Officials said Iraq had won a longstanding international arbitration case that would cease oil exports from the semi-autonomous Kurdistan region through Türkiye.
Baghdad and Irbil, the Kurdistan Regional Government (KRG) seat, have long been at odds over sharing of oil revenues.
The decision to stop shipments of 450,000 barrels per day (bpd) of crude relates to a case from 2014 when Baghdad claimed that Türkiye violated a joint agreement by allowing the KRG to export oil through a pipeline to the Turkish port of Ceyhan.
Baghdad deems KRG exports via the Turkish Ceyhan port as illegal.
The International Chamber of Commerce ruled in favor of Iraq on Thursday, Iraq's Oil Ministry confirmed on Saturday.
Türkiye has informed Iraq that it will respect the arbitration ruling, a source said, according to Reuters.
Turkish shipping officials told Iraqi employees at the Ceyhan oil export hub that no ship would be allowed to load Kurdish crude without the approval of the Iraqi government, according to a document seen by Reuters.
Türkiye subsequently halted the pumping of Iraqi crude from the pipeline that leads to Ceyhan, a separate document seen by Reuters showed.
On Saturday, an official told Reuters that Iraq stopped pumping oil through its side of the pipeline, which runs from its northern Kirkuk oil fields.
In a statement, Iraq's Oil Ministry said that the ministry, via the national oil marketing company SOMO, "is the only entity authorized to manage export operations through the Turkish port of Ceyhan."
According to a source familiar with its operations, Iraq had been pumping 370,000 bpd of KRG crude and 75,000 bpd of federal oil through the pipeline.
"Turkey has informed the authorities of Iraqi Kurdistan of a stop to imports," Assem Jihad, a spokesperson for Iraq's Oil Ministry, told Agence France-Presse (AFP).
Iraqi officials overseeing exports via Ceyhan port noted pumping stopped at "12:35 pm (0935 GMT) on March 25, 2023," according to a document, the authenticity of which Baghdad confirmed.
There has been no official confirmation from Turkish authorities yet.
"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," a second oil ministry official said.
Iraq will discuss with the relevant authorities ways to ensure the continuation of oil exports through Ceyhan, and state-owned SOMO's obligations with oil companies, Iraq's oil ministry said in a statement.
The KRG's ministry of natural resources said the "arbitration ruling in favor of Iraq against Turkey will not impede the relations with Baghdad's government and dialogue to continue."
The region's Prime Minister Masrour Barzani said recent discussions with Baghdad "have laid the groundwork for us to overcome the arbitration ruling today."
A KRG delegation is to visit Baghdad on Sunday to discuss energy issues, Barzani said in a tweet.
He added there was "goodwill" in talks with the central government, even though losing its ability to export oil independently is likely to undermine the region's autonomy.
The ruling, in which Türkiye has been ordered to pay Iraq around $1.5 billion before interest, covers 2014-2018, according to a source familiar with the case who spoke anonymously because they were not authorized to communicate with the media.
A second arbitration case, which the source expects to take around two years, will cover the period from 2018 onwards.
The final hearing on the arbitration case was held in Paris in July 2022. Still, it took months for the arbitrators, the secretariat of the arbitration court and the International Chamber of Commerce to approve the verdict, a source familiar with the process said.
The impact on the KRG's oil production depends heavily on the duration of the Iraqi Turkish Pipeline (ITP) closure, sources said, adding this would cause significant uncertainty to oil firms operating in the Kurdistan Region in Iraq (KRI).
A cessation of exports through the pipeline would trigger a collapse of the KRI economy, according to last year's letter to U.S. representatives from Dallas-based HKN Energy, which operates in the region.
Türkiye would need to source more crude from Iran and Russia to make up for the loss of northern Iraqi oil, the letter said.
Analysts have warned companies could withdraw from the region unless the environment improved.
Foreign oil firms, including HKN Energy and Gulf Keystone, have linked their investment plans this year to the reliability of KRG payments, which face months of delays.
Oil has always been a sensitive topic in relations between Baghdad and Irbil and is a key source of revenues for both governments.
The Kurdistan government sees Baghdad as trying to profit from the region's resources, while the Iraqi government argues it should enjoy sovereign control over the country's oil production.
Iraq, the second largest producer within the Organization of the Petroleum Exporting Countries (OPEC), exports an average of 3.3 million barrels daily.
