President Recep Tayyip Erdoğan last week hosted Iraqi Prime Minister Mohammed Shia’ Al Sudani at the presidential complex in the capital Ankara. One of the messages that drew attention following the meeting was concerning water. Türkiye was going to increase the amount of water released from the Tigris for a month despite the draught. This was a friendly gesture towards Baghdad. There is no doubt that during the meeting in Ankara, Iraq was asked about the ongoing arbitration case in Paris.
In less than 24 hours after this meeting, the court in Paris delivered its verdict. Iraq’s oil ministry announced the verdict like a victory, stating Türkiye will pay a compensation of $1.4 billion.
However, the truth of the matter is different. I will share the details about the arbitration verdict and what will follow, but I must first mention how it came to this point.
The legal infrastructure of the Kirkuk-Ceyhan (Yumurtalık) pipeline dates back to the agreements and protocols signed in 1973 and 2010. According to these agreements, Iraqi crude oil would be exported to Ceyhan with the approval of Iraq’s oil ministry. Currently, 500,000 barrels of crude oil reach world markets daily via this pipeline.
Let’s open a bracket here.
The price of oil per barrel soared over $100 first because of the pandemic, then the Ukraine war, and the sanctions on Russia and Iran. The U.S. thought oil prices need to be reduced to push Russia into a corner and relieve the markets. U.S. President Joe Biden visited Mohammed bin Salman in Saudi Arabia and was able to get the Riyadh administration to promise an extra production of 200,000 barrels daily.
These details need to be recalled in order to emphasize the importance of the 500,000 barrels coming to Ceyhan daily. Thus, oil prices, which dropped in fear of recession to $70 in recent weeks, increased again to $80 upon the arbitration verdict, and the closing of the Kirkuk-Ceyhan pipeline.
Let’s close the bracket and continue where we left off.
As Baghdad could not take control over the region, Türkiye tried this time to continue to keep the oil flowing by making a deal in 2012 with the Kurdistan Regional Government (KRG). The federal government in Iraq resorted to arbitration in 2014 and took action against Türkiye. The action was based on reasons such as the oil exported was not approved by the Iraqi Oil Ministry, the deal made in 2010 was violated, and the oil was sold below value. The arbitration application was made under five categories such as storage, transport, and demand for access. Baghdad was demanding from Türkiye in response to this, $33 billion compensation for the years 2012-2018 – considering the following period as well, the amount of compensation demanded totaled $55 billion.
Türkiye put up a legal and diplomatic struggle for nine years against this campaign. On the one hand, Iraq’s allegations in the arbitration were responded, and on the other hand, Iraq’s officials were sent the message to “cancel the arbitration.” Ankara was not driving substantial revenues from the oil pipeline. The oil drilled from Kirkuk and exported to Ceyhan went to the refineries in Israel and Greece. If a court case was going to be in question, then its interlocutors should have been Northern Iraq and the refineries. In fact, contrary to Iraq’s concerns, Türkiye was supporting the country’s territorial integrity. Ankara showed a strong reaction to the independence referendum in 2017, and as a result of his actions, Masoud Barzani had to leave office.
It could be said that Türkiye’s diplomatic efforts were almost working. The reported that reached Ankara in 2019 claimed Baghdad would postpone the arbitration case. However, an actor stepped in, and Baghdad no longer wanted to postpone the case.
At the current point, the arbitration found Baghdad and Ankara partially right. The verdict did not meet Bagdad’s $33-billion demand. Only one of Iraq’s five violation allegations were accepted. Türkiye was charged $1.4 billion. The court found Iraq wrongful for failing to ensure security in the region and maintaining the line and sentenced it to a compensation. At the end of the day, Türkiye’s compensation was limited to about $400 million.
Ankara believes this balance must be paid by whoever is profiting from oil. Though Iraq’s energy ministry is saying, “A delegation is to visit Ankara to establish a new mechanism,” Ankara underscores that the problem is not between Ankara and Baghdad, but between the KRG and the federal government of Iraq. The U.S., meanwhile, is waiting for the problem to be solved and the pipeline to be open as it is impacting oil prices. Iran is another country that benefits from the high oil prices. Tehran is pointed out to be the actor that pressured Baghdad in 2019 to continue the case.
