According to Reuters, the semi-autonomous Iraqi region of Kurdistan has stopped paying $6 billion in debts through crude cargoes to energy dealers including Vitol and Petraco.
Oil exports from Iraqi Kurdistan to Turkey’s Ceyhan port on the Mediterranean Sea were blocked on Saturday as a result of Iraq winning an arbitration lawsuit in which it claimed Turkey had broken the terms of a contract by permitting Kurdistan to export oil without Baghdad’s authorization.
Reuters reported that according to three trading sources, Kurdistan owes over $6 billion in total to traders who pre-paid for petroleum before the suspension.
These creditors include the leading trader in the world, Vitol, and a smaller rival, Petraco.
Since Kurdish exports account for around 0.5% of the world’s oil supply and are a significant source of crude for refineries in the Mediterranean, the stoppage resulted in an increase in oil prices.
This week, a few oil companies began to halt production in Kurdistan.
Baghdad wants to manage oil exports via its state marketing company SOMO and wants oil sales profits to be put in a separate bank account, according to Reuters, which cited an Iraqi oil ministry legal adviser familiar with the conversations with Kurdistan.
The adviser stated, echoing past ideas, that the account would have many uses, including debt repayments, and would be managed by the Kurdish administration under Baghdad’s supervision.
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