Negotiations to restart Iraqi oil exports to Türkiye, which have been suspended for two years, failed for the second time in a week, according to officials familiar with the matter.

The two-year standoff has halted flows from the Kurdistan Regional Government (KRG) region in the north of the country to Türkiye's Mediterranean port of Ceyhan.

An official from the U.S. Embassy in Baghdad attended the talks for the first time, which were held at the Iraqi Oil Ministry's headquarters in the city, four sources told Reuters.

Washington is applying pressure on Iraq to resume the exports, with Reuters reporting last month that U.S. President Donald Trump's administration had asked Iraq to allow the flows to restart or face sanctions.

The U.S. administration's stance in part reflects its "maximum pressure" campaign on neighboring Iran, which includes efforts to squeeze off Tehran's oil exports.

The main sticking point at Thursday's meeting was over pricing, one of the two official sources said.

Talks on Sunday had also ended without a breakthrough.

On Thursday, the ministry insisted on a production cost of $16 per barrel for exported volumes of around 185,000 barrels per day (bpd) but would not apply that price to all production from KRG, one of the sources said, adding that the foreign oil firms involved strongly rejected this.

Oil producers working in the KRG include DNO, Genel Energy, Gulf Keystone Petroleum and Shamaran Petroleum.

Another source with knowledge of the matter said Baghdad had earlier promised that the price would apply to all production but had backtracked at the Sunday meeting with oil firms.

The Association of the Petroleum Industry of Kurdistan (APIKUR), which represents 60% of production from the region, stressed in a statement after the meeting the need for formal agreements ensuring payment security for past and future oil exports.

The group also underscored that any deal should respect the production-sharing contracts, or PSC model, ensuring that production costs and profit-sharing terms remain in line with previously agreed contracts.

Two-year halt

The exports were halted by Türkiye in March 2023 following an arbitration ruling by the International Chamber of Commerce (ICC). The ICC ordered Ankara to pay Baghdad damages of $1.5 billion over what it said were unauthorized exports by the KRG between 2014 and 2018.

Türkiye, on the other hand, said the body had recognized most of Ankara's demands.

In October 2023, Türkiye said the pipeline was ready for operations and that it was up to Iraq to resume flows. The federal and regional governments in Iraq have been negotiating ever since over the production and transport costs payable to the region and its commercial partners.

Flows go through a KRG pipeline to Fish-Khabur on the northern Iraqi border, where the oil enters Türkiye and is pumped to the port of Ceyhan.

A resumption is expected to ease economic pressure in the KRG, where the halt has led to salary delays for public sector workers and cuts to essential services.

U.S. attendance

The U.S. official attended Thursday's talks at the request of Washington, an Iraqi Oil Ministry official with direct knowledge of the matter told Reuters.

"The presence of the U.S. diplomat aims to help push the negotiations forward and reach solutions to the issues hindering the resumption of oil exports in a way that satisfies all parties," the official said.

"There is a strong insistence from the U.S. side on ensuring the success of the negotiations by any means," said a government official close to the talks.

Washington wants the flows via Türkiye restarted partly to boost global supply and therefore help lower prices. At the same time, the U.S. administration wants to halt financial ties between Iraq and neighboring Iran as it applies pressure on Tehran over its oil exports and nuclear program.

Iraq is an important ally to the United States and Iran and vital to helping the latter support its economy amid international sanctions.

Baghdad is wary of getting caught in the crosshairs of the U.S. president's policy of squeezing Tehran, sources have told Reuters.