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Iraq Seeks Arbitration in Dispute With Turkey over Kurdish Oil Sale

  • Dorian Jones

Turkish Foreign Minister Ahmet Davutoglu, left, speaks as his Iraqi counterpart Hoshyar Zebari, listens during a joint press conference in Baghdad, Iraq, Sunday, Nov. 10, 2013

Turkish Foreign Minister Ahmet Davutoglu, left, speaks as his Iraqi counterpart Hoshyar Zebari, listens during a joint press conference in Baghdad, Iraq, Sunday, Nov. 10, 2013

Baghdad has requested legal arbitration in a dispute with Turkey over the sale of Iraqi Kurdish oil. The move comes after the first super tanker of Iraqi Kurdish oil departed from Turkey, despite warnings and threats from Baghdad to not go ahead with the sale. Analysts say the move raises the stakes again in a long-running game of political brinkmanship as Baghdad seeks to thwart Kurdistan's moves towards greater self-sufficiency.

After months of delay and in the face of international warnings, Ankara sold one million barrels of oil piped from the neighboring semi autonomous Iraqi Kurdistan Region.

The sale to an unspecified buyer was made without the consent of the central government in Baghdad. Baghdad had repeatedly warned Ankara any such sale would be illegal.

International relations expert Soli Ozel of Istanbul's Kadir Has University says the sale will further strain bilateral relations.

"Relations are already mainly in tatters. The much promised meetings between Maliki and Erdogan, or reciprocal visits, never really took place. It's just part of the ongoing process of bad relations. But obviously there is no petty defiant act on the part of Turkey and that may change the situation qualitatively," said Ozel.

When Turkey's energy minister Taner Yildiz announced the oil sale, he said it was the first of many. Ankara backs the Iraqi Kurdistan Regional government's claim that it has the constitutional right to sell independently newly found energy reserves.

Ankara has said that the proceeds of any such oil sales will be divided between the KRG and Baghdad, in compliance with the Iraqi Constitution. But on Friday, Iraq's Oil Ministry filed a request for arbitration with the Paris-based International Chamber of Commerce.

Analysts say the KRG is urgently in need of money following Baghdad's decision to cut its budget to punish it for building a pipeline to Turkey. But Sinan Ulgen of the Brussels Carnegie Institution says the dispute ultimately is more about power than money.

"The balance of power between central government and KRG will be affected by that. The KRG will be able to export its oil and gas without every time needing the green light from Baghdad. That will enhance their economic security and that will change the balance of power," said Ulgen.

Concerns about Iraq's territorial integrity have resulted in Washington strongly backing Baghdad and criticizing Ankara over the sale. State Department spokeswoman Jen Psaki said the U.S. does not support any export without the permission of the federal government of Iraq and warned it has concerns about the impact of such sales.

But international relations expert Ozel says Ankara is flexing its regional diplomatic muscles in a bid to secure an important strategic goal.

"Ankara wants to have its way and wants to prove it can have its way. That is number one. Number two, it's very important for Ankara to become a gas and oil and hub and if it cannot do it legally, I think it wants to do it through fait accompli."

But analyst Ulgen claims Baghdad is unlikely to give up without a struggle.

"Baghdad also fears that other regions in Iraq that will follow the same example like Basra and therefore they don't want to set a precedent that in time would weaken the central control over the rest of Iraq's territory."

Until now, Turkey promised it would hold off selling KRG oil until an agreement was reached with Baghdad. Observers claim the timing of Ankara's move could well be connected to the fact that Iraqi Prime Minister Nuri Al Maliki is struggling to form a new government.

With any legal challenge to the oil sale predicted to take months if not years, analysts say both the governments of Turkey and the KRG will likely be banking on the fact that the reality on the ground will by then trump any protracted legal challenge.

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