Middle East
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Iraq "impaled" Turkey financially - 1.4 billion compensation for oil exports from Kurdistan - Ankara "cries" in the courts

Turkey has filed a petition with the International Chamber of Commerce against Iraq to overturn an arbitration ruling that imposed net damages of $1.4 billion on Ankara in relation to crude oil exports from the Kurdistan region, a senior Turkish official told reporters on Thursday. 

"We say we can have an amicable solution to this issue, but the Iraqi side continues to take legal action," said Alparslan Bayraktar, Turkey's energy minister. "But from a legal point of view, we have to check and take care of our own interests. We will file a petition in the Paris court for a cessation case."

It is not immediately clear whether Turkey is seeking to overturn the entire ruling or is seeking a partial reversal. 

In April, Iraq launched an enforcement action against Turkey in the US District Court for the District of Columbia Circuit in April to collect a judgment that alleges Turkey violated its contract by directly trading oil with the Kurdish Regional Government (KRG) between 2014 and 2018.

Turkey argued in the US court last week that Iraq should pay Ankara a net amount of $956 million in damages after calculating interest on an arbitration award that originally granted a net amount of $1.4 billion to Baghdad.

The ICC awarded $1.9 billion to Iraq, but also awarded more than $500 million to Turkey for its counterclaims relating to low pipeline capacity and unpaid transportation fees dating back to the 1990s. All are subject to outstanding interest.

The motion says Turkey has already sent a letter to Iraq on August 28, reminding it of the ICC rulings on interest, providing the calculations and demanding immediate payment of the $956 million. Iraq had not responded to the letter, according to the proposal.

Following the ICC ruling, Ankara halted oil flow on the Iraq-Turkey pipeline, which produces about 0.5 percent of global supply. Ankara cited the need for repairs due to erosion and damage after the devastating 6 February earthquakes that struck southern Turkey.

Bayraktar said Turkey had to impose force majeure because the earthquake affected the six provinces through which the pipeline passes, adding that 40 days after the earthquake a flood damaged the domestic Turkish oil pipeline, causing a leak.

"It was a warning signal for us," he said. "We have to check everything, we have already checked the Ceyhan facilities for storage tanks and also loading operations, but we decided to check the whole pipeline, 650 kilometers, two pipelines, all the way from [Iraq] to Ceyhan."

Bayraktar added that an independent inspector has been working on the inspections and is preparing a report that will be used in the future if Iraq also sues Ankara for imposing force majeure on the oil flow. 

Turkish and Iraqi officials were negotiating a deal to end the impasse.

Turkey wants Baghdad to withdraw a second case at the ICC concerning the post-2018 period and find mutual ground to work out an award. Ankara also asked Iraq to find a payment system that could satisfy both the KRG and Baghdad.

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