Pipeline Dispute Resolved: Iraqi Kurdistan Oil to Flow Again

An ongoing dispute between the central Iraqi government and Kurdish authorities over oil sales, which was preventing the export of over 500,000 barrels per day and driving up petroleum prices, has been resolved. The agreement reopens the pipeline that transports oil from Iraqi Kurdistan to the Turkish port of Ceyhan, from whence it is shipped to European markets. As part of the agreement, the Kurds conceded to demands long made by Baghdad that they sell oil through the Iraqi national oil firm and put the money in the central bank. An important oil pipeline in northern Iraq was shut down because of the conflict around a week ago, driving up global crude prices to near $80 per barrel and threatening supplies in European countries seeking alternatives to Russian fuel. Iraq is the world's fifth-largest oil producer, and the pipeline transports around 400,000 barrels per day from Iraqi Kurdistan and an additional 70,000 barrels from the rest of Iraq.

According to the World Bank, Iraq is one of the world's most oil-dependent countries, and Prime Minister Mohammed al-Sudani has stated that the restricted oil exports are harming government revenue. The World Bank estimates that Iraq's oil revenues make up more than 85% of the country's total budget. Baghdad and the oil-rich northern area, where Kurdish have governed themselves with some freedom since the US deposed Saddam Hussein in 2003, have been at odds for years, but this arrangement gives a short-term solution to the problem.


Oil from the landlocked Kurdish region can only reach the global market through the pipeline. Refiners in the Mediterranean and China receive shipments from businesses like Vitol and Phillips 66, as well as the private Swiss dealer Petraco Oil Co. Since most EU states banned Russian crude imports as part of sanctions against Moscow at the end of last year, the pipeline's significance to Europe has grown. Data from commodities-tracking firm Kpler shows that this year Italy, Romania, Croatia, and Greece have used Kurdish crude in favor of oil from Moscow.

Producers like Norway's DNO ASA, Genel Energy PLC, and Gulf Keystone Petroleum Ltd. are ready to get back to work as soon as the temporary arrangement is finalized. Nevertheless, some oil executives at international businesses are concerned that the accord could yet break apart, leading to another export ban. Nonetheless, representatives from both the Kurdish and central governments have pledged to move swiftly forward with meaningful negotiations to codify the allocation of revenue from oil sales. For Iraqi Kurdistan, where the majority of the region's economy relies on exports, the stakes are especially high. Analysts and company representatives participating in Kurdistan warn that a final agreement acceptable to all sides may be difficult to achieve.
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