A Blog by the Editor of The Middle East Journal

Putting Middle Eastern Events in Cultural and Historical Context

Friday, August 1, 2014

The Oil Without a Country: The Flying Dutchman Tankers of Kurdish Oil

Like the legendary Flying Dutchman that can never make port, at least three oil tankers are standing outside territorial waters off Galveston, Texas, Mohammedia, Morocco, and in the South China Sea off Malaysia. (A fourth is said to be loading oil at the Turkish oil port of Ceyhan.) The vessel off Malaysia has offloaded some of its crude to another vessel, ultimate destination unknown. The oil, estimated to be worth some $300 million, comes from the Kurdistan Regional Government (KRG) in Iraq, and the government in Baghdad is claiming ownership until a revenue splitting agreement can be negotiated. After some initial openness to buying Kurdish crude, customers (at least open ones) are showing jitters about buying oil whose ownership is in dispute. After earlier reported deliveries of Kurdish oil to US and Israeli buyers, the Iraqi Oil Ministry is now vigorously challenging such deliveries in court as illegal sales of Iraqi oil.

The  KRG is locked in a dispute with the central government in Baghdad. and has sought to market its oil via Turkey. The tankers involved reportedly belong to a Greek company. (Russian source; use with caution.)

There are reports that at least one shipment was already delivered to Israel, sold to a private buyer. The US, which opposes the breakup of Iraq and Kurdish independence, has apparently been privately lobbying Turkey and other countries against marketing the oil.

The tanker off Galveston has provoked the most attention. Earlier cargoes had already been delivered in May, possibly bought, according to Reuters, by a Ukrainian-owned US-based oil company, LyondellBasell, but following legal moves to block delivery, the company has announced it will not buy any more of the disputed oil.

Officially, the US Administration has insisted it does not interfere with private oil sales, but one reason for the buyer's backing out was an order by a Texas judge in response to a suit by Baghdad that the estimated $100 million worth of crude carried in the Greek-owned but Marshall Islands-flagged United Kalavrvta (yes, that appears to be how it's spelled; don't ask me how it's pronounced) should be seized; but the judge also ruled that US Marshals could not seize the oil so long as it remained outside US territorial waters. The legal dispute over the ownership of the oil is having a chilling effect on other potential US buyers.

Meanwhile, a sister ship, the United Emblem, anchored outside territorial waters in  the South China Sea off Malaysia, has reportedly offloaded at least part of its cargo to another tanker, bound for an unknown mystery buyer.

The third tanker, United Leadership, has been anchored off Mohammedia, Morocco for some two months. A Kurdish report has said it is likely to be transported to Sicily. Earlier, after making port in Morocco, Moroccan authorities ordered it out of their territorial waters; and the ship reportedly headed towards the US, but then reversed course and has remained off Morocco.

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