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Kurdish smugglers in Iraqi Kurdistan blunt
sanctions against Tehran
9.7.2010
By Sam Dagher |
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July
9, 2010
PENJWIN,
Kurdistan region 'Iraq', — Even as the United States
imposes new sanctions on Iran, one of the biggest
gaps in the American strategy is on full display
here in Iraq, where hundreds of millions of dollars
in crude oil and refined products are smuggled over
the scenic mountains of Iraqi Kurdistan every year.
Day after day, without formal authorization from
Baghdad, more than a thousand tankers snake through
this town on Iraq’s border with Iran, not only
undercutting recent American sanctions but also
worsening tensions with the Iraqi government over
how to divide the country’s oil profits.
The scale and organization of the trade has raised
concerns among American officials here, said one
senior American official in northern Iraq, who would
speak about the Iran oil trade only anonymously,
following diplomatic ground rules. |
A Kurdish shepherd moved his flock past a column of
fuel tankers illegally exporting oil from Iraqi
Kurdistan near the Iranian border. NY Times photo. |
They fear that proceeds
from the sales could be flowing to corrupt Iraqi
politicians and benefiting the Iranian government,
even as the United States has approved new
unilateral sanctions against Tehran, imposing
penalties on foreign entities that sell refined
petroleum products to Iran.
A senior Kurdish government official said that the
benefits from a business he described as “elaborate”
and “huge” went to the region’s two governing
parties and affiliated companies, and that officials
and politicians in Baghdad were involved as well.
“The people are being scammed, but by whom, we do
not know,” said Hamid Mohammed, an Iraqi tanker
truck driver waiting to enter Iran recently.
The Kurds have long been allied with the United
States. Since the first Persian Gulf war, American
and NATO forces had imposed a no-flight zone over
Kurdish territory in northern Iraq, protecting the
Kurds from Saddam Hussein and helping them to build
a semi-autonomous region.
Smuggling of oil and other goods and commodities
along Iraq’s porous borders thrived in the 1990s,
when Iraq was under international sanctions. But the
semiofficial nature of the current trade underscored
how business interests had trumped the messy
politics of Iraq and the region.
The stream of tankers into Iran continued without
interruption during an Iranian military campaign
last month against Iranian Kurdish separatists
operating at the border. Hundreds of tankers,www.ekurd.neteach
with a capacity of at least 226 barrels of crude oil
and refined products, enter Iran every day from
Penjwin and two other border posts in Iraqi
Kurdistan, Kurdish officials say.
While much of the refined product is used in Iran,
which sorely lacks refinery capacity, the crude oil
is trucked all the way down to the Persian Gulf
ports of Bandar Bushehr, Bandar Imam Khomeini and
Bandar Abbas, where it is emptied into reservoirs or
loaded onto ships, according to drivers.
The trade is supported by an estimated 70
mini-refineries, known in the industry as topping
plants, said the Kurdistan region’s oil minister,
Ashti Hawrami. They are dotted around the Kurdistan
region and Kurdish-controlled areas in nearby Kirkuk
and Nineveh Province, he said, and many of them are
unlicensed.
Abdul-Karim al-Luaibi, Iraq’s deputy oil minister
for production, said he was unaware of oil exports
to Iran from the Kurdistan region, adding that all
the mini-refineries were illegal.
“They bear responsibility for this,” said Mr. Luaibi,
referring to Kurdish authorities.
In a rare interview in February with The Times of
London, Mr. Hawrami said only fuel oil and
byproducts like naphtha were being sent to Iran
after processing in the region’s own crude at two
privately owned refineries to meet the internal
market’s needs and run a local power plant. Mr.
Hawrami said that revenue from the Iran business has
helped cover costs for foreign oil companies in the
Kurdistan region that were hurt when a pipeline to
Turkey was closed down in October in a dispute
between Kurdistan and Baghdad. He said any extra
revenue that accrued to the region from this
business was being kept out of the Kurdistan
government’s finances and deposited in a separate
bank account to be reconciled with Baghdad in the
future, once the two sides resolved their
differences.
But Mr. Hawrami also said that it was not just
refined products from the Kurdish region that were
finding their way into Iran. Crude oil and refined
products from Kirkuk and the Baiji refinery to the
south were also being smuggled into the region, and
some were crossing the Iranian border. He said his
ministry had no control over this.
“A truck is a truck — so easy to manufacture a
license and say, ‘This is fuel oil and not crude
oil’ and they find their way,” said Mr. Hawrami.
“Unfortunately, the problem is much broader than
little Kurdistan.”
The disclosures about the oil trade with Iran come
at a delicate time for the Kurdish region. In May,
the central government approved a tentative deal to
resume crude oil exports of about 100,000 barrels a
day to Turkey through Iraq’s pipeline network. Mr.
Hawrami said exports would resume only after a
mechanism was worked out to pay the oil companies’
production costs.
He said the companies — Norway’s DNO and a
Chinese-Turkish venture called Ttopco — were owed a
total of about $1 billion. Together, the two fields
they operate can produce up to 200,000 barrels a
day, and the region’s overall production will reach
one million barrels a day in three to four years
when at least six other fields come online,
according to Mr. Hawrami.
Analysts say that the Kurdish region’s oil trade
with Iran provides a revenue source that it does not
have to share with Baghdad, at least for now,
diminishing its reliance on exports to Turkey. It
also grants them leverage in resolving oil and
internal border disputes with Baghdad.
“They can negotiate from a position of strength,”
says Ruba Husari, an oil specialist and founder of
Iraqoilforum.com. “They are running their own oil
kingdom.”
But questions about the legitimacy of the region’s
oil activities are increasingly coming from within.
“Kurdistan is like an island with no rule of law
when it comes to oil,” says Abdulla Malla-Nuri, a
member of the region’s Parliament from the Gorran
opposition movement, which broke away from one of
the governing parties last year and has accused them
of rampant corruption.
Mr. Malla-Nuri wants revenue from the Iran trade to
flow into the region’s budget after deducting what
is owed to the rest of Iraq — 83 percent, according
to current arrangements.
The region’s prime minister, Barham Salih, is also
reportedly pushing for this but is being met with
fierce resistance, even from his own party, which is
headed by Iraq’s president, Jalal Talabani.
Mr. Salih’s task is further complicated by an
acrimonious relationship with the regional oil
minister, Mr. Hawrami, who is backed by the region’s
president, Massoud Barzani.
Mr. Talabani’s party has had a so-called strategic
agreement with Mr. Barzani’s party since 2005,
allowing them to divide the region’s political,
economic and military power. This applied to the oil
trade with Iran as well, according to a top Kurdish
official who requested anonymity because he belonged
to one of the governing parties.
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