The region's oil... stopped 40 days ago and is a crossroads for exports[You must be registered and logged in to see this image.]
Baghdad today - Baghdad
The resumption of Kurdistan's oil exports to Turkey still faces a number of complications, in light of the failure to reach a satisfactory settlement between the Iraqi and Turkish sides on a number of points.
Despite Oil Minister Hayan Abdul Ghani's confirmation of the resumption of crude exports from the Kurdistan region within days, experts have revealed that the agreement still faces a number of obstacles, which is likely not to return to exports in the near future.
Turkey had stopped shipping oil flows from Kirkuk to the port of Ceyhan on March 25, after an international arbitration decision obligated it to pay compensation to Baghdad. For violating a 1973 pipeline agreement by allowing the export of KRG oil without Baghdad's approval between 2014 and 2018.
Damage to the Iraqi economy
Iraqi oil expert Nabil Al-Marsoumi said that it has now been about 40 days to stop exporting Kurdistan's oil to the Turkish port of Ceyhan, noting that this halt harms the Iraqi economy. Because it undermines financial resources and reduces the volume of Iraqi oil revenues.
He added that the amount of oil flows, which is close to half a million barrels, is included in the oil revenues in the general budget for the year 2023.
Al-Marsoumi added that the cessation of oil exports has forced some foreign companies to either reduce their production capacity or divert some of their production to internal consumption, which has caused harm to these companies. The spending of foreign companies has decreased and their shares have also begun to decline.
The oil expert revealed that a joint delegation from the Baghdad government and the Kurdistan region visited Turkey to discuss the resumption of pumping Iraqi oil through the Turkish line.
He explained that Turkey imposed two conditions on the Iraqi delegation, and the first condition is that the region bear the fine imposed by the International Court on Turkey, which is estimated at 1.471 billion dollars.
While Turkey demands - in the second condition - that it continue to buy Iraqi oil at reduced prices, according to the agreement between the region and Turkey, which extends to 50 years.
Al-Marsoumi stressed that the two conditions represent two major obstacles that prevent the re-pumping of Iraqi oil towards the Turkish port of Ceyhan.
Signs of a solution to the crisis
Al-Marsoumi concluded his remarks by saying, "The coming days may witness signs of a solution or a final cessation of Kurdistan's oil exports."
And he believed that despite the fact that the oil minister's statements confirm the return of oil pumping within a few days, the reality indicates otherwise.
For his part, Professor of Oil Economics at the Iraqi University of Basra, Dr. Amjad Sabah, explained that the current crisis dates back to 2003, which witnessed the change of the Iraqi regime and the development of a constitution that allowed the establishment of a federal government in the Kurdistan region that is partially independent of the central government in Baghdad.
The region signed independent oil contracts with international oil companies amounting to about 57 contracts in the field of oil extraction and natural gas investment, and the Iraqi Ministry of Oil in Baghdad did not approve of them, because they were signed without reference to it, and the region’s government also exported oil from its fields in the north to Turkey independently. on the central government.
Amjad Sabah, a professor of oil economics at the University of Basra, indicated that the oil contracts were a matter of disagreement between the Kurdistan government and the Ministry of Oil, as the central government in Baghdad saw that the Kurdistan government deducts about 17% of the general budget.
Therefore, the Iraqi government filed a lawsuit with a commercial court affiliated with the International Chamber of Commerce in Paris, during which it objects to the monopoly of the Kurdistan region on oil export revenues, and considers that this oil resource represents a public wealth for the Iraqi people that cannot be acquired by one region alone.
Sabah pointed out that after about 10 years, the court issued its ruling in favor of the central government in Baghdad to be the one responsible and disposed of Kurdistan’s oil, and the decision also obligated Turkey to stop the region’s oil flows through the Turkish port of Ceyhan to the countries and companies that buy it in the region, until it becomes a government Central Baghdad is the main authority authorized to sell, price and export Kurdistan's oil.
Sabah explained that the amount of exports from the region ranges between 400 and 450 thousand barrels per day.
Keep up to date
A professor of oil economics at the Iraqi University of Basra highlighted that the Iraqi government and the Kurdistan Regional Government had signed a temporary agreement, on April 4, paving the way for the resumption of exports, stressing that this agreement represents a big and important step.
He said, "According to the information and leaks that reached us, the agreement includes 4 basic clauses, which are: approval to export 400,000 barrels per day via Kurdistan, provided that the Iraqi Federal Oil Marketing Company "SOMO" undertakes this, and the formation of a quartet committee with representatives of the Ministry of Oil. The central Iraqi government in Baghdad and representatives of natural resources in the regional government, and this committee is responsible for supervising the sale of oil extracted in the region and exporting it to the global oil markets.
The central government also wanted to amend some of the agreements concluded by the region with international oil companies in order to keep pace with new developments.
While the fourth and final clause of the agreement provides for the opening of a bank account under the supervision of the Baghdad central government at the Central Bank of Iraq or any other bank agreed upon by the two parties, through which the regional government will withdraw the revenues from oil exports.
Sabah stressed that this agreement means that the federal government of Baghdad, represented by the Ministry of Oil and SOMO, will control Kurdistan's oil exports, stressing that it is in the interest of both parties to agree to accelerate the resumption of exports to global markets to benefit from oil revenues.