uncertainty over the future of Iraqi Kurdistan’s oil sector.
The ITP has been offline since March 2023 when Baghdad largely emerged as the winner in an arbitration case against Ankara for facilitating independent Kurdish oil exports between 2014 and 2018 (MEES, 31 March 2023). Before the shutdown, the ITP carried up to 400,000 b/d of Kurdish crude and around 70,000 b/d of Federal Kirkuk production to Ceyhan. The ICC initially awarded Iraq $1.99bn, later reduced to $1.47bn mainly due to Baghdad’s repeated failure to meet minimum throughput commitments. Both sides claim they are owed money (see chart 1 & MEES, 6 October 2023). Ankara’s latest move could strengthen its push for Baghdad to settle the awards and drop a second arbitration case covering post-2018 exports. (CONTINUED - 2348 WORDS)
