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At the request of the government of Iraq, a U.S. judge has ordered the seizure of 1 million barrels of Kurdish crude oil from a tanker off the Texas coast near Galveston.
The oil had been pumped from wells in Iraq's northern Kurdish region, then sent via a new pipeline to Cehyan, on Turkey’s Mediterranean coast, before being loaded onto the tanker United Kalavrvta and shipped across the Atlantic Ocean to the Gulf of Mexico.
The ship, which stopped near Galveston Bay with its $100 million cargo, is too big to enter ports in the area. On July 26, the U.S. Coast Guard gave it clearance to move its cargo from its offshore position to smaller craft that would deliver it to the mainland.
But on July 28, the Iraqi Oil Ministry argued before U.S. Magistrate Nancy K. Johnson in Galveston that the Kurdistan Regional Government had sold the oil without Baghdad’s permission and that the transaction amounts to smuggling oil belonging to all Iraqis.
Johnson said the tanker must remain in place so that U.S. Marshals Service can seize the oil, evidently with the help of companies that might have been used to bring the oil to market. After the ship has given up its cargo, it would be free to go, she said.
Oil pumped in Kurdistan is a major source of friction in Iraq, a country already divided between majority Muslim Shi'as, who control the government of Prime Minister Nouri al-Maliki, and minority Sunnis, who resent his rule. Add to that the desire by Sunni Kurds in the north for a large measure of autonomy, if not independence.
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U.S. foreign policy has sought to keep Iraq united. It has been trying, with little success, to persuade al-Maliki to make his government more inclusive. The U.S. State Department has warned that independent sales of oil from Kurdistan could help break up Iraq.
The State Department has issued conflicting statements about the oil's status, warning potential customers of the legal risks of buying the Kurdish oil, yet saying it would take no action to interfere with such a sale.
If an American refinery ignores Washington’s warnings and buys the oil, it could convince other countries that it is acceptable to bypass Baghdad and deal directly with the Kurds, according to Carl Larry, president of the oil news and analysis group Oil Outlooks & Opinions.
“It opens the door to some kind of breakup in that region where you could have a separate Kurdistan and Iraq,” Larry told Bloomberg News “It’s definitely going to create that separation, and more people are going to recognize that and respect it.”
The Kurdish Regional Government estimates that its territory contains 46 trillion barrels of oil.
By Andy Tully of Oilprice.com
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com