Reuters: Oil Smuggling from the Kurdistan Region of Iraq to Iran has Flourished

On Thursday, July 21, Reuters reported that oil smuggling from the Kurdistan Region of Iraq to Iran has flourished, emphasizing that the United States is also examining whether sanctions against the Islamic Republic are being violated. According to Reuters, hundreds of oil tankers are smuggled daily from Erbil, the capital of the Kurdistan Region of Iraq, to Iran and Turkey, with the transfer of these shipments increasing since the closure of the official export pipeline last year. The report states that these oil shipments are offered to Iran at a discount. Reuters added that over a thousand oil tankers carry at least 200,000 barrels of oil daily, generating about $200 million in revenue monthly. Officials have stated that the scale of this informal export is one of the reasons Iraq has struggled to comply with OPEC's production cuts this year. Officials from the Islamic Republic and Turkey did not respond to Reuters' requests for comments. Asim Jihad, spokesman for the Iraqi Ministry of Oil, stated that the transfer of oil from the Kurdistan Region of Iraq is not approved by Baghdad, and only the state oil marketer is authorized to sell Iraqi crude oil. Jim Krane from the Baker Institute at Rice University told Reuters that OPEC's tolerance for smuggling is decreasing. The news agency noted that oil smuggling to Iran from the Kurdistan Region of Iraq could also strain relations with the United States. The increase in oil smuggling followed the halt of this commodity's exports from the Kurdistan Region of Iraq via the Iraq-Turkey pipeline in March 2023, after an international court agreed to the federal government's request to suspend exports. Until last year, the Kurdistan Region of Iraq exported about 450,000 barrels per day through the official Iraq pipeline to Turkey, reaching the Turkish port of Ceyhan from the oil city of Kirkuk. This action faced opposition from the Iraqi government, and an international court ruled in line with Baghdad's position. The Iraqi government stated that Turkey coordinated oil imports from the Kurdistan Region of Iraq with the regional government without Baghdad's consent, which is contrary to the 1973 treaty. Reuters gathered details of this thriving trade through conversations with over 20 individuals, including oil engineers in the Kurdistan Region of Iraq, traders, government officials, politicians, diplomats, and oil industry sources. Hiwa Mohammed, a senior official of the Patriotic Union of Kurdistan, one of the two ruling parties in the Kurdistan Region of Iraq, stated that oil passes through border crossings with the knowledge of regional and federal governments. An American official told Reuters that Washington is examining the oil trade to assess compliance with sanctions against the Islamic Republic. Ali Hameh Saleh, a regional legislator who was the head of the oil committee until the dissolution of the Kurdistan Regional Parliament in 2023, stated, 'There is no trace of oil revenues.' A U.S. State Department official said, 'U.S. sanctions against Iran remain in place, and we regularly communicate with our partners regarding enforcement issues, but we do not disclose the details of these discussions.' A senior official from the Kurdistan Region's Ministry of Natural Resources stated, 'Oil production in this region is 375,000 barrels per day, of which 200,000 barrels are transported to Iran and Turkey, and the rest is refined domestically.' This official, who requested anonymity due to the sensitivity of the issue, said, 'No one knows what happens to the revenues from the smuggling of 200,000 barrels of oil abroad or the sale of oil derivatives to regional refineries.' Reuters stated that it could not determine what Iran, which is struggling to sell its oil products due to sanctions, gains from this smuggling trade or who receives the oil in Iran. Hiwa Mohammed, a member of the Patriotic Union of Kurdistan, stated that oil smuggled from the Kurdistan Region of Iraq is sent to Iran for gasoline refining. Meanwhile, the Pakistani Ministry of Oil declined to comment on this matter, and Taliban officials also did not respond to Reuters' request for comments. This report comes as Nechirvan Barzani, the President of the Kurdistan Region of Iraq, visited Iran earlier this year and met with senior officials of the Islamic Republic, including former President Ebrahim Raisi and Supreme Leader Ali Khamenei.