Story highlights
There may be the equivalent of 45 billion barrels of oil under Kurdish land
U.S. opposes sales as a destabilizing factor
The Kurdish government needs cash quickly
Iraq is "falling apart," the region's President says
For sale: One million barrels of crude oil. Attractive discount offered. Currently sitting off Moroccan coast.
That’s what the Iraqi Kurds are offering potential buyers, much to the fury of the government in Baghdad. It amounts to a declaration of economic independence, fraying the already tattered ties holding Iraq together.
Here’s how it works:
The Kurdish Regional Government, or KRG, deals with oil exploration companies independent of the central government.
Exxon Mobil, Chevron and Total are among the companies working in Iraqi Kurdistan.
The crude produced there goes through a pipeline to the Turkish port of Ceyhan in the Mediterranean. Then it’s loaded onto tankers and floats about until it finds a buyer.
The proceeds are held in a Turkish bank; the Kurds say they will take 17% and the Iraqi government is entitled to the rest.
Who are the Iraqi Kurds?
Along with the Shiite Arabs and the Sunni Arabs, the Kurds are one of the three dominant groups in the fractious and diverse nation of Iraq.
While most Kurds are Sunnis and a minority are Shiite, they identify first as an ethnic group. They are distinct from Arabs and speak an Iranian language.
The Kurdish population numbers 15% to 20% of Iraq, which has a population of 32,585,000, according to an estimate from the CIA World Factbook. There are also large Kurdish populations in the neighboring countries of Iran, Syria and Turkey, with varying levels of independence aspirations.
The KRG rules an autonomous region with its own Cabinet, parliament, president and military forces. The region consists of three provinces In Iraq’s north: Irbil, Sulaimaniya, and Duhuk.
The Kurds had been oppressed by Iraq’s Saddam Hussein government, but the area has avoided much of the country’s warfare since Hussein’s overthrow in 2003.
Today, Iraqi Kurdistan is regarded as a relatively stable and economically booming Middle East success story, thanks to its oil clout.
Scaling up
The KRG began exporting small amounts of crude oil in trucks last year, but the pipeline to Ceyhan gives it the opportunity to scale up.
Industry sources say more than 100,000 barrels are flowing through the pipeline every day, and more than 2 million barrels are already stored at Ceyhan.
Altogether, there may be the equivalent of 45 billion barrels of oil under Kurdish land in Iraq, according to the KRG.
Aligning with Israel
The most recent buyer appears to be Israeli.
Late Friday, the SCF Altai docked at the port of Ashkelon, having taken on a load of Kurdish crude from another tanker in the Mediterranean a week ago.
Why Israel? It’s not clear who the buyer is, or whether the oil changed hands once or more before finding its final destination.
But the Israelis may see the Kurds as a natural ally in a region where both feel they are threatened minorities.
Problems offloading
Another much larger cargo – said to contain 1 million barrels – has been at sea for more than a month.
According to shipping sources, the United Leadership tanker was at anchor off Casablanca in Morocco late last week, still looking for a buyer. Ship tracking databases had the vessel listed as “For Orders,” meaning its cargo does not yet have a destination.
SEE MAPS: Where ISIS has taken over in Iraq
The United Leadership’s limbo suggests that despite reportedly offering big discounts for its crude, the KRG is having problems offloading it.
Some buyers are worried about Baghdad’s threat to sue anyone who buys Iraqi oil other than through the state company. The Iraqi government has already blacklisted some agents and importers of Kurdish oil, including the Austrian company OMV.
Other buyers
Reuters reported earlier this month that Russian oil company Rosneft had bought a cargo of Kurdish crude for a refinery in Germany that it co-owns.
