Baghdad launched legal action against Ankara Friday after oil from Iraq's autonomous Kurdish region was exported to international markets without the cental government's consent, potentially worsening already-poor ties between the neighbours.
The sudden decision to call for arbitration by Iraq, which came after shipments began on Thursday evening, is the latest move in a years-long row in which Baghdad has insisted it has the sole right to export Iracaught itqi crude.
The dispute over the exports, which the US has said could further destabilise Iraq, also throws into doubt Prime Minister Nuri al-Maliki's bid for re-election after polls last month, with his campaign expected to hinge on whether or not he can secure Kurdish backing.
The central government's oil ministry said in a statement that it has "filed a request for arbitration against the Republic of Turkey and its state-owned pipeline operator BOTAS... with the International Chamber of Commerce (ICC) in Paris."
"By transporting and storing crude oil from Kurdistan, and by loading that crude oil onto a tanker in Ceyhan, all without the authorisation of the Iraqi Ministry of Oil, Turkey and BOTAS have breached their obligations under the Iraq-Turkey Pipeline Agreement," it said.
The ministry said it was asking the ICC to order Turkey and BOTAS to "cease all unauthorised transport, storage and loading of crude oil," and added it was seeking financial damages of more than $250 million.
Turkish Energy Minister Taner Yildiz told reporters earlier that shipments of oil pumped from the autonomous Kurdish region in northern Iraq and stored in Turkey's Mediterranean port of Ceyhan began on Thursday night.
Yildiz insisted that Iraq would "govern the future sales", but the exports still came in defiance of Baghdad, which insists it has the sole right to develop and export the country's prized natural resources, which account for nearly all government income.
A Turkish official, speaking on condition of anonymity, told AFP that Ankara had not been informed of Iraq's decision to take legal action, while an ICC spokeswoman said she was not allowed to confirm any details of potential cases.
Ties between Iraq and Turkey, which had been on the upswing as recently as 2010, have since dramatically worsened with the ICC case likely to damage fledgling efforts to improve them.
The two countries differ in particular over the Syrian conflict as well as Turkey's dealings with Iraq's Kurdistan region.
Diplomats say the two countries' leaders also have strained personal relations.
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- Chilled Ties -
The latest dispute is also expected to further chill ties between Baghdad and Iraqi Kurdish authorities, just weeks after officials hailed an interim goodwill agreement under which Kurdistan would export 100,000 barrels of oil per day via central government-controlled pipelines.
Kurdish authorities based in the northern city of Arbil said Friday that revenue from the sales would be deposited in Turkey's state-owned Halkbank, insisting they had acted transparently.
The Kurdish region would "continue to exert its rights of export and sell oil" but remained committed to negotiate "in good faith" with Baghdad "to reach a comprehensive settlement" on the sharing of energy supplies.
Baghdad and Arbil have long-standing disagreements over a litany of issues, including whether or not Kurdish officials can sign deals with foreign oil companies without the central government's consent.
They are also at loggerheads over a swathe of disputed oil-rich territory.
Washington warned that the oil export move could destabilise Iraq, with State Department spokeswoman Jen Psaki telling reporters that the US does not "support exports without the appropriate approval of the federal Iraqi government, and certainly we do have concerns about the impact of those continuing."
"Iraq is facing a difficult situation," she said.
"We've been clear that it's important for all sides to take actions to help the country pull together and avoid actions that might further exacerbate divisions and tensions."
The tensions come as Maliki looks to secure a third term in power after April 30 elections in which his bloc emerged with by far the most seats in parliament, though well short of a majority.
The incumbent premier is likely to need some Kurdish support if he is to secure the seats necessary to win re-election.
Mete Goknel, an analyst and a former BOTAS director, said that from Ankara's perspective, "Iraqi oil is the best option for Turkey because it is a cheaper and more stable source of energy."