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Iraq's oil minister said Friday that the country has started legal action against Turkey as part of the ongoing dispute over the semi-autonomous Iraqi Kurdistan region's independent oil exports.

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"The Oil Ministry has taken the necessary procedures by asking the legal parties in Baghdad and Ankara to start the legal process to conduct a lawsuit against the Turkish government because it allows the [Kurdistan] region to pump oil through the export pipeline without the approval of the central government," Abdul Karim Luaibi said Friday, according to a statement given to Platts by the Oil Ministry.

Over the past year, the Kurdistan Regional Government has built a 300,000 b/d pipeline within its northern Iraq territory and connected it to the 40-inch-diameter leg of the Iraq-Turkey Pipeline. Under a series of oil and gas export agreements signed between Erbil and Ankara late November, crude exports have begun flowing, and the KRG announced on January 8 that it would load the crude onto tankers starting this month -- completely independent of Baghdad. That leg of the pipeline would also be under the control of the KRG and Turkey, the announcement said.

The KRG argues the revenue will first go to pay the contractors, then to reparations it says are due from Saddam Hussein-era atrocities, and then will be split with Baghdad.


Baghdad, however, considers as illegal the 50-plus production sharing contracts the KRG has signed with global oil companies, and has refused to pay the contractors. It demands the KRG send exports through the Iraq-Turkey Pipeline, be sold by the State Oil Marketing Organization, and that the KRG pay its companies from its share of the revenue redistributed by the central government to the provinces.

The KRG's cut is typically 17% of that revenue. The Iraqi Cabinet on Wednesday passed a draft budget that holds hostage that revenue until 400,000 b/d of Kurdish oil is consistently exported through the Baghdad-controlled export mechanism.

Baghdad is not only implementing repercussions on the Kurds. It views Turkey and any purchasers as complicit in "smuggling" Iraqi oil.

"All the companies and parties have been informed not to deal with the region in purchasing any amounts of oil, which is considered as smuggling and will be subjected to the judicial process," the Luaibi statement said. He said purchasers would be banned from buying any other Iraqi crude or fuel sold by or selling fuel purchased by SOMO.

He reiterated the Iraqi argument that Turkey is also violating the 2010 amended agreement governing the Iraq-Turkey Pipeline. He said that all Turkish companies would be blacklisted from Iraqi contracts regardless of industry sector, and that existing contracts would be canceled. TPAO is operator of the Mansuriya gas field and junior partner in Kuwait Energy's Siba gas field, Gazprom Neft's Badra oil field and CNOOC's Missan oil fields development.

"It is not for the interests of Turkey that this relation is affected by that," he said.

--Staff, newsdesk@platts.com
--Edited by Derek Sands, derek.sands@platts.com