Economic Insights – Baghdad
The Oil, Energy, and Natural Resources Committee within the House of Representatives has expressed optimism regarding the imminent resumption of Iraqi oil exports via the Turkish Jihan pipeline. This development coincides with ongoing preparations for negotiations between Iraq and Turkey to address outstanding debt issues originating from Ankara.
On this day, the Ministry of Oil has scheduled a meeting in Baghdad with the Ministry of Natural Resources from the Kurdistan region to deliberate on contractual agreements and to cultivate a framework that supports the advancement of oil fields. Additionally, an invitation has been extended to foreign companies with contracts with the Kurdistan Regional Government to assist in the development of the region’s oil reserves.
The ministry stated that the discussions will focus on “issues related to existing contracts, aiming to achieve understandings that align with best global practices in oil field development, thereby serving national interests.”
Sabah Sobhi, a member of the Oil, Energy, and Natural Resources Committee, noted in an interview that the Ministry of Oil has deployed a specialized committee to Zakho to inspect the pipeline connections from the Khormore field in the Kurdistan region to Turkey. He indicated that all necessary procedures for the resumption of oil exports through the Jihan pipeline have been concluded. However, Iraq is awaiting confirmation from Turkey on the integrity of these pipes to commence oil exports within the forthcoming days, approximately two years after operations ceased on March 25, 2023.
He emphasized that “the resolution regarding the debt Iraq claims from Turkey, following a ruling from the International Chamber of Commerce in Paris, remains unclear.” The ruling mandated Turkey to remit $1.4 billion to Iraq for breaching the pipeline agreement executed in 1973 and its subsequent amendments, which stipulate that “the Turkish government must adhere to Iraqi directives concerning the movement of crude oil from Iraq to all storage, drainage, and final station centers.” He also referenced that “Ankara had previously agreed with the Kurdistan region on an oil pumping fee of $3.50 per barrel, up from the prior rate of $1.25.”
Committee members have expressed hope for both countries to engage in negotiations that would resolve the dual debt issues and the dues owed to operating companies, particularly after recent amendments to the budget law aimed at clearing persistent matters between the Kurdistan region and the federal government. Furthermore, they highlighted the necessity of enacting the oil and gas law to fundamentally address issues faced by both the region and oil-producing provinces such as Basra, Kirkuk, and Maysan.
Dr. Safaa Al-Shammari, an advisor at the Baghdad Chamber of Commerce, pointed out that the process to resolve financial and legal impediments surrounding the resumption of oil exports through the Turkish Jihan pipeline has been sluggish, with no clear strategy in sight. He articulated that this delay, spanning nearly two years, has resulted in significant economic losses for Iraq—not only due to halted exports but also because of the absence of decisive approaches to address the debt owed to Turkey and the dues of companies working within the region.
Dr. Al-Shammari cautioned that “repetitive negotiations yielding no practical resolutions weaken Iraq’s position and adversely affect oil revenues, which are pivotal to the national economy.” He asserted that the $1.4 billion recognized by the International Chamber of Commerce in favor of Iraq against Turkey must be central to any discussions, coupled with the urgency for a defined timeline for collection.
He called for “decisive measures to ensure the restoration of oil exports as quickly as possible, either by securing the technical readiness of pipelines or through agreements guaranteeing Iraq’s financial claims.” Furthermore, he stressed that prioritizing the legislation of the oil and gas law is essential to clarify relations between the federal government and the Kurdistan region, thus preventing recurring crises that impede exports and threaten the national economy.”
