18 Apr 2023; MEMO: Turkiye is considering petitioning a federal court in the United States to enforce an arbitration award amounting to hundreds of millions of dollars that it won against Iraq, amid a dispute over crude oil exports Ankara received from Iraq's autonomous northern Kurdish region.
Almost nine years after Iraq began suing Turkiye over an oil deal between the Turkish government and Iraq's Kurdish Regional Government (KRG) on exports through the Kirkuk-Ceyhan pipeline, the International Chamber of Commerce (ICC) ruled last month that Ankara had breached its contract with Baghdad by directly trading oil with Erbil – which both have a shared responsibility over Iraq's oil industry – between 2014 to 2018.
The ICC subsequently awarded $1.9 billion to the Iraqi government, as a 2010 amendment to the Iraq-Turkey Pipeline agreement clarifies that Iraq's Oil Ministry and its corporation, Somo, are the only legitimate authorities that can issue orders for loading oil.
As it found that Turkiye had only breached the contract by loading tankers with the oil that was transported to Ceyhan port under the instructions of the KRG, the ICC also awarded over $500 million to Ankara for its counter-claims regarding unpaid pipeline throughput fees going all the way back to the 1990s, as well as low capacity at the pipeline.
According to the London-based news outlet, Middle East Eye, two anonymous sources familiar with the matter informed it that Turkiye is now considering petitioning a US federal court to enforce the $527 million arbitration award owed to it.
EXPLAINER – What is the Iraq-Turkiye oil pipeline dispute and who is on the hook?
It is seen as a possible retaliation to Iraq's own filing of its petition to the same court – the District Court of the District of Columbia – to request it to move ahead with "Recognising, Confirming and Enforcing the Final Award issued by the Arbitral Tribunal".
If US court does rule in favour of Iraq, it would reportedly be able to seize Turkiye's significant financial assets within the US in order to properly enforce the arbitration ruling.
One of the sources who spoke to the outlet said that Turkish officials were surprised by the Iraqi decision to file the enforcement request in the US, particularly after Turkish President Recep Tayyip Erdogan's order to double the flow of water to Iraq via the Tigris River which passes down through it. "Ankara may file a counter-enforcement action, and there might be more legal steps to remedy the situation", the source said.
The other source revealed that the Turkish government has been disappointed by the Iraqi government's general silence on the issue and lack of communication with Ankara, stressing that "Iraqi officials didn't approach Ankara on the ICC ruling". Turkiye had, instead, "expected that Baghdad would formally relay the ruling and begin the calculation for the interest rates that are due on the awards. But that didn't happen."
Until the issue is settled, the oil flow from Iraq and the KRG to Turkiye remains obstructed, as both countries stopped the flow at the pipeline after the ICC ruling was issued. Despite the signing of a deal early this month by Iraqi Prime Minister, Mohammed Shia Al-Sudani, and KRG Prime Minister, Masrour Barzani, which aims to restart northern oil exports through Turkiye, Ankara has said that it must conduct necessary repairs to corrosion and damage caused by the devastating earthquakes that hit southern and south-east Turkiye – as well as north-west Syria – on 6 February.
