Pipeline Politics

Dispute between Turkey and Iraq cuts European crude supply

Earlier this week, officials from Turkey and Iraq tried to reach a breakthrough in talks to restart flows through a pipeline that carries oil from the fields in Northern Iraq to the Turkish port of Ceyhan.  This pipeline carried 400-500,000 b/d in recent years, destined mostly for Europe.  Turkey halted flows on the pipeline in March of this year after the International Court of Arbitration at the International Chamber of Commerce ordered them to pay a reported net $1.5 Billion in damages to Iraq for unauthorized transportation of oil.

According to the ruling, Turkey breached a 50-year-old pipeline transit agreement by allowing crude oil from Kurdistan to be exported without Bagdad’s consent.  The Turkish action keeps 500,000 b/d of oil off the global market at a time that oil prices are rising, and Europe needs alternative supplies due to their ban on Russian oil imports.  A resumption of exports would increase the availability of oil in the Mediterranean and boost the employment opportunities for Aframax and Suezmax tankers in the region.

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