Saturday, July 24, 2010

Kurds Continue With Their Oil Smuggling To Iran

Since the New York Times ran an article on July 8, 2010 about Kurds smuggling oil to Iran, the Kurdistan Regional Government (KRG) has been trying to explain away their activities. In the Times piece KRG Natural Resource Minister Ashti Hawrami admitted that the regional government was sending refined oil products like fuel to Iran. Afterward, the KRG officially denied any illegal sales, and promised to crackdown on any smuggling. They claimed that if any oil was being sent to Iran it was the work of gangs. Later, on July 20, a KRG spokesman said that they respected the Iraqi constitution and international law and would end all illegal oil exports. He went on to say that Kurdistan would only allow legal exports of oil using the official pipelines and that they would cooperate with the central government. A committee was also supposed to be formed to review the oil industry in the region.

Despite these statements, the smuggling in Kurdistan is continuing. Reuters went to an official border crossing in the KRG at Haj Umran and found dozens and dozens of tanker trucks lined up to cross over into Iran. The drivers said that they worked for an Irbil based shipping company that had official contracts from the Natural Resource Ministry to send refined oil products like diesel to Iran. They got official documents from the Ministry, loaded up at one of Kurdistan’s three refineries, and then headed for the Iran-Iraq border. They said that they would usually go to Bandar Imam or Bandar Abbas ports in Iran, while some drove all the way to Afghanistan. The man in charge of the border crossing and the mayor of Haj Umran both said that everything was legal because the tankers were only carrying refined products. In all the statements by the KRG officials about stopping smuggling and following Iraqi laws they only mentioned crude oil. Nothing was said about refined products, so they are using that as a loophole.

The KRG’s activities are causing tension not only with Baghdad, but with the United States and other Kurdish politicians as well. The central government claims that all exports of crude and refined products are under their jurisdiction. The Oil Ministry has called for the Kurds to send a delegation to discuss the matter, but they have not responded saying that the government’s authority expired after the 2010 elections. The KRG has also blamed Baghdad’s subsidies of refined oil products for the smuggling since the products can be sold for a tidy profit in foreign countries where prices are much higher. In July 2010 the U.S. passed new sanctions on Iran for its nuclear program. The U.S. Ambassador to Iraq Christopher Hill said that the country needs to consider its long-term goals when considering its deals with Iran because they could affect relations with America. The Congressional Research Service’s Middle East expert however thought that ultimately Washington would do nothing about the Kurds because they want to support Iraq. Finally, a member of the KRG parliament’s energy committee said that the shipments to Iran smacked of corruption because no one knew where the profits went to. The KRG Natural Resource Minister told the New York Times that the revenue was first used to pay the two foreign companies that were producing oil in the region, while the leftover funds were placed in a bank account whose future was to be discussed with Baghdad sometime in the future. Others said that the profits were going directly to the two ruling parties in the KRG, the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK). Some have said that the KRG’s Prime Minister Barham Saleh wants to legalize the trade with Iran, but is opposed by the Natural Resource Minister.

In the end, the KRG will continue their smuggling to Iran. It provides a tidy, off the books profit for the KDP and PUK. It also allows them to assert their autonomy from the central government, even if it is illegal. Finally there is no one that can stop them. Baghdad has no presence along the Iran-Iraq border in Kurdistan, the United States is unlikely to pressure the Kurds about it, and the KDP and PUK have the last say in Kurdistan, not the parliament or even the regional prime minister. Not only that but the Kurds have been smuggling oil to Iran since the 1990s so there’s no reason to stop now.

SOURCES

AK News, “Kurdistan Government denies any breach of international law over exported out to Iran,” 7/21/10

Dagher, Sam, “Smugglers in Iraq Blunt Sanctions Against Tehran,” New York Times, 7/8/10

Reuters, “Despite pledges, Iraqi Kurd oil still flows to Iran,” 7/22/10
- “Iraq Kurds say to crack down on fuel smuggling,” 7/11/10

El-Tablawy, Tarek and Barzanji, Yahya, “Oil smuggling to Iran embarrassment for Iraq,” Associated Press, 7/13/10

Van Heuvelen, Ben and Lando, Ben, “Iraqi oil and gas moves could violate U.S. sanctions on Iran,” Iraq Oil Report, 7/16/10

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