Iraq reviewing Turkish proposal to renew 1973 oil pipeline deal with expanded energy cooperation 

Iraq is reviewing a new proposal from Turkey to renew a 1973 agreement for transporting oil from northern Iraqi fields to Turkey's Ceyhan port with broader terms to include gas and petrochemicals cooperation, a source from Iraq's oil ministry was quoted by Iraq's News Agency on Monday. 

The step comes after Turkish President Recep Tayyip Erdoğan formally terminated the decades-old pipeline agreement on Monday, citing its scheduled expiry in July 2026.

In a decision published in its Official Gazette on Monday, Turkey announced that the existing Turkey-Iraq Crude Oil Pipeline Agreement, originally signed in the 1970s, along with all subsequent protocols and memoranda, would be terminated effective 27 July 2026.

"Iraq is keen to maintain economic relations with neighbouring Turkey, and has been in negotiations with the Turkish side since July 2024 to renew the agreement under discussion," the source told the agency, adding that Turkey's energy ministry sent a letter to the Iraqi oil ministry and disclosed its willingness to renew the joint agreement with Iraq for exporting oil along with a new draft appendix on broader cooperation between the two neighbouring countries in aspects of oil, gas and petrochemicals. 

"The Ministry of Oil is currently reviewing the draft agreement sent by the Turkish side and is negotiating with them to reach a version that serves the interests of both Iraq and Turkey."

The source also said that as per the signed deal, either party wishes to terminate the agreement, a written request must be submitted to the other party one year before the expiration date.

The 1.6 million barrels per day Kirkuk-Ceyhan pipeline has been offline since 2023 after an arbitration court ruled in favour of Iraq and ordered Ankara should pay $1.5 billion in damages for unauthorised exports by the Kurdistan Regional Government (KRG) between 2014 and 2018. Turkey is appealing the ruling.

Energy experts rule out both parties reaching a new agreement soon, and say Turkey aims to press Iraq to pardon it from paying the $1.5 billion in damages.  

"The sudden announcement by the Turkish president took Iraq by surprise. It came just as Baghdad and Erbil were nearing an agreement to resume oil exports from the Kurdistan Region via the Ceyhan pipeline. Turkey's primary objective is to pressure Baghdad to drop the $1.5 billion compensation awarded by the International Chamber of Commerce (ICC), as well as to avoid any future liabilities," Harry Istepanian an independent energy and water consultant, remarked to The New Arab. 

"Ankara is also seeking a new agreement with more favourable terms. The storage and loading facilities in Ceyhan have remained idle for more than two years, resulting in significant financial losses for BOTAŞ. Turkey has communicated to Baghdad its desire to negotiate a broader deal that includes cooperation on electricity and petrochemicals, though such an agreement is highly unlikely to be reached under the current Iraqi government," he added. 

In terms of how Turkey's unilateral step might impact ongoing efforts between the Iraqi Federal government and the KRG to resume oil exports from the Kurdistan Region, Istepanian noted that if Baghdad and Erbil manage to finalise an agreement on oil exports, it is likely that flows through Ceyhan will resume for a transitional period of up to 12 months.

"However, the next governments in both Baghdad and the KRG will need to decide whether to negotiate a new long-term agreement with Ankara or explore alternative routes, such as diverting Kurdish oil exports through Iraq’s southern ports," he clarified.

On whether the step by Ankara is leveraging its position to settle outstanding financial claims owed to Iraq, as ruled by the Paris arbitration court, Istepanian opined: "Absolutely. Turkey will likely postpone any payments until a new agreement is reached, potentially next year. The compensation awarded by the Paris arbitration court will most likely be incorporated into a broader settlement between Baghdad and Ankara as part of future negotiations."

Karwan Hama Saleh, a Kurdish economist and political analyst, told TNA that Turkey is not seeking to halt Iraqi oil exports via its territories, but plans a new deal with Iraq that is to be consistent with the recent geopolitical shifts in the region and favours Ankara economically, politically, and try to terminate or elevate paying liabilities as per the ICC ruling.

He also said that if Turkey allows KRG oil exports to be made via Iraq's State Marketing Company (SOMO), then the new deal opens a horizon that includes mechanisms for resuming oil exports via the Kurdistan region.