Iraqi Govt Accuses Kurdish Region of Smuggling Oil

The Iraqi government on Monday accused the northern semi-autonomous region Kurdistan of smuggling oil out of the country and underscored Iran as a major transit.

At a joint news conference in Baghdad, Deputy Prime Minister for Energy Affairs Hussein al-Shahristani and Oil Minister Abdul-Kareem al-Luaybi said the government has obtained detailed information about the trafficking routes.

“The oil has been smuggled though Iran and then to the Gulf ports of Bandar Abbas and Bandar Khomeini, where the oil is being sold at lower prices than in the world oil market,” said Luaybi.

The remarks of the top officials came as the Kurdistan halted oil exports over payment dispute with Baghdad, as the region said it has not received any payments from the central government since May 2011.

“After consultation with the producing companies, the ministry has reluctantly decided to halt oil exports,” the regional Ministry of Natural Resources (MNR) said in a statement.

In 2010, Iraq’s Oil Ministry and MNR concluded an agreement, under which Kurdistan is allowed to export crude oil through a national pipeline that goes to the Turkish port of Ceyhan by the Mediterranean, and the revenues go to the central government with 17 percent returning to Kurdistan to cover oil fields development.

However, as claimed by Luaybi, the region gradually reduced the exports and started to auction crude oil off in the local market, the revenues of which, five times the costs of oil fields development, are not transferred to the central government.

In addition, the row between Baghdad and Erbil, the Kurdish capital, has long been focused on the right of exploiting the oil fields in the region, as Baghdad stresses that oil deals struck locally with foreign firms are illegal.

The MNR, on its part, said it hopes the exports halt would be a temporary measure and that once Baghdad has solved the payment problem, it will work on increasing the exports to its proper capacity.

Iraq, which depends on oil revenues for nearly 95 percent of its budget, announced in 2010 that its proven oil reserves increased to 143.1 billion barrels from the previous estimate of 115 billion barrels.