From near Erbil, the capital of Kurdistan, hundreds of oil tankers daily make their way to Turkey to the north and Iran to the east, clogging the often winding and mountainous highways of the Iraqi region.
The big haulers are the most noticeable part of a monstrous activity to truck oil from the semi-independent district of Iraq to Iran and Turkey in dim, under the table exchanges that have blast since an authority trade pipeline shut a year ago.
Through conversations with more than 20 individuals, including politicians, diplomats, oil industry sources, Iraqi and Kurdish oil engineers, traders, and government officials, Reuters was able to piece together the specifics of this flourishing trade.
They portrayed a thriving industry in which more than 1,000 tankers transported at least 200,000 barrels of cheap oil daily to Iran and, to a lesser extent, Turkey, bringing in approximately $200 million per month. Iraqi officials stated that one reason Iraq was unable to adhere to output cuts agreed upon with the OPEC oil cartel this year was the scale of the unofficial exports, which had not previously been reported. Iranian and Turkish authorities didn’t answer demands for input.
Assim Jihad, a spokesperson for the Iraqi oil ministry, stated that the Kurdistan trade was not authorized by the Iraqi government and that SOMO, a state-owned oil marketer, was the only official entity permitted to sell Iraqi crude.
These dark cylinders fill a gigantic tank with pungent saline solution sucked profound starting from the earliest stage as a component of a 870 million dollar project in the region of Salta. He said the public authority didn’t have precise figures for how much oil was being carried into Iran and Turkey. “OPEC has become less patient with smuggling in recent years and has even been known to impose punitive measures on members who violate its rules.
I question we’ll see any revenge against Baghdad since it’s notable that the Kurdish district lies outside focal control,” said Jim Krane at Rice College’s Cook Foundation in Houston.
According to a U.S. official, the business could also set Kurdistan on a collision course with Washington, a close ally, as Washington investigates whether the transaction violates any economic sanctions imposed by the United States on Iran.
The official Iraq-Turkey Pipeline (ITP), which connects the Iraqi oil city of Kirkuk with the Turkish port of Ceyhan, was the primary means by which Kurdistan exported most of its crude until the previous year. However, when an international tribunal ruled in favor of the Iraqi federal government’s request for the shipments to stop in March 2023, those exports of approximately 450,000 barrels per day (bpd) came to an end, putting the pipeline in legal and financial limbo.
The federal government in Baghdad, which has long maintained that it is the only entity authorized to sell oil from Iraq, successfully argued that Turkey violated a 1973 treaty by arranging the exports with the Kurdistan regional government without the Kurdish government’s consent.
“NEU TRACE” Business picked up this year after talks to reopen the pipeline stalled, according to industry sources, oil officials, and diplomats. Tankers started taking Kurdish oil to neighboring countries instead shortly after. Nearby authorities expressed none of the returns are represented, or enlisted, in the money chests of the Kurdistan Local Government (KRG), which has been battling to pay large number of public workers.
Regional legislator Ali Huma Saleh, who presided over the oil committee in Kurdistan’s parliament until it was disbanded in 2023, stated, “There is no trace of the oil revenues.” He put the trade at over 300,000 bpd, which was higher than the majority of other estimates.
One of Kurdistan’s two ruling parties, the Patriotic Union of Kurdistan (PUK), senior official Hiwa Mohammed stated that the oil was passing through border crossings with the knowledge of the federal and regional governments.
The representatives of KRG Treasury did not respond to requests for comment. There is no spokesperson for the KRG Ministry of Natural Resources, which is in charge of oil trading in Kurdistan. According to a US official, Washington is evaluating Iran’s compliance with sanctions by examining the oil trade.
The U.S. The Treasury Department did not respond. “We regularly engage with partners on sanctions enforcement issues, but we do not detail those conversations,” a State Department official stated. “U.S. sanctions on Iran remain in place.” According to a senior member of Kurdistan’s natural resources ministry, the region was producing 375,000 barrels per day of oil, of which 200,000 were transported by truck to Iran and Turkey and the remaining were refined locally.
The official, who requested anonymity due to the sensitive nature of the situation, stated, “Nobody knows what happens to the revenues from the 200,000 smuggled abroad, or the oil derivatives sold to refineries in the region.” RUDE CUT-PRICE According to industry and political sources, the crude is sold to local buyers by Kurdish oil companies at cut-price rates of $30 to $40 per barrel, or roughly half the global rate.
This generates at least $200 million per month in revenue. DNO ASA (DNO.OL), opens a new tab, Genel Energy (GENL.L), opens a new tab, Gulf Keystone Petroleum (GKP.L), ShaMaran Petroleum (SNM.V), HKN Energy, WesternZagros, MOL’s (MOLB.BU), Kalegran, and Hunt Oil Company control the majority of Kurdistan’s oil production.
The American-based Hunt Oil declined to comment. The local company KAR Group, a major player in Kurdistan, and the other seven businesses did not respond to requests for comment. Even though the pipeline shut down most of the oil production, some companies, like DNO, Keystone, and ShaMaran, have said in statements that they have started producing crude for sale to Kurdish buyers. Keystone reported in June that sales of crude from the Shaikan Field this year were bringing in approximately $28 per barrel, while ShaMaran stated that the average price of oil it sold in the first three months of 2024 was $36.49 per barrel.
According to industry sources, approved local buyers take oil companies’ crude and sell it through middlemen for export without the producers’ knowledge. By far most of the shipped oil goes to Iran, the majority of the business and political sources said, by means of true Iraqi boundary intersections including Haji Omaran, or through Penjwen further south.
According to industry, political, and diplomatic sources, it is then either transported by road to Afghanistan and Pakistan or loaded onto ships at Iranian ports in the Gulf called Bandar Imam Khomeini and Bandar Abbas. These ports were once used as a trade route for the export of Kurdish oil. Reuters was unable to ascertain who is receiving the oil in Iran or what Iran gets out of the trade, as sanctions make it difficult for Iran to sell its own oil products. Mohammed of the PUK claimed that it was sent to Iran for refinement into gasoline.
The petroleum ministry of Pakistan declined to comment. Requests for comment were not answered by officials from Afghanistan.
LABYRINTH ON THE BLACK MARKET
The trade is the most recent version of a long-running black market for oil in Iraq that is widely believed to be in the best interests of politically connected political elites and business interests. Twelve individuals expressed authorities in Kurdistan’s two decision parties, the Kurdistan Leftist faction (KDP) of the Barzani family and the PUK of the Talabani tribe, were the recipients. “Black-market salespeople are paid in a maze, and people approve of those sales.
They are not simply ignoring the situation. An individual working in the Kurdish oil industry stated, “They’re taking their share.” According to a senior diplomat in Baghdad, official exports via the pipeline, which were once considered a priority, have fallen off the diplomatic agenda because political interests are so invested in the trade. The individual stated, “I’m not going to be advocating for this while they’re all having a party.” Requests for information regarding the illicit trade were met with silence from KDP representatives.
The official from the PUK, Mohammed, did not say who might be behind it. The pipeline closure, according to Kurdish officials, forced the region into the trade. They see this as part of a larger effort by Iran-backed Shi’ite parties in Baghdad to limit the relative autonomy they have enjoyed since the 1991 end of the first Gulf War.
Baghdad is aware of the specifics of the business, according to a senior Iraqi parliamentary official familiar with oil matters, but is avoiding public criticism as officials attempt to resolve pending disagreements with Erbil. According to the person, who declined to be identified due to the sensitive nature of the matter, putting pressure on Erbil to stop oil smuggling would corner the region and deprive it of all funding sources, potentially leading to its collapse.
The exchange has been refered to secretly by Iraqi authorities as being behind Baghdad’s failure to adhere to its OPEC creation shares, a bone of conflict with OPEC’s true chief Saudi Arabia.
The oil ministry’s spokesman, Jihad, stated that Iraq was committed to voluntary production cuts and had pledged to reduce output this year to compensate for overproduction. Until further notice, the sheer volume of big haulers growling up thruways, and engaging in mishaps, is enraging occupants along significant avenues.
“It’s extremely difficult,” said Rashid Dalak, visiting the grave of his sibling Rouzkar, who was killed in an accident with a big hauler in May on the thruway among Erbil and Sulaimaniya that prompts the Iranian line. “No one here has seen a dollar despite passing through, damaging our roads, and killing our loved ones.”
