We’re Arming the Kurds—Why Aren’t We Buying Their Oil?

Giant tanker full of Kurdish crude in limbo off Texas

We’re Arming the Kurds—Why Aren’t We Buying Their Oil? We’re Arming the Kurds—Why Aren’t We Buying Their Oil?

Uncategorized August 13, 2014 0

Sixty miles from Galveston in the Gulf of Mexico sits an oil tanker with $100 million worth of Kurdish oil. And it’s not going... We’re Arming the Kurds—Why Aren’t We Buying Their Oil?

Sixty miles from Galveston in the Gulf of Mexico sits an oil tanker with $100 million worth of Kurdish oil. And it’s not going anywhere.

Were authorities to allow in the 81,000-ton United Kalavrvta, it would set a precedence for further Kurdish regional ambitions—including Kurdish separatism—payed for with oil that won’t trickle down to the Iraqi central government in Baghdad.

The U.S. government doesn’t say no one can buy it.

“There is no U.S. ban on the transfer or sale of oil originating from any part of Iraq,” U.S. Assistant Secretary of State Brett McGurk said on Twitter. “As in many cases involving legal disputes, however, the U.S. recommends that parties make their own decision with advice of counsel.”

The two U.S. buyers of Kurdish crude, LyondellBasell Industries and Axeon Speciality Products, say they won’t buy the oil due to the risk of a legal dust-up with Baghdad. Despite officials asserting there’s no ban, U.S. marshals are under order to seize any Kurdish crude from the vessel.

If the tanker were to offload its oil, it would likely be onto smaller lightering ships, as the Marshall Islands-flagged United Kalavrvta is too large to dock in the Houston Ship Channel. In the meantime, the ship is burning around $60,000 in shipping fees every day it’s at sea without a buyer.

But the status of the tanker reveals a paradox in U.S. strategy. Arm and support the Kurds—which helps them create a state of their own—while not buying the oil the Kurds’ need to make their state viable.

There’s an argument we should buy their oil—and lots of it. For one, the Kurds are our friends. The Kurdistan Regional Government provides protections for refugees and religious minorities, and its citizens are friendly to Western countries and their values.

“It’s the one part of Iraq that actually works and has a bright future ahead of it,” journalist Michael Totten blogged. “Refusing to defend it would be like refusing to defend Poland, Taiwan or Japan.”

Kurdish oil facility. Matt Cetti-Roberts photo

“It’s an area that’s taken in refugees, and its stability is great enough for international investors,” Jim Krane, a researcher in energy geopolitics at Rice University’s Baker Institute tells War is Boring. “It’s a bulwark of international stability and an investor haven that’s coming under threat.”

So it seems that buying Kurdish oil makes sense. It’s good for U.S. and Kurdish interests, and it means supporting a pro-U.S. ally with an openness to American companies. But really, it’s not as simple as that.

“[The Kurds] have a separatist agenda and want to break away from Iraq,” Krane adds. “Even better [for them] if it contains parts of Iran and Turkey and Syria. So the main thing that’s missing is an economic lifeline. And they want oil to be that lifeline independent of Baghdad.”

When the Iraqi army collapsed this summer as Islamic State fighters overwhelmed Mosul, Kurdish Pershmerga troops stormed into the partly-Kurdish city of Kirkuk. This didn’t receive as much as attention as the fall of Mosul, but it’s still a very big deal.

Seizing Kirkurk wasn’t just a long-awaited Kurdish ambition, it now meant control over Iraq’s northern oil fields—some of the oldest-producing fields in the Arab world. This also established a bubbling, lucrative lifeline between Kurdistan to the outside world.

An independent Kurdistan now not only can survive, but prosper.

Here’s the contradiction of American policy. To prevent an expanded Kurdistan—a reliable American ally and haven for investors—from collapsing to the fundamentalist Islamic State, the U.S. has sent in fighter aircraft and hundreds of Marines and Special Forces advisers to assist Kurdish troops.

Kurdish oil facility. Matt Cetti-Roberts photo

While we’re doing all of this, the White House is trying to hold Iraq together as a state. That means discouraging buying Kurdish oil when the proceeds bypass Baghdad.

But combine the weight of U.S. military support, Kurdish oil sales elsewhere in the world and the general madness of Iraq’s situation, and an independent Kurdish state becomes more viable in any case. The momentum is building, the U.S. is helping and discouraging it … at the same time.

It’s a paradox. “Here we are blocking them from selling oil with one hand while handing them weapons to further their independence agenda with the other,” Krane says.

To be sure, the Kurds have other places to sell oil. Kurdish crude first travels through a pipeline to the Turkish port of Ceyhan. This summer, at least five tankers with Kurdish crude left Ceyhan for destinations around the world, according to the Washington Post.

One ship offloaded its cargo in Israel—an interesting hint of burgeoning Kurdish and Israeli ties. Another tanker transferred oil to another ship near Singapore. A third tanker is transiting near Malta. The fourth is off New Jersey and United Kalavrvta is still sitting in the Gulf of Mexico.

Offloading $100 million worth of crude at a U.S. terminal would be a “real coup,” Krane says. Which might explain why the Port of Houston was the ship’s destination.

But the decision to sail toward Texas could simply be a practical, business move as well. “Most of the production in northern Iraq is heavier, sour crude,” Krane says. “It’s a type of oil that is normally less valuable on global markets, but here on the Gulf Coast we have a lot of capacity for that type of crude. The refinery configurations are ideal.”

Still, United Kalavrvta’s oil may never reach the oil-refining promised land of Houston without a deal between the Kurdish authorities and Baghdad. If the crew is hoping for an American buyer, they might be waiting for a very long time.