As part of the deal cut between the central and Kurdistan Regional Government (KRG) for the latter to resume oil exports, the Kurds promised to crackdown on oil smuggling to Iran. On February 3, 2011 it was reported that crude began to flow out of Kurdistan to the northern pipeline headed towards foreign markets. The next day, a reporter for Al Jazeera traveled to one of the main border crossings along the Iraq-Iran border and found dozens of tanker trucks lined up ready to go to Iran.
Stories of Kurdish oil smuggling to Iran emerged in the summer of 2010. In July, the New York Times reported that thousands of tanker trucks carrying oil were going back and forth from Kurdistan to Iran each day. KRG officials strenuously denied the story initially, but then began to fudge their facts. At first, they said that only surplus gas was being sold to Iran. By August however, the KRG’s Natural Resource Minister said that no crude was going to Iran, but if it was, it was legal. Baghdad rejected that claim. Either way, the Kurdish sales were also violating U.S. sanctions upon Iran that ban exporting gas to the country. Despite the fact that Iran is the second larger producer in OPEC, it has little refining capacity, and relies upon the importation of gas and other refined oil products.
The Kurds have been smuggling oil and other refined products to Iran since the 1990s. During the international sanctions period following the 1990 invasion of Kuwait, both the Iraqi government and Kurdistan began selling crude illegally. After the 1990 Gulf War, Kurdistan became largely autonomous with the protection of U.S. and English no fly zones. Oil smuggling became a major source of revenue. Today the profits from the Iranian sales go to the ruling parties in Kurdistan, the oil companies operating there, and some say even officials in Baghdad.
Since the new ruling coalition is still being put together after the March 2010 parliamentary elections, it’s unlikely that the central government will make a big deal out of this story. Prime Minister Nouri al-Maliki needs to play his cards right in this early phase, and can’t afford to anger too many parties. Even if Baghdad did take issue, there’s nothing they could do. In the summer of 2010 the KRG did nothing substantial to stop oil flowing to Iran. There are no representatives from the central government in the northern border crossings either. There’s also oil smuggling going on from southern Iraq that barely ever gets mentioned. It has simply become part of the widespread corruption that goes on within the country. It will make the press occasionally, but it will not end any time soon.
AK News, “Kurdish prime minister promises to release oil documents,” 8/26/10
Aqrawi, Shamal, “UPDATE 1-Iraq starts exporting Kurdish oil – officials,” Reuters, 2/3/11
Bloomberg, “Iran oil minister claims jump in refining capacity,” 2/5/11
Dagher, Sam, “Smugglers in Iraq Blunt Sanctions Against Tehran,” New York Times, 7/8/10
Davies, Rhodri, “Tanker trucks line up on North Iraq-Iran border,” Al Jazeera Blogs, 2/4/11
Jacob, Jijo, “Middle East’s new oil war: Iran, Iraq gloat over reserve size,” International Business Times, 10/14/10
Rasheed, Ahmed, “UPDATE 1-Iraq to pay expenses to oil firms in Kurdish region,” Reuters, 1/19/11
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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