Much like the dispute in Libya between Cyrenaica and Tripoli, the Iraqi central government and the Kurdistan Regional Government (KRG) have long been engaged in local disputes over oil sales and revenues. Baghdad, for example, is withholding the KRG’s share of oil revenues, which amount to US7bn for 2014 alone. In July Kurdish troops seized oil fields near Kirkuk after Maliki allegedly ordered the destruction of oil pipelines there.
The oil crisis du jour, however, has much more at stake and involves a vanishing tanker in the Gulf of Mexico, lawsuits and counter-suits, and perhaps most importantly, the future of Iraq. The geopolitical plot twists in this saga are reminiscent of any best-selling political thriller and could very well be a catalyst that reshapes the region.
The tanker United Kalavryta departed from Ceyhan, Turkey on June 23 with oil on board that was pumped to Ceyhan via a newly constructed pipeline that runs directly from Kurdistan, bypassing the old pipeline from fields in Iraq proper. To date, Kurdistan has managed to sell one tanker of oil from this pipeline. The United Kalavryta has been sitting in the Gulf of Mexico doing $100m donuts for more than two months waiting to be the first shipment of crude from Ceyhan to be sold in the United States.
In May of this year KRG Prime Minister Nechirvan Barzani said in a speech to parliament that “[t]here is no going back,” referring to the sales of Kurdish oil. The KRG was throwing down the Kurdish crude gauntlet and forging ahead on its own. In early July, in the wake of the fall of Mosul and the collapse of the Iraqi army, KRG President Massoud Barzani announced plans for a referendum on independence for Kurdistan. And then, to the fanfare of Kurdish media touting independence, United Kalavryta chugged into the Gulf of Mexico laden with Kurdish crude.
Had the crude been offloaded and sold, it certainly could have been seen as tacit approval by the U.S. of Kurdistan’s bid for independence and the abandonment of its long-standing policy of Iraqi unity. It would have been a significant and symbolic sale for the Kurds.
According to Baghdad, the Kurdish crude loaded on to United Kalavryta, and the oil in holding tanks in Ceyhan is stolen property that the KRG had no right to export or try to sell. The Kurdish government says otherwise. So convinced is Baghdad that the Kurds have stolen the oil, they engaged the services of a U.S. law firm and got a Texas magistrate judge to issue a seizure order to the U.S. Marshal service for the more than 1,000,000 barrels of Kurdish crude on the tanker. The judge rescinded the order the next day saying the U.S. had no authority to seize the oil as the tanker was outside of U.S. jurisdiction. After rescinding the seizure order, Magistrate Judge Nancy Johnson said, “Seems to me this is not a matter for the U.S. courts to tell the government — the governments — of Iraq who owns what.” Perhaps Judge Johnson was unaware of the June 24 Iraqi Supreme Court ruling, which seemed to favor the Kurdish position on oil sales. In the meantime, the KRG, through its London-based attorneys, outlined its case in a 184-page brief filed with the U.S. District Court for the Southern District of Texas.
On August 25 the U.S. District Judge to whom the KRG response was addressed, threw out the case entirely noting that Kurdistan’s actions do not violate U.S. maritime law, concluding that “Kurdistan’s motion to vacate is granted.” The judge, Gray Miller, also noted in his ruling that the Iraqi central government had ten days to amend and refile the case. The tanker soon thereafter mysteriously vanished from radar, having presumably turned off its transponders.
While media outlets ran headlines such as “Tanker Vanishes off Texas Coast”, United Kalavryta remained in the Gulf of Mexico. Some thought, as happened with a tanker laden with Kurdish crude in the Mediterranean, that the tanker had simply gone dark for the offloading process. However, when United Kalavryta reappeared on radar several days later it was still 95% full, as it had been when it arrived in the Gulf. No offloading of its crude had taken place. But surely its “disappearance” had Baghdad worried.
Late on Thursday, September 4 the Iraqi government refiled its lawsuit in Houston, just barely within the ten-day limit granted by Judge Miller. This new claim cites the Foreign Sovereign Immunities Act and Texas state law governing stolen property and names Kurdistan and the unknown buyer as the plaintiffs. The refiling throws the case back to the U.S. courts, even after Judge Johnson has ruled that it is not a matter for the U.S. courts to decide. The court has given KRG’s lawyers 21 days to respond.
Where does Washington stand on the sales of Kurdish oil?
While State Department spokesperson Marie Harf has said that there is no official U.S. ban on Kurdish oil, those in the oil industry say that it has been that same department using its diplomatic sway to prevent sales of Kurdish crude that are not sanctioned by Baghdad, emphasizing their worn-out mantra that it would be “bad for a united Iraq.” More recently Harf has said that “[t]hese are commercial transactions. The U.S. government is not involved in them.” Brett McGurk, Deputy Assistant Secretary of State for Near Eastern Affairs (Iraq and Iran) reiterated Harf’s announcement and wrote on his Twitter feed on July 30 that “[t]here is no U.S. ban on the transfer or sale of oil originating from any part of Iraq. Suggestions to the contrary is [sic] false.” Both Harf and McGurk also said that “Iraq’s energy resources belong to all of the Iraqi people.” So is the U.S. backing away from its earlier position or still blocking sales behind the scenes? Their position is murky at best. Some would argue though that it is time to rethink the kind of relationship [the U.S. has with Kurdistan, both on the energy front as well on the security front, particularly in the wake of the crisis with the Islamic State.
Since the arrival of United Kalavryta off the coast of Texas, Iraq has seen noteworthy changes in the government. Most significantly, beleaguered Iraqi PM Nouri al-Maliki will be replaced by Haider al-Abadi. Al-Abadi was named Prime Minister-designate on August 11 by new Iraqi President Fouad Massoum. Al-Maliki is now only in a caretaker position until a new government is formed.
In light of the changes in Baghdad, the Kurdish government has now announced that it will postpone its plans for a referendum on independence and instead focus on helping form a new government in Baghdad. With the Islamic State a stone’s throw from the Kurdish capital of Erbil, the KRG needs continued U.S. and other western assistance to fight that threat. The price they have to pay is acquiescence to U.S. pressure to maintain Iraqi unity. Perhaps the U.S. will repay the Kurds by allowing Kurdish crude to be sold in the U.S. Strapped for cash, one demand the Kurds have in negotiating with any new government in Baghdad is a three-month lifting on the ban of direct oil sales from Kurdistan. If the demand is met, the 1,032,212 barrels of crude on United Kalavryta could be offloaded and sold in the U.S. This could be a face-saving measure for all parties. However, the sale would no longer carry the same significance for Kurdish independence.
Christian Sinclair is the assistant director of the University of Arizona’s Center for Middle Eastern Studies (CMES); his research focuses on Kurdish media and identity and their expressions in Turkey and Syria. Sinclair is also president of the Kurdish Studies Association.