The oil agreement with Kurdistan: Washington pushed Baghdad toward concessions and acceptance through both enticement and intimidation.
The resumption of oil flow through the pipeline between the Kurdistan Region and Turkey continues to generate conflicting interpretations. Some view it as an inevitable step brought about by US pressure and threats of sanctions against Baghdad, while others portray it as a sunrise over the region’s mountains, but only a first step.
Oil Price, a website specializing in oil affairs, stated in a report translated by Shafaq News Agency that “the United States views the Kurdistan Region as a strategic partner and is exerting pressure on Baghdad to cut its dependence on Iran, while China, Russia, and Iran support Baghdad’s position of central control over the oil sector.”
The website quoted an oil sector source close to the Iraqi Oil Ministry as saying, “The United States’ entry into the two-and-a-half-year conflict is the main reason behind the lack of sudden objections from the Iraqi federal government and Turkey.” He noted that “Baghdad had previously demanded that Ankara pay $1.5 billion in damages for exports it considers illegal by the Kurdistan Region before resuming operations on the pipeline.”
He explained that “early congratulations on the resumption of oil flows from the region to Turkey, on September 27, came from US Secretary of State Marco Rubio, who confirmed that Washington helped facilitate the deal.”
The report continued, saying, “Washington began increasing pressure on Baghdad to agree to such a deal with the region last March through a very frank conversation between Rubio and Iraqi Prime Minister Mohammed Shia al-Sudani, where the US Secretary of State emphasized the importance the United States places on Iraq’s energy independence, and thus stopping supporting Iran by continuing to buy gas and electricity from it.” He added, “It was made clear at the time that if Baghdad moved in these directions, it would receive more investment from the United States, but if it did not, there would be no more investment, but rather more sanctions would be imposed on it, and their severity would escalate very quickly.”
However, the Oil Price report stated that, given the significant interest of both the global North and South in the outcome of the relationship between the Kurdistan Region and the federal government in Baghdad, it remains to be seen which of the two sides will use the carrot-and-stick approach to be most convincing to Baghdad.
For its part, the English-language newspaper The National described the resumption of oil flow through the Kurdistan Region’s oil pipeline to Turkey as a “sunrise” over the region’s mountains after a two-year closure. However, it considered this to be only the first step for the region and Iraq as a whole.
The Abu Dhabi-based newspaper’s report, also translated by Shafaq News Agency, stated that the Iraq-Turkey Pipeline (ITP) began operations in 1977, transporting oil from the area surrounding the giant Kirkuk field to the Turkish port of Ceyhan on the Mediterranean. The report noted that this route was vital for Iraq because it avoided reliance on its political rivals, Iran to the east and Syria to the west.
He pointed out that after Saddam Hussein’s invasion of Iran in 1980, Iraq’s oil exports through the Gulf were cut off, leaving Turkey as the sole outlet for Iraqi oil. He explained that a second, larger pipeline along the same route entered service in 1987, late in the Iran-Iraq War.
The report explained that in 2013, the Kurdistan Region completed a pipeline linking its own fields to the ITP and began marketing its oil independently of the Iraqi federal authorities, which consider this to be their sole responsibility. It noted that a ruling in March 2023 in favor of Iraq on this dispute forced Turkey to close the pipeline. Although Ankara was subsequently prepared to reopen it, the dispute over oil rights between the federal authorities and the region hindered progress.
According to the report, al-Sudani was keen to resolve the pipeline crisis, but was under pressure from anti-Kurdish political elements in Baghdad. The report explained that al-Sudani was keen to reach an agreement to strengthen his position before the November parliamentary elections.
He also stated that the United States was exerting its influence in a bid to help its companies operating in Kurdistan, bring more oil to the market, and weaken Iranian-linked interests in Baghdad. He added that the Kurdistan Region and the federal government had reached an agreement whereby the federal Ministry of Oil, through SOMO, would market the oil, which in turn would open the way for central budget payments to Erbil.
However, the report noted that international oil companies operating in Kurdistan have refrained from resuming exports until their financial interests are guaranteed and the validity of their contracts is accepted by the federal government, at least implicitly. It added: “Because of this, the agreement was almost derailed by drone strikes that caused minor damage to some fields in July and temporarily cut production by about 100,000 barrels per day. However, after lengthy negotiations, an agreement was reached that was joined by all international oil companies operating in the region, with the exception of the Russian companies Rosneft and Gazprom, and the Norwegian company DNO.”
While SOMO will sell the oil, and companies will initially receive $16 per barrel, an amount that will be adjusted later, the Kurdistan Region is scheduled to deliver at least 230,000 barrels per day to SOMO for export, with 50,000 barrels per day allocated for domestic use, according to the report.
He pointed out that what is most significant in its long-term implications is that, after two decades of legal disputes, disagreements, and budget cuts, Baghdad has accepted the legitimacy of the Kurdish oil sector’s independence, while Erbil, in turn, has relinquished its sovereignty to federal authorities regarding oil exports and payments.
The report concluded that a more stable financial flow from the federal budget is expected to stabilize the Kurdish economy, and that many international companies will now be able to invest more consistently in new developments, boosting the region’s production.
However, he noted at the same time that the next stage concerns the expiration of the Iraq-Turkey pipeline agreement in July of next year. Turkey has previously indicated that it will not renew the agreement and wants a new treaty.
The website also noted that the pipeline is important to both countries, but could be put to much better use. It could be rehabilitated to its original capacity of 1.5 million barrels per day, while Turkey wants to expand it to carry 2.2 million barrels per day. It also noted that Turkey will likely seek to negotiate a reduction in the international arbitration compensation it owes Baghdad.
The report stated that Iraq had previously proposed the idea of building a pipeline to Aqaba in Jordan, which would allow it to have an independent outlet from the Gulf. However, it noted that this pipeline could be interrupted by bad weather or military aggression.
He emphasized that the recent war between Israel and Iran had heightened these concerns, and that the Aqaba route was long and costly. He noted that the new regime in Syria was open to the idea of reviving the Kirkuk-Banias pipeline, an option that would strengthen Baghdad’s position in its negotiations with Ankara.
The website concluded its report by stating that “previously limited-term deals on oil and the budget between Baghdad and Erbil were prone to collapse within a few months,” noting that “there are many details that could hinder cooperation this time, and that fixing a major source of headaches and distractions should make the entire Iraqi energy sector run more smoothly.”
Shafaq.com