Iraq's Fortunes Held Hostage to Pipeline Politics

Rising oil prices and Kurdistan’s deepening financial crisis have incentivized high-level talks between Iraq and Turkey this week aimed at breaking the deadlock over the shuttered export pipeline to the Mediterranean. Five months after it was closed, halting around 13% of Iraq’s total crude exports, some of the Kurdish region’s upstream operators have begun selling crude to the local market. But the limited volumes and knockdown prices offer them scant consolation. Political intransigence in Baghdad and Ankara has emerged as the main obstacle to an agreement that could see more than 450,000 barrels per day of oil swiftly returning to the market. Iraq’s Oil Minister Hayan Abd al-Ghani flew to Turkey on Monday — his first visit since Ankara closed the Iraq-Turkey pipeline (ITP) in March — just as Turkey’s Foreign Minister Hakan Fidan embarked on a three-day visit to Iraq. Some Iraqi officials are optimistic about reaching a deal, now that talks have resumed. But resolving the pipeline dispute — which erupted when an arbitration case brought by Iraq against Turkey resulted in Ankara being ordered to pay Baghdad $1.5 billion in compensation — could still be a long way off. “There are a lot of things attached to it. This is not just about the oil and payment,” says an Iraqi industry source. Factions within Iraq’s Iran-backed government are resisting making concessions that would primarily benefit the Kurds. Meanwhile, amid continued anger in Turkey over the arbitration award and awareness of Iraq’s reliance on Turkey to mitigate its worsening water problems, Ankara has given no indication that it is ready to reopen the pipeline.