The Financial Times By Daniel Dombey in Ankara and Anjli Raval in London
Turkey has called on the US to lift obstacles to the sale of oil by Iraq’s cash-strapped Kurds to help with their battle against the jihadis of the Islamic State of Iraq and the Levant (Isis).
The call, by a senior Turkish official, comes while the US carries out air strikes against Isis in support of the Kurdistan Regional Government, even as officials in Washington discourage international purchases of Kurdish oil for fear such a trade could further fragment the Iraqi state.
“This is urgent: Isis is now selling its oil, but the Kurds are not allowed to sell their oil,” the Turkish official told the Financial Times, referring to oilfields captured by the jihadist group in eastern Syria and around the northern Iraqi city of Mosul.
He claimed Isis was selling cut-price oil to the Syrian government – there are also allegations of widespread oil smuggling from the jihadist-controlled region, notably to Turkey itself – and compared those sales with the legal obstacles faced by KRG exports.
This week, Axeon, a US-based refiner said it would not proceed with a Kurdish buy because it was “controversial” – the latest in a series of rebuffs for tankers circling the globe with shipments of Kurdish oil.
With few buyers for its oil, one Kurdish official said the KRG was now working with Ankara on increasing storage capacity at the port of Ceyhan and elsewhere in Turkey, where the oil is piped before being loaded on to tankers, and was also looking at storing offshore.
Yet oil remains the principal source of revenue for the KRG, which has failed to keep up monthly salary payments to state employees since Baghdad cut off transfer payments early this year.
The issue is one of intense concern for Turkey, which sees the KRG as a buffer against the rising threat from Isis and has invested in Kurdish oilfields. Behind the scenes, Ankara has also provided the KRG with substantial financial support.
However, Turkey is constrained from taking a leading role against Isis because of 49 Turkish hostages, who include members of the special forces and diplomats, seized by the jihadis in June.
“Our message for the US is always very clear,” said the senior Turkish official. “There is a dispute within Iraq on how to interpret the constitution [over rights to oil revenues] but if outsiders take sides it will not benefit either Iraq, nor energy security, nor future political conciliation.”
The central government in Baghdad argues that KRG sales without central government permission violate the Iraqi constitution. The US has also warned against “unilateral” moves such as oil sales without federal government approval.
“We have informed all interested parties that any such transactions exposes them to potential legal risks,” Brett McGurk, a top State Department official on Iraq, said in a tweet in May – although he subsequently denied there was any US ban “on the transfer or sale of oil originating from any part of Iraq” or that the US was taking sides.
Haider al-Abadi, the Shia politician recently nominated to replace Nouri al-Maliki as Iraqi prime minister, shares the outgoing Baghdad government’s opposition to unapproved Kurdish oil sales. He warned last year that they could lead to “the disintegration of the country” and backed the move to deny the KRG its share of budget revenues.