It’s been a busy week in energy, particularly on the geopolitical front, with Washington at a loss over exactly whose side to take in the Iraq-Kurdish oil showdown, the implications of new sanctions against Russia unclear at best, and continued conflict and chaos in Iraq, Syria and Libya that has speculators reaching the limits of their predictive powers.
On Monday, a Texas judge ordered US Marshalls to seize a tanker carrying a million barrels of Kurdish oil off the US coast—at the behest of the Iraqi authorities in Baghdad--but two days later the story is that the tanker is too far offshore to be in Texas’ jurisdiction, so some more time has been bought for the Kurds to sell their wares on the international market.
There is some suggestion that Washington is not united on this particular issue. From the onset of the Kurdish gamble on independence through unilateral oil exports bypassing the Iraqi central authorities, Washington has warned the Kurdistan Regional Government (KRG), fearful that the eventual division of Iraq would push Baghdad closer to Iran. Baghdad had threatened to sue anyone who tried to buy “illegal” Kurdish oil, and was counting on US support to that end.
However, the conflict in Iraq and the Kurds’ seizure of the oil-rich disputed area of Kirkuk—the last piece of the Iraqi Kurd independence puzzle—largely spells the end of this game, and Kurdish oil exports will happen with or without American help in making it difficult for it to reach international markets.
Meanwhile, the rest of Iraq is burning. In northern Iraq, government security forces have managed to keep the Islamic State (IS) from moving further inwards passed Tikrit, but the Sunni extremists have created a pincer movement, and are now moving steadily towards Baghdad from the south.
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In Ukraine, fighting has intensified near the scene of the downed Malaysian jetliner, while the European Union and the US have expanded sanctions against Russia over the conflict in eastern Ukraine. Previous European and US economic sanctions against Russia have focused primarily on the defense and banking sectors, and new measures announced July 29 ramp up pressure on its oil industry, the core of the country’s wealth. But this shift could mean bad news for the West, as well, as Oilprice.com’s Andrew Tully reports.
While the new sanctions would limit Russia’s access to Western oil and gas technology—particularly important for exploitation in the Arctic—this has also been the biggest edge that Western energy companies still have, so the sanctions could have significant blow back.
From the EU perspective, as the Moscow Times reports, sanctions purposefully avoid damaging the energy industry because Europe does not wish to play hard ball here and disrupt Russian gas supplies.
Beyond the conflicts and geopolitical maneuvering, mainstream headlines are again focusing in on US oil exports with the launch of a tanker carrying $40 million in US oil bound for South Korea and promoted as the “first unrestricted sale of unrefined American oil since the 1970s.”
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It’s partly about loopholes, but partly about the media getting things wrong. It’s also a key focus of an exclusive Oilprice.com interview this week with Micheal Levi, who discusses a number of energy issues with us, and sorts out the sexy headlines from the starker realities of the day.
By. James Stafford of Oilprice.com
