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Oil Sale Boosts Kurdistan As It Signals Move Toward Independence

Oil Sale Boosts Kurdistan As It Signals Move Toward Independence

On June 20, the oil tanker SCF Altai docked in Israel and offloaded oil from Kurdistan. The completion of the sale marked a huge win for the semi-autonomous region in Iraq and has emboldened its leaders to accelerate their push for independence as the rest of the country seemingly collapses.

The oil delivery to Israel was apparently not the first. According to a statement by Iraq’s Oil Ministry, earlier this year the Kurdish Regional Government (KRG) sold four other shipments of oil to Israel. The Iraqi government has condemned the sales and labeled it “smuggling.” Not only is the sale of oil without Baghdad’s approval illegal in the eyes of Iraq’s leaders, but the KRG sold the oil to Israel, a country with which Iraq does not have a relationship and is still technically at war.

But the Shiite government led by Prime Minister Nouri al-Maliki is powerless to stop the KRG, as Iraq’s institutions succumb to the onslaught by the Islamic State of Iraq and Syria (ISIS), the Sunni militant organization now in control of large swathes of the county.

The only thing Baghdad can do in the face of increasingly assertive moves by Kurdistan is issue scathing press releases.

In fact, the KRG is eyeing independence sooner rather than later. In the immediate aftermath of the Mosul invasion by ISIS, Kurdish Peshmerga forces quickly moved to secure Kirkuk, a once-disputed territory between Kurdistan and Iraq. The KRG criticized the Iraqi security forces for incompetence and hinted at the fact that they would not return Kirkuk to the control of the Iraqi government.

On June 23, however, Kurdish leaders suggested they are considering going further. In an interview with CNN, Kurdish President Massoud Barzani suggested that the deterioration of the foundations of Iraq have changed everything. “Iraq is obviously falling apart. And it’s obvious that the federal or central government has lost control over everything. Everything is collapsing – the army, the troops, the police.”

Related Article: Big Oil Is Cashing In On Iraq Violence

He went on: “We did not cause the collapse of Iraq. It is others who did. And we cannot remain hostages for the unknown. The time is here for the Kurdistan people to determine their future and the decision of the people is what we are going to uphold.”

The successful sale of oil is a stepping stone towards that goal of independence. Kurdistan has been suffering from a shortage of cash after Baghdad cut off the KRG’s portion of national revenue sharing earlier this year. This led to budget shortages and the inability to pay salaries for many Kurdish workers. But the sale of oil to Israel has brought in a deposit of $93 million for the KRG, which was sent to a bank in Turkey.

That will provide an immediate influx of cash, but more importantly, it could pave the way to future exports and access to credit with international financial institutions. “When we approach international finance houses, they look to whether we can export and sell the oil. Now that we have done that, it is easier to get loans,” a KRG spokesman told The Wall Street Journal.

Greater economic independence coupled with the collapse of the Iraqi state means that the dream of independence for the Kurdish people is closer to being realized than ever before.

One key missing ingredient is the blessing of the United States, a longtime ally. The U.S. government has thus far opposed the notion of an independent Kurdish state, not wanting to sow instability in Iraq, which the American government has tried to prop up for years. Now with the onslaught by ISIS and the crumbling of Iraq, the U.S. fears the complete failure of Iraq as a viable country.

On June 24, U.S. Secretary of State John Kerry made a surprise visit to Erbil, the capital of Kurdistan, to press the KRG to support the Iraqi government and prevent its collapse. But Barzani didn’t make any commitments. “We are facing a new reality and a new Iraq,” he said.

By Nick Cunningham of Oilprice.com

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