Kurds lose fight to sell crude oil in U.S. after Iraq sues

LAUREL CALKINS and BRUCE STANLEY

BAGHDAD, Iraq (Bloomberg) -- Iraq’s self-ruled Kurds can’t sell Iraqi crude oil in the U.S. under a court decision that puts a fresh hurdle in the path of Kurdish efforts to achieve financial independence from the central government in Baghdad.

The U.S. Court of Appeals for the Fifth Circuit in New Orleans dismissed an attempt by the Kurdistan Regional Government to overturn a judge’s earlier decision against its planned sale of oil to an unidentified buyer in the U.S. The KRG’s eventual sale of the disputed cargo in Israel made the appeal moot, the court said in a ruling.

The case began last year when Iraq’s central government sued to seize a tanker loaded with crude from the country’s Kurdish region that had sailed to the Gulf of Mexico and anchored 60 miles off the coast of Texas. The appeals court upheld an order by a judge in Houston requiring the KRG to notify him before trying in the future to sell any oil in the U.S.

“The KRG mooted this appeal through its voluntary decision to discharge the cargo in Israel,” the court said Monday in its 13-page ruling. “In so doing, the KRG severely weakened its argument.”

Resisting Control

Iraq’s minority Kurds, who historically have resisted control by governments in Baghdad, are independently developing oil reserves they say may total 45 Bbbl -- equivalent to almost a third of Iraq’s total deposits, according to BP Plc data. When the KRG sought to export oil on its own last year, the central government waged a legal battle to stop Kurdish cargoes from unloading, including the tanker that reached the Texas coast.

Oil companies including DNO ASA and Genel Energy Plc that operate in the Kurdish region have been caught up in the dispute over revenue from crude sales between the KRG and the central government.

The Suezmax vessel United Kalavryta departed Ceyhan, Turkey, on June 22, 2014, according to ship-tracking data. The ship dropped anchor off Galveston, Texas, and remained unable to discharge its cargo of 1.03 MMbbl of oil before sailing in January to Ashkelon in Israel, according to the appeals court ruling. The tanker discharged its oil in Ashkelon between Feb. 23 and March 3, the court said.

The court’s ruling is a rare, official confirmation that Israel has received oil sold by Iraq’s Kurds.

The KRG has denied selling oil either directly or indirectly to Israel. Ship-tracking data in February showed that 40 out of 51 cargoes of Kurdish oil may have discharged at Israeli ports.