From transit leverage to pricing hub: Kirkuk–Ceyhan allocation versus flow, and four steps for Türkiye
ABSTRACT
The restriction of Hormuz transit from March 2026 raised the bargaining value of Kirkuk–Ceyhan, Iraq’s export outlet that bypasses the Gulf. This piece sets out ends, ways and means for Türkiye after the one-year agreement of 1 August 2026. It argues that Ankara obtained an allocation of 750,000 b/d while flow stayed near 170,000 b/d, and that a Rotterdam-type pricing hub at Ceyhan requires three thresholds unmet in September 2026: volume, price-formation institutions and contract tenure. Drawing on ministerial statements, deal reporting and Kpler’s Basra–Haditha timeline, it proposes four sequenced steps and identifies the principal risk: Türkiye’s leverage moves with disruption in Hormuz.
1. The strategic problem
Türkiye terminated the Kirkuk–Ceyhan transport agreement with Iraq by presidential decision in July 2025; the termination took effect on 27 July 2026 (Kaya, 2026), a date Arab News gives as 28 July (Arab News, 2026). On 1 August 2026 BOTAŞ signed a new one-year agreement with Iraq’s SOMO and NOC that allocates 750,000 b/d of transit capacity; the line’s design capacity is 1.5 mb/d and actual flow was about 170,000 b/d (Arab News, 2026). Energy Minister Bayraktar has since set a more ambitious end: turning Ceyhan into a Rotterdam-type centre where oil is stored, traded and priced (Milliyet, 2026). The claim of this piece is that the 2026 crisis gave Türkiye an allocation gain without a flow gain, and that the hub end can be reached only if Ankara sequences four steps before the agreement expires in summer 2027. The scope is June–September 2026 and three routes: Kirkuk–Ceyhan, Baku–Tbilisi–Ceyhan (BTC) and the planned Basra–Haditha line. An earlier post on this site treated transit position as a bargaining asset in general terms; this piece starts from the terms actually obtained in August 2026.
2. Where advantage sits
Transit leverage is the bargaining power a state derives from controlling another producer’s export route; it grows as the producer’s alternatives become costlier or unusable, and it pays in tariffs. A pricing hub is a place where crude from several origins is stored, changes hands among many buyers and sellers, and generates a price that other contracts reference; it pays in trading volume and price information. Nalbant, Kayalica, Kayakutlu and Kaya (2024) analyse pricing in natural gas hubs and Türkiye’s hub potential. This piece applies their conditions of liquidity and market openness to crude by analogy.
The 2026 crisis enlarged the first source of advantage. Enerdata reports that Iraq’s output fell from 4.3 mb/d to about 1.2 mb/d by March 2026 (Enerdata, 2026), which raised the value of an outlet that bypasses the Gulf. The line remained exposed: after a four-day outage from 9 March, flow resumed at no less than 100,000 b/d (Bloomberg HT, 2026a). Ediger and Berk (2011) show that Türkiye’s crude import policy since 1968 has been shaped by regional geopolitical events; the 2026 link between Kirkuk–Ceyhan and Hormuz fits that pattern and implies that leverage obtained from a regional shock is temporary.
3. Türkiye’s position after 1 August
On 16 June Ankara said it would not renew on existing terms and made three demands: full use of the 1.5 mb/d capacity, a five-to-ten-year commitment, and payment for unused capacity (Bloomberg HT, 2026b). The same report recalled an arbitration award, covering 2014–2023 on the 986-km line, obliging Türkiye to pay Iraq $1.5 billion. The award suggests that the old agreement had become a source of financial liability and that termination aimed to end that pattern; this is the author’s reading, not the source’s finding. On 14 July Bayraktar described a one-year transport offer, with a capacity increase to 2.5 mb/d, the addition of Kuwaiti and Gulf crude, and a parallel gas line on the agenda (Bloomberg HT, 2026c).
The outcome fell short of the June demands. Tenure is one year. The 750,000 b/d figure is, according to Bloomberg, a “reserved” ceiling subject to security and infrastructure conditions, against actual June flow of about 180,000 b/d (Kozok et al., 2026). The sources reviewed do not show whether the unused-capacity fee entered the agreement, and its publication in the Official Gazette could not be confirmed. One concrete gain sits outside the agreement: during the talks TPAO took a 15 per cent stake in BP’s Kirkuk consortium (Kozok et al., 2026), which gives Türkiye an income channel from production in addition to tariffs.
The revenue arithmetic shows the gap. Bayraktar put annual transport income from the 750,000 b/d allocation at about $500 million (Milliyet, 2026). If income is proportional to flow, 170,000 b/d is about 23 per cent of the allocation (170 ÷ 750 = 0.227), or roughly $110–115 million a year. This is the author’s estimate; the tariff structure is not public.
4. Ends, ways and means
The end is a Ceyhan that prices crude rather than only loading it; the intermediate end is multi-year, multi-source flow large enough to support independent storage and trading. The ways are contract design, upstream participation and route choice in Iraq. The means are BOTAŞ as contracting party, TPAO’s upstream stake, the Ministry of Energy’s negotiating position, and the existing BTC throughput.
5. Step one: convert allocation into flow
The 750,000 b/d ceiling will not raise flow at Ceyhan while northern Iraqi production and internal security do not allow it, and no actual flow figure for September 2026 appears in the sources reviewed. TPAO’s consortium stake is the instrument that links Türkiye’s interest to northern output: a rise in Kirkuk production raises pipeline flow and TPAO’s share of production together. The indicator is monthly flow measured against the 750,000 b/d allocation.
6. Step two: aggregate volume from several origins
A hub requires volume from more than one producer. Bayraktar puts BTC deliveries to Ceyhan at 550,000–600,000 b/d (Milliyet, 2026). Adding about 170,000 b/d from Kirkuk–Ceyhan gives 720,000–770,000 b/d, which is 29–31 per cent of the 2.5 mb/d capacity target the minister cites (author’s calculation). Kazakhstan’s shipment of more than one million tonnes through BTC in the first eight months of 2026 (Interfax-Kazakhstan, 2026) points towards diversity of origin, but the volume is small. The minister’s figure of $65–70 billion a year, conditional on 2.5 mb/d capacity, is the value of commodities passing through, not Turkish revenue (Milliyet, 2026). The indicator is the number of origins and the combined daily volume reaching Ceyhan.
7. Step three: build price-formation institutions
Most crude arriving at Ceyhan moves under long-term contracts shipped by each pipeline’s producers. That structure delivers transport, not price discovery, which needs independent storage open to third parties, standard trading contracts and many participants. The sources reviewed contain no independent price benchmark at Ceyhan and no information on third-party storage capacity. Nalbant et al. (2024) identify market openness as a condition for gas hubs, and the same condition applies to crude: traders will not use a centre unless they trust that the price is resistant to manipulation and that access is predictable. The indicator is the existence of third-party storage and of a published Ceyhan price assessment.
8. Step four: lengthen tenure at the 2027 renewal
A one-year agreement does not give storage and trading investors the multi-year assurance of flow they need. The five-to-ten-year commitment Türkiye sought in June therefore matters more for the hub end than for tariff income. Sequencing matters: the Basra–Haditha feasibility studies may be completed by end-2026 (Kpler, 2026), before the renewal talks open. Iraq authorised a tender for the 2.25 mb/d, $4.6 billion line on 10 April 2026 (Enerdata, 2026). Kpler lists two routes beyond Haditha, to Kirkuk–Ceyhan or to Banyas; construction could start in 2027 and last three to five years (Kpler, 2026). On that timetable southern crude could reach Ceyhan around 2030 at the earliest (author’s calculation). Türkiye’s renewal offer should therefore tie tenure to the Kirkuk–Ceyhan routing decision. The indicator is a multi-year term in the 2027 agreement.
9. The principal risk
Türkiye’s leverage moves in the same direction as disruption in Hormuz. If the strait normalises and Basra exports recover, Iraq’s need for Kirkuk–Ceyhan falls just as Ankara seeks a long commitment. The Banyas option shows that Ceyhan is not Iraq’s only possible Mediterranean outlet, so leverage obtained in 2026 is not permanent. The steps above are ordered so that the routing decision and multi-year tenure are sought while crisis-level leverage still exists.
10. Outlook: Türkiye, Saudi Arabia and the World
For Türkiye the near-term calendar has two nodes. Basra–Haditha feasibility is expected by end-2026 (Kpler, 2026), and the route choice will decide whether Ceyhan can pass the volume threshold in the 2030s. The one-year agreement expires in summer 2027; if Hormuz restrictions persist then, Ankara can return the long-term commitment to the table, and if Basra exports recover through the Gulf, its position weakens.
For Saudi Arabia, the East–West pipeline restarted on 22 September with full repair expected to take six to eight weeks (Hannany et al., 2026). Bayraktar’s July idea of adding Kuwaiti and Gulf crude to Kirkuk–Ceyhan (Bloomberg HT, 2026c) could intersect with Gulf producers’ search for a second outlet; no negotiation on carrying Saudi crude to Ceyhan appears in the sources reviewed, so this remains conditional.
At the global level, the IEA’s Oil Market Report of 14 October (International Energy Agency [IEA], 2026) will update shut-in Gulf output and Iraqi exports. If Iraqi recovery runs through Hormuz, Ceyhan’s marginal value falls; if the restriction carries into 2027, Mediterranean outlets gain value.
11. Conclusion
The Hormuz crisis increased Türkiye’s transit leverage and produced a 750,000 b/d allocation on 1 August 2026, but no multi-year commitment; flow stayed near 170,000 b/d, and the $500 million revenue figure assumes full use of the allocation. TPAO’s entry into the Kirkuk consortium is the only concrete gain beyond tariffs. Ceyhan operates as a transit terminal: combined flow is under a third of the 2.5 mb/d target, no independent price benchmark exists, and tenure is one year. The hub end requires flow, origin diversity, price institutions and tenure to be pursued before the 2027 renewal, with the Basra–Haditha routing decision as the condition on which the rest depends.
SOURCES
Arab News. (2026, 1 August). Turkiye, Iraq sign one-year oil pipeline deal. https://www.arabnews.pk/node/2653014/middle-east
Bloomberg HT. (2026a, 13 March). Kerkük-Ceyhan hattında petrol akışı yeniden başladı [Oil flow resumed on the Kirkuk–Ceyhan line]. https://www.bloomberght.com/kerkuk-ceyhan-hattinda-petrol-akisi-yeniden-basladi-3771852
Bloomberg HT. (2026b, 16 June). Türkiye Kerkük-Ceyhan’ı şartlar değişmeden yenilemek istemiyor [Türkiye does not want to renew Kirkuk–Ceyhan on unchanged terms]. https://www.bloomberght.com/turkiye-kerkuk-ceyhani-sartlar-degismeden-yenilemek-istemiyor-3780205
Bloomberg HT. (2026c, 14 July). Kerkük-Ceyhan’da yeni formül: Kapasite artışıyla 1 yıllık uzatma [New formula for Kirkuk–Ceyhan: One-year extension with capacity increase]. https://www.bloomberght.com/kerkuk-ceyhanda-yeni-formul-kapasite-artisiyla-1-yillik-uzatma-3782807
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Furkan Mahmut Tameroglu