Baghdad Threatens Legal Action Against KRG Over Authorized Exports

Two weeks after a 700,000-barrel tanker named Neverland reportedly began its journey towards the U.S. East Coast, Baghdad declared its readiness to challenge the legal validity of Kurdish oil exports in American courts, according to a new report by S&P Global Platts.

The ministry will challenge the legality of any shipments originating from semiautonomous Kurdistan, according to an anonymous senior Iraq oil ministry official. Tensions between Erbil and Baghdad have been brewing in recent weeks as the war against the Islamic State (ISIS) winds down and the Kurds prepare for a referendum on independence scheduled for September.

"The Iraqi government prevented three years ago such a cargo to the US by judicial authority in the US," the official said, referring to the Kurdish cargo on the United Kalavryta, which had been destined for Galveston, Texas, back in 2014. "It is a challenge [to us] and we will challenge that."

In the end, the KRG ordered the ship to offload in Israel and withdrew an appeal to Baghdad’s legal challenge in September 2015, just as ISIS became the main issue on the minds of national leaders.

Neverland’s final destination has not been confirmed, because the ship turned off its transponder after crossing the Strait of Gibraltar.

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The bane of the KRG’s existence is its relationship with the Iraqi federal government. Erbil has argued for years that it remains under compensated for its fossil fuel assets. Baghdad maintains that oil exports from the Kirkuk field must be approved by the Iraqi oil ministry.

Kurdish oil is likely replacing the export reduction pedaled by Saudi Arabia earlier this month to force American refineries to draw from domestic inventories. Baghdad was quick to offer its crude to U.S. importers looking for a substitute to Saudi supplies in a bearish market. Erbil is cashing in on the same opportunity.

By Zainab Calcuttawala for Oilprice.com

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