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Iraq Government Condemns Kurds for ‘Illegal’ Oil Sale to Israel

SCF Altai Tanker
The SCF Altai tanker, according to media reports carrying crude oil from Iraqi Kurdistan, is seen anchoring near the southern Israeli city of Ashkelon, on June 22, 2014. Photographer: Davis Buimovitch/AFP via Getty Images

June 22 (Bloomberg) -- Iraq’s government condemned the country’s semi-autonomous Kurdish authorities for “illegally” selling crude oil to Israel for the fourth time.

The SCF Altai tanker carrying crude oil from the Kurdish region docked in Ashkelon, Israel, June 20, according to an e-mailed statement from the Iraqi Oil Ministry.

The Kurdistan Regional Government also continues to smuggle crude to neighboring countries, the ministry said. Four phone calls to the KRG’s Ministry of Natural Resources weren’t answered. Israel doesn’t have diplomatic relations with OPEC’s number two producer.

The Oil Ministry said it will continue to track shipments and prosecute buyers of crude supplied by the KRG, which it said is exporting crude illegally in violation of Iraq’s constitutional accords and at discounted prices.

The KRG confirmed the sale of its second shipment by pipeline to Turkey in a statement on its website on June 20, without identifying the buyer. The KRG said its crude sales are constitutional, and that a third and fourth crude tanker are now loading with Kurdish oil in Ceyhan, Turkey.

The central government in Iraq, holder of the world’s fifth-largest crude reserves, has been in a dispute with the KRG over land and energy revenue. Kurdish Peshmerga armed forces seized the northern key oil hub, Kirkuk, after militant Islamists routed the government’s army earlier this month. The oil dispute has raised the possibility of the Kurds achieving financial self-sufficiency to go with the expanding territory.

Legal Action

Iraq’s government has initiated legal action against Turkey, taking the case to the International Chamber of Commerce in Paris. A lawsuit has also been filed domestically against the KRG’s Ministry of Natural Resources.

“The Oil Ministry reiterates a request to the Turkish government to respect the sovereignty and national resources of Iraq,” the statement said.

The SCF Altai loaded the Kurdish oil at sea from the taken United Emblem tanker, which had been denied access in Malta, according to the statement. The first tanker to have loaded crude shipped by pipeline from Iraq’s Kurdish region, United Leadership, has shut off the transponder that signals its location to avoid being tracked and remains off Moroccan waters after being denied entry to the country, the Iraqi government said.

Iraq remains technically at war with Israel since its establishment in 1948. Israel bombed Iraq’s Osirak nuclear site in 1981, and former Iraqi President Saddam Hussein’s army fired missiles at Israel during the Gulf War in 1991.

Iraq, excluding the Kurdish region, holds 150 billion barrels in proven crude reserves, the world’s fifth-biggest deposits. The KRG controls 45 billion barrels and has attracted international oil companies including Exxon Mobil Corp. and Total SA with financial terms many investors see as more generous than those available in the rest of the country.

To contact the reporters on this story: Kadhim Ajrash in Baghdad at kajrash@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Kraus, Matthew Brown

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