Iraq Kurds say to crack down on fuel smuggling

Sunday, 11 July 2010

Iraq’s northern Kurdish region is cracking down on fuel oil smuggling through the area and across Iraq’s borders, the government of the semi-autonomous region said on Sunday.

The Kurdish Regional Government (KRG) issued a statement in response to a New York Times story on Friday that said hundreds of millions of dollars worth of crude and refined products were smuggled through the mountains of Iraqi Kurdistan every year.

The smuggling process, reportedly carried out without authorization from the Iraqi government, is not only seen as undermining U.S. efforts to isolate Iran, but also heightening tension inside Iraq over the distribution of oil wealth and which has always been a bone contention between the Kurds and the country’s central government.

American concerns over the smuggling are also intensified by the fact that the autonomous government in Kurdistan has been a U.S. ally since the end of the Persian Gulf War when Kurds were granted autonomy and Kurdish territory was made a no-fly zone with the support of the United States.

The Kurdistan Regional Government (KRG) admitted to being involved in the transferring of oil to Iran. In an interview with the New York Times, Ashti Hawrami, Minister of Oil in the autonomous region, said only fuel oil and byproducts are sent to Iran after the domestic needs of Kurdistan are met.

According to Hawrami, crude oil is processed in 70 unlicensed refineries scattered all over the Kurdistan region as well as in the nearby provinces of Kirkuk and Nineveh. The profit, he added, is used to settle debts with foreign oil companies that were not paid for exporting Kurdish oil due to disputes between the KRG and the central government in Baghdad.

Hawrami also admitted that crude oil is smuggled to Iran from the cities of Tamim and Salahaddin, yet added that neither his ministry nor the KRG is involved in this.

Another version of the story was told by a senior Kurdish official who said Baghdad is involved in the trade and that the profits are split between the ruling Kurdistan Democratic Party (KDP) of KRG President Massoud Barzani and the Patriotic Union of Kurdistan (PUK) of Iraqi President Jalal Talabani.

Baghdad responds

Abdul-Karim al-Luaibi, the Iraqi Deputy Oil Minister for Production, stated that he was not aware that oil is exported from Kurdistan to Iran, adding that the refineries in which the oil is processed are illegal and that the KRG is fully responsible for those clandestine activities.

Iraqi government spokesman Ali al-Dabbagh said that Baghdad officials contacted the government of Kurdistan about reports of smuggling oil and that the Iraqi authorities will look into ways of curbing this phenomenon.

The sanctions imposed on Iraq by the United Nations in the 1990s led to the thriving of the smuggling of oil and other products across the border with Iran. However, it is the semi-official acquiescence that is raising concerns now.

According to analysts, the current openness about oil trade with Iran is meant to put pressure on the central government as it gives Kurds leverage in any future negotiations about the distribution of oil wealth.

“They can negotiate from a position of strength,” says Ruba Husari, an oil specialist and founder of “They are running their own oil kingdom.”

By expanding their oil trade with Iran, Kurds are not longer fully dependent on exporting oil to Turkey and which has to go through Iraq’s pipeline network and is, therefore, under the control of the central government.

Being in control of oil trade, analysts argue, the government of Kurdistan does not have to share the revenue with Baghdad, at least not until disputes are resolved.