Iraqi Kurdish Oil Nears US Port Despite Concern in Washington

Posted by Eric Haun
Thursday, July 24, 2014

A tanker carrying crude oil from Iraqi Kurdistan is just one day away from arriving at a U.S. port, according to ship tracking satellites, despite Washington's long-standing concern over independent oil sales from the autonomous region.

The United Kalavrvta tanker, which left the Turkish port of Ceyhan in June carrying oil delivered via a new Kurdish pipeline, is due to dock in Galveston, Texas on Saturday, Reuters AIS Live ship tracking shows.

A sale of Kurdish crude oil to a U.S. refinery would infuriate Baghdad, which sees such deals as smuggling, and raises questions about Washington's commitment to preventing oil sales from the autonomous region.

Washington has expressed fears that independent oil sales from Kurdistan could contribute to the break-up of Iraq as the government in Baghdad struggles to contain Sunni Islamist insurgents that have captured vast swathes of the country.

But it also has grown frustrated with Prime Minister Nuri al-Maliki's handling of the crisis.

Washington has pressured companies and governments not to buy crude from the Kurdish Regional Government (KRG), but it has stopped short of banning U.S. firms from buying it outright.

The Kurdish Regional Government (KRG) has renewed its push for an independent state amid the latest violence roiling Iraq. Its relationship with Baghdad has deteriorated over what it sees as Maliki's role in stoking the crisis and over the long-running dispute over oil sales.

On Thursday Carlos Pascual, head of the U.S. State Department's Energy Bureau, told Reuters that there had been no change of policy in Washington towards Kurdish independent oil sales, but he said he hoped the central government and the region could reach an agreement in time.

Baghdad has threatened to sue anyone that buys Kurdish oil.

"We have made people aware that whatever they buy entails certain risks, and we have consistently told them about that," Pascual said after a talk at Washington's Carnegie Endowment.

"At some point Baghdad and Arbil have to come to an understanding of how the development and the export of those resources can contribute to Iraq's overall development," he said in a speech, one of his last official events before taking up a fellowship at Columbia University in New York.

Pascual said that without a deal, conflict between the two sides risked becoming "more acute".

The KRG has been emboldened amid the latest crisis in Iraq to take control of the long-disputed oil city of Kirkuk and to increase its territory by more than third as Iraqi forces fled the onslaught of Sunni insurgents aligned with the Islamic State of Syria and the Levant (ISIL).

ISIL, which has now changed its name to the Islamic State, aims to establish what it describes as a "caliphate" stretching through eastern Syria and into western Iraq and beyond.

Bahgdad Threatens to Sue
Trading sources in Texas, New York, London and Geneva have been unable to identify the buyer of the United Kalavrvta tanker's cargo.

On Friday it was heading northwest through the Gulf of Mexico, Reuters AIS Live tanker tracking showed. The signal reappeared after disappearing briefly as it navigated round the Florida peninsula.

The ship carries approximately 1 million barrels of crude, which would fetch more than $100 million at international prices.

The tanker still could change course and head away from the United States to Mexico or another country in Central or South America.

On Thursday an official at SOMO, Iraq's central state oil marketer, reiterated that it would sue any company buying Kurdish oil and blacklist them from deals for Iraq's sizeable crude exports.

"The government of Iraq will reserve the right to sue any company, refinery or trader that buys the Iraqi crude that KRG is illegally offering," an official from Baghdad's state oil marketer SOMO told Reuters.

"Our foreign legal team is watching closely the movement of the vessel and is ready to target any potential buyer regardless of their nationality."

The first tanker carrying crude from the Kurdish pipeline set sale from Ceyhan in May. Three others have sailed since then, but only one of the four has been delivered so far - into an Israeli port after a ship-to-ship transfer.

The first, the United Leadership, has been moored off the coast of Morocco for more than a month, while another is now sailing towards Asia without a clear buyer listed.

As the United Kalavrvta crossed the Atlantic, it was originally listed as sailing to Brazil, though without a specific buyer named in shipping fixtures.

Under Pressure
The KRG has so far declined to comment on any tanker sales, beyond denying that it sold oil to Israel. A spokesman for the Ministry of Natural Resources could not be reached on Thursday.

The United States has not formerly banned purchases of Kurdish crude oil, but in recent months it has pressured companies - both at home and abroad - not to buy Iraqi crude from outside Baghdad's central oil sales system.

Baghdad has withheld payment into the KRG's budget since January as part of the dispute, damaging the autonomous region's economy. The KRG desperately needs access to additional funds, and oil sales are the most obvious means to quickly raise cash.

Iraqi Kurdistan began selling its oil independently of the federal government in 2012, trucking first small amounts of condensate through Turkey and then two types of crude oil.

At least one tanker of Kurdish crude, which had been trucked into Turkey before being exported, has already gone to the United States.

But Baghdad has increased its opposition to Kurdish sales since the launch of the KRG's own pipeline to Turkey in January. Both sides claim the Iraqi constitution is on their side.

At the same time Washington has enjoyed a long-running relationship with the Kurds, whose Peshmerga forces helped U.S. special forces launch a northern front during the 2003 invasion of Iraq.

Politicians in the regional capital Arbil are walking a line between pursuing a long-held dream of independence against alienating regional and international allies.

They have so far declined to commit their Peshmerga forces to help Baghdad fight the Sunni militants of the Islamic State.

But the Kurds have been involved in a number of skirmishes with IS, with which the region now shares a 1,000 km (620 mile) border.

(By David Sheppard, Ahmed Rasheed and Timothy Gardner; Additional reporting by Julia Payne in London, Catherine Ngai in New York; editing by Jane Baird)

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