Anticipated Restart of the Iraq-Türkiye Pipeline
On February 2, 2025, the Iraqi Parliament approved amendments to the budget law to subsidize production costs for international oil companies operating within the Kurdish Regional Government (KRG). The extraction and transportation cost per barrel has been set at $16, a significant increase from the previously proposed $7.9 per barrel, which the KRG had deemed insufficient.
This financial adjustment is expected to facilitate the resumption of oil exports through the Iraq-Türkiye pipeline, which has been inactive since March 25, 2023, following an arbitration ruling by the International Chamber of Commerce. The halt in operations has reportedly led to a $23 billion loss for the KRG. Iraqi Oil Minister Hayan Abdel-Ghani announced on February 4 that KRG oil would be delivered to Iraq’s State Organization for Marketing of Oil (SOMO), with necessary procedures underway with Türkiye to export oil from the Ceyhan Port.
Expert Insights
Alberic Mongrenier, Executive Director of the European Initiative for Energy Security, emphasized the economic importance of this development, noting that both the central Iraqi government and the KRG have strong incentives to make this agreement work. He cautioned, however, that future friction over cost rates could arise, but the current compromise is viable as the agreed-upon rate is nearly double the previous offer.
Francesco Sassi, a research fellow in energy geopolitics and markets at Ricerche Industriali ed Energetiche (RIE), highlighted that resuming oil flows to Türkiye could enhance dialogue between Ankara and Baghdad. He also noted that stabilizing Iraq’s economy through efficient and transparent management of its oil reserves is crucial, especially amid high volatility in oil prices driven by global economic factors.
Looking Ahead
The increased payments to KRG oil companies represent a pivotal move toward revitalizing Iraq’s oil exports and strengthening regional economic ties. As both parties work to implement this agreement, the international community will monitor its impact on regional stability and global oil markets.
