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Kurdistan Rising
Iraq Uses Influence to Thwart Kurdish Oil Sales

Iraq’s central government is throwing its weight around in the international oil markets to impede Kurdish ambitions for independence. The Kurds, who have announced their intent to hold a referendum on secession from Iraq in the fall, have been planning on using the newly-seized oilfields of Kirkuk to sustain a new country.

As the Wall Street Journal reports, that may not be so easy:

[…] an examination of Iraqi Kurdistan’s attempted oil sales shows the steep barriers to becoming a legitimate player in international energy markets.

Major oil companies and refineries, for example, are reluctant to trade with the KRG for fear of breaking ties with Iraq’s State Oil Marketing Organization, or SOMO, which threatens to blacklist buyers of Kurdish crude. Iraq supplies about 4% of the world’s oil with roughly 2.5 million barrels shipped daily.

The U.S. believes the Kurdish oil strategy could destabilize Iraq and lead to the country’s breakup. Behind the scenes, the attempted oil sales have drawn diplomatic pressure from Washington, according to Western, Kurdish and Turkish officials briefed on the matter.

The Kurds claim that they are entitled to sell their own oil because the Iraqi central government has been withholding Kurdistan’s constitutionally-promised 17% of national oil revenues since January. The Iraqis, in turn, claim they’ve withheld the money in response to Kurdish aspirations for independence.

The upshot is that four tankers of Kurdish oil have been sailing around in circles, stuck in limbo on the ocean. Finding buyers has proven difficult, because Iraq has threatened to seek reparations in the International Chamber of Commerce in Paris, which many European courts recognize, as well as forbid companies who buy Kurdish oil from working with SOMO (Iraq’s State Oil Marketing Organization).

The Kurds aren’t entirely without advantages, however. Turkey, through which the oil is piped, has an interest in seeing them find buyers, while one prospective buyer, Israel, has no incentive to respect Iraqi threats. Israel and Iraq have technically been at war since 1948, and have no diplomatic relations. The first tanker of Kurdish oil was finally sold to the Israelis recently—but the transfer had to occur unannounced and in international waters.

Semi-secret sales to Israelis are not likely to sustain Kurdistan forever, though. Kurdish independence relies on the ability to sell 400,000 barrels of oil per day.

Ultimately, Kurdistan still has the fundamental assets it needs to sustain itself as an independent state: a strong military in the peshmerga, popular support, and lots of oil—which will eventually entice buyers, at some price. But as the Iraqis are proving, it will not all be smooth sailing.

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  • Andrew Allison

    Really shallow reporting from WSJ. Iran’s production in 2013 was 2.39m barrels (the same as 2008). That was before the Kurds took over the Kirkuk production and ISIS the Mosul/Tikrit fields. The Iraqi government estimates of an increase in production this year are, shall we say, a tad optimistic. Meanwhile, the pipelines to Syria and Turkey are under the control of ISIS and the Kurds respectively. Shouldn’t we be asking how what’s left of Iran can survive the resulting loss of access to markets?

  • wigwag

    The Gaza imbroglio is bad news for the Kurds. As a result of the fighting, a rapprochement between Israel and Turkey has been derailed; the Iraqi Kurds need cooperation (tacit or otherwise) between Israel and Turkey to move their oil.

    And surprise, surprise, the Obama Administration is on the side of the bad guys (the Iraqi Central Government) yet again.

    Same as it ever was.

  • Breif2

    An Arab government is losing on the battlefield and proceeds to use oil blackmail and appeals to “international law”. So what’s new?

  • gabrielsyme

    Holding Iraq together is a fool’s errand, and the West needs to find a plausible leadership structure for Sunni Iraq (I would suggest an enlarged Jordan), line up some borders and tell Iran and Maliki to lump it. The Sunnis in Iraq would happily accept a government that doesn’t discriminate or persecute them, and it would rob ISIS of its necessary oxygen of discontent with Baghdad. One might even turn Kurdish and Jordanian support into leverage to end the Syrian Civil War through a negotiated settlement, complete with territorial transfers.

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