A tanker’s tale: Iraq’s oil divide - caught up in a row between Kurdistan and Baghdad

, The Independent Newspaper said in news followed by “Shafaq News”.

The United Kalavrvta, a tanker the length of three football fields, is carrying about one million barrels of crude oil from the Kurdish region of Iraq. It set sail for Galveston, but it never got there.

The central government of Iraq, despite recent military setbacks, dispatched its American lawyers to do battle in the federal court in southern Texas, where a judge ruled that the tanker’s cargo, worth about $100m, should be seized if it came within Texas state waters.

The core of the dispute: the Iraqi government says that the crude cargo belongs to the Baghdad Ministry of Oil and that it was never the property of the Kurdistan Regional Government. But the Kurds argue that the Texas court doesn’t have jurisdiction, and they filed a motion on Monday in the court to lift the restrictions on the oil.

Michael Howard, an adviser to the Kurdish minister of natural resources, said: “It’s a constitutional issue that should be determined in Iraq and shouldn’t be exported to US courts.” The decision is key for international oil companies exploring in the rich ground of Kurdistan – companies like London Stock Exchange-listed Genel – run by the former BP chief executive Tony Hayward.

As the legal case plays out, the ship waits in the Gulf of Mexico, the fate of its cargo unclear. The drama in Texas is just part of a global play being made by the Kurdistan Regional Government, which is desperately seeking money in the midst of turmoil in Iraq. The Kurds, many of whom have long sought an independent state, say the central government in Baghdad has stopped providing the northern region with its share of the national budget. And without the ability to sell their own oil, Kurdish officials argue, they cannot protect themselves from militants or provide government resources. On Sunday, Sunni extremist militants seized three Kurdish towns, sending thousands of Kurds fleeing, The Independent Newspaper said.

But if the Kurds could sell their own oil, they would also potentially secure the financial base they need to finally declare their independence.

At stake is the US goal of a unified Iraq, and the Obama administration is stuck in the middle of the dispute. Having invested tremendous effort in securing Iraqi federalism and its constitution – which says oil belongs to the entire republic – the administration has been discouraging companies and countries from buying the Kurdish oil cargoes. Revenue-sharing accords in Iraq are supposed to provide 17 per cent of oil revenue to the Kurdistan Regional Government.

US officials thought they had brokered an agreement between the Kurds and Baghdad in March, and they were unhappy when it fell apart.

Then the Kurdistan Regional Government worked out a deal with Turkey to load the tankers. Iraq said Turkey’s agreement to load Kurdish oil violates accords between the two nations, The Independent Newspaper added.

The United Kalavrvta is one of five tankers that have been loaded with Kurdish crude oil at the Turkish port of Ceyhan since late May. One delivered its cargo in Israel. Another, the United Emblem, which like the United Kalavrvta belongs to a Greek firm called Marine Management Services, is in the Strait of Singapore; Reuters reported that it transferred its cargo at sea to an unidentified tanker last week. Still another tanker, the Kamari, left Ceyhan on Friday and was heading for Egypt’s Port Said.

Since 1991, Iraqi oil revenue has gone through the UN Compensation Commission, which is still sending 5 per cent of the total to Kuwait as reparations for damage done during Saddam Hussein’s invasion and occupation in 1990. The most recent payment to Kuwait, $1.2bn, was made in July, bringing the total payments to $46.7bn.

The Kurds say they have no choice but to broker their own deals. Senior Kurdish officials visiting Washington in early July said they wanted to change the State Department’s posture and allow Kurdistan to sell its own oil. They said that Baghdad had not paid Kurdistan anything this year and that they should be able to sell oil to make up for that.

Brett McGurk, deputy assistant secretary of state for Near Eastern affairs, said: “There is no US ban on the transfer or sale of oil originating from any part of Iraq. Suggestions to the contrary [are] false.”

That triggered speculation the State Department would allow the United Kalavrvta to unload its oil in Texas, but department officials said there was no change in the US position. One said: “If we hear of potential buyers, we alert them that buying this oil could expose them to serious legal risks and they should consult legal counsel about that.”

Oil industry analysts say such warnings have discouraged buyers. The United Kalavrvta idling off Texas was supposed to deliver the oil to an American chemical giant called LyondellBasell, which now says it does not want to get involved in a legal dispute between Baghdad and the Kurds. AET Offshore Services, which was supposed to remove some of the big tanker’s oil outside the port, also bowed out.

Meanwhile, the United Leadership, a tanker that took on a cargo of Kurdish oil at Ceyhan in May, has been idling off the coast of Morocco. Industry sources say the most likely customer for the oil is Samir, a refinery owned by the al-Amoudis, a Saudi merchant clan.

State Department officials say the best solution to the standoff is for Kurdish leaders to reach an agreement with the government in Baghdad. But that seems unlikely.

In a global market thirsty for oil, tanker loads of crude would ordinarily be sold and delivered expeditiously. Yet the United Kalavrvta is running up about $60,000 a day in fees as it waits in the Gulf of Mexico – stuck in the middle of a dispute more than 7,000 miles away, The Independent Newspaper concluded.