Iraq Halts Northern Crude Exports after Winning Arbitration Case against Türkiye

The Nihran Bin Omar oil field flare stacks burn north of Basra, Iraq, Wednesday, March 22, 2023. (AP)
The Nihran Bin Omar oil field flare stacks burn north of Basra, Iraq, Wednesday, March 22, 2023. (AP)
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Iraq Halts Northern Crude Exports after Winning Arbitration Case against Türkiye

The Nihran Bin Omar oil field flare stacks burn north of Basra, Iraq, Wednesday, March 22, 2023. (AP)
The Nihran Bin Omar oil field flare stacks burn north of Basra, Iraq, Wednesday, March 22, 2023. (AP)

Iraq halted crude exports from the semi-autonomous Kurdistan region and northern Kirkuk fields on Saturday, an oil official told Reuters, after the country won a longstanding arbitration case against Türkiye.

The decision to stop shipments of 450,000 barrels per day (bpd) of crude relates to a case from 2014, when Baghdad claimed that Türkiye violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil through a pipeline to the Turkish port of Ceyhan.

Baghdad deems KRG exports via Turkish Ceyhan port as illegal.

The International Chamber of Commerce ruled in favor of Iraq on Thursday, Iraq's oil ministry confirmed on Saturday.

Türkiye has informed Iraq that it will respect the arbitration ruling, a source said.

Turkish shipping officials told Iraqi employees at Türkiye’s Ceyhan oil export hub that no ship will be allowed to load Kurdish crude without the approval of the Iraqi government, according to a document seen by Reuters.

Türkiye subsequently halted the pumping of Iraqi crude from the pipeline that leads to Ceyhan, a separate document seen by Reuters showed.

On Saturday, Iraq stopped pumping oil through its side of the pipeline which runs from its northern Kirkuk oil fields, one of the officials told Reuters.

Iraq had been pumping 370,000 bpd of KRG crude and 75,000 bpd of federal crude through the pipeline before it was halted, according to a source familiar with pipeline operations.

"A delegation from the oil ministry will travel to Türkiye soon to meet energy officials to agree on new mechanism to export Iraq's northern crude oil in line with the arbitration ruling," a second oil ministry official said.

Iraq will discuss with the relevant authorities ways to ensure the continuation of oil exports through the port of Ceyhan and state-owned SOMO's obligations with oil companies, Iraq's oil ministry said in a statement.

The ruling, in which Türkiye has been ordered to pay Iraq around $1.5 billion before interest, covers the 2014-2018 period, according to a source familiar with the case who spoke on condition of anonymity because they were not authorized to speak with the media.

A second arbitration case, which the source expects to take around two years, will cover the period from 2018 onwards.

Turkish government officials did not immediately respond to requests for comment.

Production risk

The final hearing on the arbitration case was held in Paris in July 2022, but it took months for the arbitrators, the secretariat of the arbitration court and the International Chamber of Commerce to approve the verdict, the source familiar with the process said.

The impact on the KRG's oil production depends heavily on the duration of the Iraqi Turkish Pipeline (ITP) closure, sources said, adding this would cause significant uncertainty to oil firms operating in the Kurdistan Region in Iraq (KRI).

A cessation of exports through the pipeline would trigger a collapse of the KRI economy, according to a letter last year to US representatives from Dallas-based HKN Energy, which operates in the region.

Türkiye would need to source more crude from Iran and Russia to make up for the loss of northern Iraqi oil, the letter said.

Analysts have warned that companies could withdraw from the region unless the environment improved.

Foreign oil firms, including HKN Energy and Gulf Keystone, have linked their investment plans this year to the reliability of KRG payments, which face months of delays.



Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
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Saudi Non-Oil Exports Hit Two-Year High

The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)
The King Abdulaziz Port in Dammam, eastern Saudi Arabia. (“Mawani” port authority)

Saudi Arabia’s non-oil exports soared to a two-year high in May, reaching SAR 28.89 billion (USD 7.70 billion), marking an 8.2% year-on-year increase compared to May 2023.

On a monthly basis, non-oil exports surged by 26.93% from April.

This growth contributed to Saudi Arabia’s trade surplus, which recorded a year-on-year increase of 12.8%, reaching SAR 34.5 billion (USD 9.1 billion) in May, following 18 months of decline.

The enhancement of the non-oil private sector remains a key focus for Saudi Arabia as it continues its efforts to diversify its economy and reduce reliance on oil revenues.

In 2023, non-oil activities in Saudi Arabia contributed 50% to the country’s real GDP, the highest level ever recorded, according to the Ministry of Economy and Planning’s analysis of data from the General Authority for Statistics.

Saudi Finance Minister Mohammed Al-Jadaan emphasized at the “Future Investment Initiative” in October that the Kingdom is now prioritizing the development of the non-oil sector over GDP figures, in line with its Vision 2030 economic diversification plan.

A report by Moody’s highlighted Saudi Arabia’s extensive efforts to transform its economic structure, reduce dependency on oil, and boost non-oil sectors such as industry, tourism, and real estate.

The Saudi General Authority for Statistics’ monthly report on international trade noted a 5.8% growth in merchandise exports in May compared to the same period last year, driven by a 4.9% increase in oil exports, which totaled SAR 75.9 billion in May 2024.

The change reflects movements in global oil prices, while production levels remained steady at under 9 million barrels per day since the OPEC+ alliance began a voluntary reduction in crude supply to maintain prices. Production is set to gradually increase starting in early October.

On a monthly basis, merchandise exports rose by 3.3% from April to May, supported by a 26.9% increase in non-oil exports. This rise was bolstered by a surge in re-exports, which reached SAR 10.2 billion, the highest level for this category since 2017.

The share of oil exports in total exports declined to 72.4% in May from 73% in the same month last year.

Moreover, the value of re-exported goods increased by 33.9% during the same period.