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Iraqi Kurdistan defies Baghdad to load first pipeline crude sale First cargo of oil bought by Europe

ANKARA/ISTANBUL, May 23, (Agencies): Iraqi Kurdistan started loading oil from its new pipeline for shipment from a Turkish port on Thursday, defying the Baghdad government, which claims sole authority over Iraqi crude and declares any independently sold oil as ‘smuggled’. The cargo of 1 million barrels of crude oil was being loaded on a tanker in the Mediterranean port of Ceyhan, Turkish Energy Minister Taner Yildiz told Reuters on Thursday. “Loading will be completed today,” Yildiz said, declining to name the buyer. The sale is likely to infuriate Baghdad, which has been at loggerheads with the autonomous Kurdish region over the sharing of oil revenues, and denounced Turkey’s courtship of the Kurds, warning that steps towards Kurdish economic independence could threaten Iraq’s sovereignty.

Baghdad has cut the region’s share of the budget to punish it for building the new pipeline, and oil sales can provide the Kurdistan Regional Government (KRG) with desperately needed independent income. Flows through the pipeline started last December, but Ankara had pledged it would wait for Baghdad and Arbil to resolve their differences before allowing independent oil exports. After five months of talks and little progress, however, tanks at Ceyhan are now full with 2.5 million barrels of Kurdish oil, and Turkey decided there was no point in further obstructing exports, sources familiar with the sale said. Iraq’s State Oil Marketing Organization (SOMO) issued a statement late on Thursday calling the loading of oil from Ceyhan “an illegitimate deed of the Turkish authorities”.

It said that both the Oil Ministry and SOMO “reserve the right to take all legal measures against any company or entity” that loaded Iraqi crude from Ceyhan without Baghdad’s approval. Officials in Arbil could not immediately be reached for comment. An official at the GAC shipping agency in Turkey confirmed that a tanker named United Leadership was loading piped Kurdish oil. Reuters AIS Live ship tracking showed the tanker had arrived in Ceyhan around May 20 and was berthed there. “Because the Kirkuk line was not working, KRG was able to pump around 100,000 barrels per day (bpd) at times, which filled up the storage tanks quickly,” the source said. KRG’s new oil pipeline connects to the existing Iraqi federal pipeline on the Turkish border.

The industry source said the flow in the KRG pipeline continued as the export cargo was being loaded in Ceyhan. A Turkish company called Powertrans has acted as broker for the Kurdish government, selling the oil via tenders to traders. Last week, Reuters reported that Israeli and US oil refineries had imported small cargoes of crude oil from the region. The sales may have immediate political consequences as Iraq’s incumbent prime minister, Nuri al-Maliki, looks for partners to form the next government after preliminary results from the April 30 election were announced last Monday. European markets bought the first load of oil to be carried by pipeline from Iraqi Kurdistan, the autonomous region said in a statement on Friday, adding that the revenue will be deposited in Turkey’s Halkbank .

The Kurdistan Regional Government (KRG) said sales from the Turkish port of Ceyhan would continue despite opposition from the federal government in Baghdad, which has threatened legal action against any company involved in exporting Iraqi oil. Kurdistan began pumping its own crude to the Turkish border independently of Baghdad earlier this year, bypassing the state-owned system. Previously Arbil had only used trucks to transport its oil to Turkish Mediterranean ports. “A tanker loaded with over one million barrels of crude oil departed last night from Ceyhan towards Europe,” the statement said. “This is the first of many such sales of oil exported through the newly constructed pipeline in the Kurdistan region.”

It added that the oil revenue would be treated as part of the region’s share of the Iraqi national budget. Baghdad has cut funds to the region as punishment for the Kurds’ moves to export crude independently. The KRG said it remained open to negotiations with Baghdad and would comply with United Nations obligations by setting aside 5 percent of the revenue in a separate account for reparation for Iraq’s invasion of Kuwait in 1990. Turkish Energy Minister Taner Yildiz said on Friday the first cargo was sold into the Mediterranean spot crude market. “This crude oil will possibly go to Italy or Germany,” Yildiz said in comments broadcast live on TRT television. The sales may have immediate political consequences as Iraq’s incumbent prime minister, Nuri al-Maliki, looks for partners to form the next government after preliminary results from the April 30 election were announced last Monday.

The United States voiced concerns on Thursday that the move could destabilise Iraq. “Our position has long been that we don’t support exports without the appropriate approval of the federal Iraqi government, and certainly we do have concerns about the impact of those continuing,” US State Department spokeswoman Jen Psaki told a daily press briefing in Washington. “Our most immediate concern is for Iraq’s stability,” she said. “Iraq is facing a difficult situation. We’ve been clear that it’s important for all sides to take actions to help the country pull together and avoid actions that might further exacerbate divisions and tensions”.

The latest development also risks harming Ankara’s relations with Baghdad. Last year, Turkey offered to serve as an independent intermediary by having Iraq’s oil revenue deposited into an escrow account at a Turkish state bank. In the past Turkey refused to engage in official contacts with Iraqi Kurds, fearing the establishment of a Kurdish state there could embolden its own Kurdish minority, which had waged a long separatist campaign. But as Turkey’s economy has boomed, and its thirst for energy grown, Prime Minister Recep Tayyip Erdogan’s government has moved to forge ties with Iraqi Kurds. Erdogan has even referred to the autonomous region in northern Iraq as “Kurdistan”, a word long taboo among politicians in Turkey.

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