Turkey accepts arbitration verdict on oil

The International Chamber of Commerce has given an arbitration verdict in the 2014 case in favour of Iraq in the Iraq-Turkey dispute over oil supplies from the fields in the Kurdistan region in Iraq, and Turkey has to pay $1.5 billion. Turkey has said that it would honour the arbitration verdict. Turkey violated a joint agreement by allowing the Kurdistan Region Government (KRG) to export 450,000 barrels per day to the Turkey port of Ceyhan. The oil exports have been halted on both the sides. An Iraqi oil ministry official said, “A delegation from the oil ministry will travel to Turkey soon to meet energy officials to agree on a new mechanism to export Iraq’s northern crude oil in line with the arbitration ruling.” At the internal level, the Kurdistan Regional Government (KRG) does not see it as an adversarial verdict either. According to KRG’s ministry of natural resources “arbitration ruling in favour of Iraq against Turkey will not impede relations with Baghdad’s government and dialogue to continue.”

What is interesting and important about this is that it shows how countries with problems can solve them in peaceful ways, and that it need not result in a stand-off leading to political and diplomatic conflict. It will be said that the issue of supply of crude oil by the Regional Kurdistan Government (RKG) is an economic issue and that it is easier to sort out economic issues than more complicated security ones. Perhaps this is true. But solving economic problems between countries is as important as the security ones because the livelihoods of thousands of people depend on it. The revenues earned by RKG and the Iraqi government through the export of crude oil to Turkey is crucial for the local Kurdistan government as well the federal government in Baghdad.

Secondly, solving the issue through arbitration of the International Chamber of Commerce is instructive. The export of crude oil is a deal involving governments on both sides. If it had been a deal between private oil companies it would have been expected that arbitration is the way out. That the governments of Iraq and Turkey were willing to seek arbitration from an international body which is a non-governmental body, and is not connected to any of the United Nations organisations, is a good example of a rules-based regime and the willingness of the governments to abide by the rules is the key to solving problems and moving on. It would be naïve to suggest that all international problems can be solved like the one between Iraq and Turkey through the International Chamber of Commerce, but it does show that there are many problems that can be solved this way. Arbitration is the most favoured mode of resolving issues between national government and multinational companies as well as between multinational companies. It is believed on all sides that the litigation pursued through the established judicial systems in any country is a time-consuming process, and at the end of it one of the parties is a loser and that leaves enough rancour in the minds of companies and of countries. The arbitration mode is a mutually agreed one and there is the assurance that it will be fair and amicable.

As the world economy grows into a more deeply connected system, ways have to be found on how to solve problems that arise on the way. There cannot be a single way. One of them could be the path followed by Iraq and Turkey on the issue of supply of crude oil from the northern autonomous region of Kurdistan in Iraq. The autonomous region of Kurdistan is the arrangement under the 2005 constitution after the invasion of Iraq and the dethroning of Saddam Hussein. The autonomous region clause could have turned into a burning political issue. That it did not shows that Iraq is working the constitution system well, and the temptation that other countries might have to deal with the Kurdistan autonomous region as an independent political entity has been laid to rest. Turkey’s acceptance of the arbitration award is evidence of this.