Worldwide Oil Firms Caught in Kurdish Smuggling Net

Tsvetana Paraskova

Tsvetana is a author for Oilprice.com with over a decade of expertise writing for information retailers reminiscent of iNVEZZ and SeeNews. 

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• A Reuters investigation discovered that over 1,000 tanker vehicles are smuggling at the least 200,000 barrels of Kurdish oil per day to Iran and Turkey.
• The smuggling operation generates an estimated $200 million in month-to-month income, however the vacation spot of the funds stays unclear.
• The illicit commerce has flourished since a pipeline to Turkey was closed in March 2023 on account of a dispute over export rights.

Kurdistan hasn’t been capable of export its oil by way of a pipeline for greater than a yr now, however crude continues to circulation out of the semi-autonomous Iraqi area—on tank vehicles to the border with Iran. 

Greater than 1,000 such tank vehicles are estimated to be transporting at the least 200,000 barrels per day (bpd) of Kurdish oil to Iran and Turkey, a Reuters investigation has discovered.  

Though the worth of the crude being smuggled out of the northern semi-autonomous area is reportedly round $40 per barrel in these murky offers, the commerce is profitable, particularly in comparison with the hardships the Kurdistan regional authorities has seen with out oil revenues over the previous yr. 

The smuggling is estimated to be bringing round $200 million per thirty days, in response to Reuters, whose reporters talked with greater than 20 folks, together with oil engineers, oil business sources, merchants, authorities officers, politicians, and diplomats. 

A few of these sources informed Reuters that the oil smuggling was seemingly taking place with the information of the regional and federal governments. As soon as in Iran, the oil is loaded onto ships on the Iranian ports within the Gulf at Bandar Imam Khomeini and Bandar Abbas, or transferred by highway to Afghanistan and Pakistan, business, political, and diplomatic sources informed Reuters. 

Different sources stated that nobody actually is aware of what occurs with the $200 million month-to-month income from these operations. 

The smuggling enterprise has thrived because the closure of the pipeline path to the Turkish port of Ceyhan, which the semi-autonomous area of OPEC’s second-largest producer used to ship its oil overseas till March 2023. 

These exports by way of pipeline to Turkey, of about 450,000 bpd, ceased final yr after they have been shut in in March 2023 on account of a dispute over who ought to authorize the Kurdish exports. 

The deadlock adopted an Worldwide Chamber of Commerce ruling in March 2023 in a dispute between Turkey and Iraq relating to Kurdistan oil. The ICC dominated in favor of Iraq, which had argued that Turkey shouldn’t enable Kurdish oil exports by way of the Iraq-Turkey pipeline and the Turkish port of Ceyhan with out approval from the federal authorities of Iraq.

Now, solely Iraq’s state oil advertising and marketing agency SOMO has the suitable to promote crude oil produced wherever in Iraq. 

And it appears to be like just like the re-opening of the pipeline to Ceyhan on the Turkish Mediterranean coast isn’t a precedence for politicians in Baghdad. 

In November 2023, Norwegian agency DNO, one of many six members of the Affiliation of the Petroleum Trade of Kurdistan (APIKUR), stated that the worldwide oil corporations working in Kurdistan wouldn’t be producing oil for exports until they have clarity about overdue and future funds and gross sales phrases. 

Some corporations have resumed oil manufacturing for the native market. 

However business sources informed Reuters that the native consumers, accepted to purchase the crude, promote it by way of middlemen for export with out the worldwide companies figuring out of those re-selling operations. 

The smuggling provides between 200,000 bpd and over 300,000 bpd to Iraqi provide, as estimated by numerous Reuters sources. Privately, Iraqi officers have cited this commerce as one of many the reason why Iraq – OPEC’s second-largest producer – has did not restrict its output beneath the OPEC+ deal to this point. 

Iraq hasn’t complied with the present cuts regardless of repeatedly pledging it will present higher self-discipline going ahead.  

Compensation plans have been prepared for Iraq, in addition to non-OPEC producer Kazakhstan, which is a part of the OPEC+ group however has failed to stay to its quota, too. Between January and March 2024 alone, Iraq’s cumulative overproduction stood at 602,000 bpd, per OPEC’s estimates. 

Iraq has a 4-million-bpd cap on manufacturing. It pumped 4.189 million bpd in June—down by 25,000 bpd from Could, per OPEC’s secondary sources in its newest month-to-month report launched this week. However that’s almost 200,000 bpd above its goal beneath the OPEC+ deal. 

By Tsvetana Paraskova for Oilprice.com

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