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Oil Prices Climb As Iraq's Dispute With Kurdistan Escalates

An oil dispute between the Iraqi government and the semi-autonomous Kurdistan region that also involves Turkey has escalated this week, pushing oil prices higher.

Brent crude is inching closer to $80 and WTI was above $73 per barrel at the time of writing as Kurdish oil flows remain shut in for the fourth day in a row.

The dispute flared up last week, leading to the Iraqi government shutting down oil exports from Kurdistan to Turkey. The shutdown followed an International Chamber of Commerce court ruling in favor of Baghdad in a case against Turkey that claimed that the latter should not have allowed for the flow of oil from Kurdistan to Ceyhan without the express approval of the government in Baghdad.

Initially, Turkey said it would abide by the court's decision but this week, the Turkish Ministry of Energy and Natural Resources said in a statement that the court had in fact ruled that Iraq should compensate Turkey for violating an oil export deal the two countries had.

In the statement, the Turkish ministry said that the ICC had dismissed four of Iraq's five claims against it while accepting most of Turkey's claims.

Kurdistan exports about 400,000 bpd via the pipeline that connects Iraq with Turkey. Currently, the government of the semi-autonomous region is discussing next steps with Baghdad but an agreement has yet to be reached.

Iraq has stated it is very much in favor of restarting oil exports from Kurdistan but it has suggested it would only agree to that on its own terms. These terms involve the state oil company of Iraq, SOMO, being in charge of the exports, rather than the Kurdish government.

"The best way for oil to get exported through SOMO and for the Kurdistan Region to get its share," a spokesman for the Iraqi oil ministry told Rudaw on Tuesday.

These are just the most recent events in a long battle for control over the oil resource of Kurdistan between the region's government and the government in Baghdad.

By Charles Kennedy for Oilprice.com

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Charles Kennedy

Charles is a writer for Oilprice.com More