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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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    Why did the flow of oil between Iraq and Turkey stop?

    Rocky
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    Why did the flow of oil between Iraq and Turkey stop? Empty Why did the flow of oil between Iraq and Turkey stop?

    Post by Rocky Tue 14 Nov 2023, 5:08 am

    Why did the flow of oil between Iraq and Turkey stop?

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    Economy News - Baghdad
    Crude oil may begin flowing from northern Iraq to Turkey again this week after Baghdad said it had reached an “understanding” with Istanbul after pumping it stopped for more than seven months.
    Here are the broad outlines of the dispute over the pipeline:
    What are the latest developments?
    On a visit to Erbil on Sunday, Iraqi Oil Minister Hayan Abdul Ghani announced that he expected to reach an agreement with the Kurdistan Regional Government and foreign oil companies to resume production from oil fields in the Kurdish region within three days, indicating the possibility of its flow resuming soon.
    Turkey indicated last month that the pipeline was ready to begin operations, but Iraq confirmed that it had not received any official notification about the pipeline. A senior energy advisor told Reuters that Baghdad is waiting for the “outstanding financial and technical problems” to be resolved before any resumption of operation.
    Why is it important?
    Although Iraq, OPEC's second-largest oil producer, exports about 85 percent of its crude through ports in the south, the northern route via Turkey still represents approximately 0.5 percent of global oil supplies.
    What prompted the closure?
    Turkey halted flows of 450,000 barrels per day through the export route in northern Iraq leading to the port of Ceyhan on March 25, two days after a ruling issued by the International Chamber of Commerce.
    A source familiar with pipeline operations reported that this included 370,000 barrels per day produced by the Kurdistan Regional Government and 75 thousand barrels per day produced by the federal government.
     
    The International Chamber of Commerce ordered Ankara to pay compensation to Baghdad amounting to about $1.5 billion for unauthorized exports by the semi-autonomous Kurdistan Regional Government between 2014 and 2018.
     
    The Kurdistan Regional Government's exports flow through its pipeline to Fish Khabur on the northern border of Iraq, where the oil enters Turkey and is pumped to the port of Ceyhan on the Mediterranean coast.
    The Iraqi federal government says that the state-owned Oil Marketing Company (SOMO) is the only entity authorized to manage crude oil exports through the port of Ceyhan.
    Turkey closed the pipeline because the federal government won the right to control loading operations at the port of Ceyhan.
    SOMO will have to issue instructions to Turkey on loading ships with cargo, otherwise crude oil will accumulate in warehouses with no way to transport it.
    What are the causes of disagreements?
    Iraq filed a request for arbitration in 2014 before the Paris-based International Chamber of Commerce regarding Turkey's role in facilitating oil exports from Kurdistan without the approval of the federal government in Baghdad.
    Iraq explained that by transporting and storing oil from Kurdistan and loading it on tankers in Ceyhan without Baghdad's approval, Ankara and the Turkish state energy company Botash violated the terms of the pipeline agreement between Iraq and Turkey signed in 1973.
    A source familiar with the case told Reuters that the International Chamber of Commerce ruled in March in favor of Iraq that it has the right to control loading at the port of Ceyhan and see what is being loaded.
    Three sources said that Turkey was also asked to pay 50 percent of the discount with which the KRG oil was sold.
    A source familiar with the case explained that, based on several rulings, the net amount owed by Turkey to Iraq is about $1.5 billion before interest.
    According to a Turkish source, Iraq initially demanded about $33 billion.
    The second arbitration case, which may take about two years, will cover the period from 2018 onwards.
    The Turkish government and the governments of Baghdad and the Kurdistan Region have issued statements since the ruling was issued, but none of them included full details of the decision.
    In addition, the agreement regulating the pipeline obligates Baghdad to pump a guaranteed minimum number of shipments through it, and therefore this will mean Iraq’s commitment to a minimum amount of payments to Turkey, regardless of the amount of crude oil flowing as long as the pipeline is operating, which may further complicate matters, according to the statement. What an Iraqi official said.
    Maintenance work?
    Iraq indicated in May that the pause in March coincided with Turkey's request to inspect the pipeline and storage tanks for any damage resulting from the devastating earthquake that occurred on February 6.
    The two countries agreed to wait until the pipeline maintenance assessment is completed to resume flows while continuing the legal battle over arbitration awards.
    In April, Iraq submitted a petition to a US federal court to enforce the arbitration award issued by the International Chamber of Commerce. Ankara also stated last month that it was considering legal measures against Iraq.
    Turkey is seeking to stop the lawsuit in the American court, and the lack of progress in resolving this issue was among the reasons behind postponing a scheduled visit by Turkish President Recep Tayyip Erdogan to Iraq in August.
    Sources said that Erdogan's visit to Baghdad would help resolve the matter, but that has not happened yet. Turkish Energy Minister Alp Arslan Bayraktar made a surprise announcement during an event in Abu Dhabi on October 2 when he said maintenance had been completed and the pipeline would resume operation during that week.
    Baghdad did not officially comment on the matter at the time, but officials indicated that the talks were continuing. Flows have not yet resumed.
     
    Source: Al-Nahar Al-Arabi



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