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

A ship carrying $100m of oil in the seas off Texas awaits the resolution of a row between Kurdistan and Baghdad which threatens US hopes of a unified Iraq

Sixty miles off the coast of Texas sits a crude oil tanker fully loaded with years of antagonism between the Kurdish region of Iraq and the central government in Baghdad.

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.

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 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.

Terror threat: Hayward seeks calm

Genel, the biggest independent oil operator in Iraqi Kurdistan, has seen its shares fall in London by more than 6 per cent since Isis forces inflicted a defeat on the Kurds at the weekend, with a rapid advance through three towns to reach the Mosul Dam.

But yesterday, its management, led by Tony Hayward, tried to calm investors’ nerves about the instability in the region, pointing out that the Isis advance was far to the west of Kurdistan. Many of the questions on the conference call with City analysts to discuss half-year profits were dominated by questions over the conflict.

Genel profits rose 6 per cent to $138m (£82m) on revenues up a fifth to $192.1m. Key to the company’s future profitability is when it will begin receiving payments for the oil the regional government sells through its new pipeline to Turkey. Analysts expect those revenues to come through in the second half of the year.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions