The clock that was ticking down to economic disaster for Iraq on 27 July has been paused, with Turkey agreeing to a one-year temporary arrangement that ensures the continuation of critical oil exports running via pipelines from northern Iraq into the Turkish port of Ceyhan. The new one-year protocol covers the entire Iraq-Turkey Pipeline (ITP) corridor – comprising two separate oil pipelines – treating it as a single, unified mechanism, in line with the original 1973 'Crude Oil Pipeline Agreement'. These routes were made even more vital to Iraq's ability to monetise its oil flows following the effective closure of the Strait of Hormuz on 28 February and ongoing disruptions since then. Before that, around 95% of Iraq's crude was shipped through that route to key export destinations in Asia, including China, with over 90% of Baghdad's annual budget historically coming from those oil exports. As a result of the Strait's blockade, Iraq's oil storage tanks filled quickly to capacity, and with highly limited options for transporting its crude elsewhere, it was forced to shut down production wells. That, in turn, dramatically increased the risk of permanent damage to Iraq's oil production through a loss of reservoir pressure, water infiltration, and corrosion, among other factors. But how secure is this new arrangement with Turkey and what are the chances that a permanent solution will be agreed?
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As it stands, according to a statement by Khazal Hostani, director general of contracts at the Kurdistan Region of Iraq's (KRI) Ministry of Natural Resources, the temporary protocol will keep more than 200,000 barrels per day (bpd) flowing through the Ceyhan pipeline corridor, in line with the volumes going through it immediately prior to the onset of the Strait of Hormuz crisis. That said, these flows through northern Iraq into Turkey had been significantly reduced – and for two and a half years, from March 2023, halted completely – following an international arbitration ruling by the International Chamber of Commerce's (ICC) on 13 February that year. The ICC had judged that Turkey pay Baghdad US$1.5 billion in damages for breaching the 1973 'Crude Oil Pipeline Agreement' by allowing the Erbil-based semi-autonomous KRI northern Iraqi region's government (the KRG) to circumvent the Baghdad-based Federal Government of Iraq (FGI) and export oil independently. Turkey then halted the flow of oil through the northern Iraq pipeline route, which at the time regularly exported approximately 450,000 bpd of crude from the Kirkuk region to Ceyhan. The prohibition on the KRG selling oil independently from the FGI had been a core condition of the 2014 agreement between Baghdad and Erbil, as laid out in a simple trade?off: the KRG would funnel the crude produced in its territory – roughly 550,000 barrels a day at the time – to the federal authorities for marketing through the state-owned State Organiza