On Monday, I talked about the Kurdish oil exports coming to U.S. coastlines…
Earlier this week, it looked like the Kurds were going to sell their oil from the port in Galveston. The Coast Guard had allowed the controversial shipment of crude — valued at $100 million — through into U.S. waters in the Gulf.
At least, it was about to be sold… until U.S. Magistrate Judge Nancy Johnson sent marshals to seize the cargo of the United Kalavrvta after the federal government in Baghdad filed a complaint to the court in Houston.
The government in power — for now — in Iraq has long been at odds with Kurdistan in the Northeast over oil exports. The Kurds have built a pipeline into Turkey and have expressed their desire to ship oil independently from the central government.
But Baghdad has repeatedly stated that they’re violating Iraq’s laws and that it would sue any buyers involved in a transaction with Kurdistan, as well as potentially blacklist them exporting oil.
Yesterday, Kurdistan disputed the claims made by the Iraqi government and condemned the seizure of the one million barrels of oil on their tanker.
“The federal government cannot win, because our crude is legally produced, shipped, exported, and sold in accordance with the rights of the Kurdistan region as set forth in the Iraqi constitution,” Ashti Hawrami, the Kurdish oil minister, said in a rebuttal.
Even though oil is involved, I’ll be honest and say that I don’t know the particulars of the Iraqi constitution, but the latest blow to the United Kalavrvta has me questioning how much longer Kurdistan can hold out.
The fact remains that the Kurds have to fund the shipment of this oil without any remuneration from its sale.
The crude first made it through the pipeline into Turkey at their port of Ceyhan in December, and after two months on the open sea, it looks as though it’ll be another two-month trek back to Turkey.
Remember that it costs about $75,000 a day to transport a large oil tanker, so after taking two months to get to the U.S., the Kurds have possibly spent $4.5 million.
And if the saga goes on too much longer, they may not even make a profit off of this cargo once it is — if ever — sold.
Granted, the entire situation could be easily resolved if Iraq allowed Kurdistan to sell the oil but charged a fee for the shipment. Then again, that might be possible if it weren’t for the lack of trust on both sides.
And if the Kurds fail to pay up after shipping their oil, what happens next? The overstretched and overburdened Iraqi military would be little challenge when facing an organized Kurdish force flush with $100 million in fresh cash.
Don’t get me wrong; I’m not trying to suggest this will happen. But it’s clear that both sides are drawing out the conflict instead making the practical — and valuable — solution.
The nearly one million barrels aboard the United Kalavrvta is a significant amount of crude compared to Iraq’s daily production.
The recent ISIL (ISIS, IS, or whatever they’re calling themselves today) invasion in Iraq has already curtailed Iraq’s production growth — despite the fact that the rebels never made it into the oil-rich southern region of Basra.
That’s an oil crisis that would immediately take top priority.
Until next time,