Kurdish Oil Tanker Beyond U.S. Jurisdiction

A tanker ship carrying about 1 million barrels of Kurdish crude remains off the Texas coast in the Gulf of Mexico, legally out of the reach of U.S. law enforcement.

In defiance of Iraq's central government in Baghdad, the Kurdistan Regional Government (KRG) had pumped the oil from Iraqi Kurdistan through a pipeline to Ceyhan, on Turkey's Mediterranean cost, then loaded it onto an oiler, the United Kalavrvta, and transported it across the Atlantic Ocean to the Gulf of Mexico.

Its destination was Galveston, Texas, but the ship is too big for the city's harbor, so the tanker remained about 60 miles off the coast with the intent to offload the crude to smaller vessels, called lighters, which would then deliver the cargo to a buyer.

On July 28, though, the Iraqi Oil Ministry argued before U.S. Magistrate Nancy K. Johnson in Galveston that the KRG had "illegally misappropriated" the oil by selling it without Baghdad's permission and that the transaction amounts to smuggling oil belonging to all Iraqis.

Johnson said the tanker must stay put to allow the U.S. Marshals Service to seize the oil. Only once it had given up the crude could it move on, she ruled.

At a hearing the very next day, however, Johnson revised her ruling, saying the marshals can't board the United Kalavrvta because, at 60 miles offshore, it was out of the state's boundaries and therefore beyond her jurisdiction.

Besides, Johnson said, it would be more appropriate to resolve the oil's ownership in an Iraqi court, not in the United States. "Seems to me this is not a matter for the U.S. courts to tell the government - the governments - of Iraq who owns what," she said. "This just seems way outside our jurisdiction."

Johnson said the cargo could be held in escrow on U.S. soil, or that a sale could proceed as originally planned but its proceeds held until the dispute was resolved.

The ship's cargo, worth more than $100 million, is symbolic of a struggle in Iraq over the status of the Kurds, who for years have sought their own sovereign status in a region spanning from eastern Turkey to northern Iraq and which sits atop an estimated 46 billion barrels of oil. The Kurds, who are Sunni Muslims, also resent the rule of the Shi'a-led Baghdad government.

The U.S. State Department, meanwhile, appears to be on the sidelines of the dispute. It has warned on the one hand that there would be legal risks to a U.S. company buying the Kurdish oil, but on the other it has said it would not try to block any sale.

In the meantime, the tanker is untouchable unless it approaches within 12 nautical miles of the Texas coast, said Martin Davies, a professor of law and director of Tulane University's Maritime Law Center in New Orleans. Until then, he says, the ship remains in limbo.

By Andy Tully of Oilprice.com