Oil smuggling to Iran
via Kurdistan embarrassment for Iraq
SULAIMANIYAH, Kurdistan region 'Iraq', — The
smuggling of tens of thousands of gallons a day of
crude oil and refined fuels from Iraqi Kurdistan
region to Iran, in violation of new U.S. sanctions,
is stoking tensions between Iraq's central
government and its Kurdish provincial counterparts.
The reports about the oil smuggling surfaced just
over a week after the U.S. imposed new sanctions
barring the export of refined fuels to Iran. They
also arise at a time when Kurdish help may be needed
to form the next government as politicians in
Baghdad have been deadlocked since the March 7
Iraqi officials quickly vowed to do something about
the practice. The smuggling is an embarrassment for
Baghdad and the Kurds — both U.S. allies — not only
because of the sanctions but also because of Iraqis'
perception that politicians are profiting on the
trade while the public suffers from fuel shortages.
In this June 7, 2010 photo, trucks carrying oil
snake their way through Haj Omran, Iraq a
mountainous Kurdish resort town on the border with
Iran. The smuggling of as much as tens of thousands
of gallons of crude oil and refined fuels daily from
northern Iraq to Iran, in violation of new U.S.
sanctions, is stoking tensions between the central
government and its Kurdish provincial counterparts.
Iraqi Oil Minister
Hussain al-Shahristani said Tuesday the cabinet had
decided to summon representatives of the Kurdish
regional government to discuss the smuggling issue
and "to put an end to it, as it harms Iraq's
national and economic interests."
"This matter is unacceptable and strange," al-Shahristani
told reporters after the cabinet meeting. It is
"illogical to export refined products to neighboring
countries while Iraq imports refined products such
Days earlier, government spokesman Ali al-Dabbagh
said an urgent meeting would be held with Kurdish
The Kurds, however, appeared resistant. One Kurdish
government official told The Associated Press he
doubted any meeting would take place, noting "the
government's mandate is over." He spoke on condition
of anonymity because he was not authorized to
discuss the issue.
Kurdish officials acknowledged that some refined
fuel from their region was being exported legally,
but denied that any crude was being smuggled into
Kurdish Natural Resources Minister Ashti Hawrami
insisted the source of the smuggling problem was not
the Kurds. According to the Kurdish news agency,
Hawrami said oil from two major refineries in
central Iraq is being shipped to Iran and "the Iraqi
government's raising of this issue now has a
political objective of covering up the unofficial
sale of crude oil from southern Iraq."
In a statement this week, the Kurdistan regional
government KRG blamed Baghdad's policy of selling
heavily discounted fuel to private distributors for
the Iraqi public, which it said creates "incentives"
for the buyers to smuggle it abroad. It acknowledged
some of that smuggling may go through Kurdistan and
said it is "committed to working with the federal
government to eliminate permanently all such
profiteering of fuel oil."
An Associated Press reporter who visited the area
several weeks ago saw hundreds of fuel tankers lined
up at an official crossing on a narrow mountain road
at Haj Omran,www.ekurd.neta
Kurdish resort town on the border with Iran. One
driver, Nouri Ahmed, said he was to transport his
shipment down to the Iranian port of Bandar Imam,
where it is unloaded and moved to a tanker in the
"I don't know where it goes" from there, Ahmed said.
The oil smuggling is far from new. For several years
after the 2003 U.S.-led invasion, it was one of the
preferred ways for insurgents to fund their
operations. As security improved, private
individuals and political groups picked up on the
lucrative practice. Analysts say that smuggling of
oil has been going on in the Kurdish north since the
But the issue is in the limelight now after
President Barack Obama this month signed the new
sanctions, which punish entities involved in
exporting refined fuel products to Iran. Iran is a
major exporter of crude oil, but it sorely lacks
refineries, making it heavily reliant on imports of
gasoline and other refined fuels. The U.S. move aims
to put extra pressure on Iran over its nuclear
program after four rounds of U.N. financial
"If Iran had not been placed under international
sanctions, the smuggling would have continued
without a single comment," Bassem al-Sheik, the
editor-in-chief of Ad-Dustour newspaper wrote
Monday. He said the Kurdistan government's silence
on smuggling for so long was likely because the
Kurdish political groups were benefiting from the
Oil has long been a source of tensions between the
central government in Baghdad and the government in
the autonomous Kurdish region in the north. The two
sides have been at odds over just how much control
the Kurds — who sit on over a third of Iraq's 115
billion barrels in proven crude reserves — should
have over the oil in their territory.
Several years ago, Baghdad deemed illegal the
unilateral oil deals signed by the Kurds with
foreign companies following Saddam Hussein's ouster.
While the Baghdad government struck a deal in June
2009 with the Kurds to allow exports to resume
through the pipeline that runs from Kirkuk to Ceyhan,
Turkey, the agreement was short-lived, with exports
halted three months later over a dispute over
payments to foreign companies operating there.
Exports through the line have yet to resume with any
consistency, raising the question of what becomes of
production from the Taq Taq and Tawke fields that
feed it. Taq Taq is operated by China's state-owned
Sinopec Group and Turkey's Genel Enerji, and Tawke
by the independent Norwegian oil company DNO.
Tawke's production in May — the latest available —
stood at about 4,800 barrels per day, far shy of the
field's 50,000 barrel per day capacity. Of that
production, 80 barrels per day go to power the
company's operations at Tawke, according to company
figures. The rest is split between DNO's local
refinery and the small refineries in the region,
said DNO spokesman Tom Bratlie.
While DNO doesn't keep track of what happens to the
oil once it's sold, "all deliveries are subject to
approval by the local government," Bratlie said. He
said oil refined by DNO is distributed by the local
The smuggling seems less a matter of helping Iran
than of turning a profit.
"It's physically impossible for the oil being
smuggled to be more than a drop in the bucket for
Iranian needs," Samuel Ciszuk, Mideast energy
analyst with IHS Global Insight said.
El-Tablawy is based in Baghdad and Barzanji in
Sulaimaniyah; AP writer Sinan Salaheddin contributed
to this reoprt from Baghdad and Ian MacDougall from
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