International oil companies operating in Kurdistan continue to smuggle over 1,000 oil tankers daily amid a pipeline shutdown since March 2023. According to Reuters investigations, this illicit trade routes crude through Iran and Turkey, generating approximately $200 million monthly despite regulatory challenges.
Although Kurdistan hasn’t been able to export its oil through a pipeline in more than a year, crude still leaves the semi-autonomous area of Iraq and travels on tank trucks to the Iranian border.
According to a Reuters investigation, more than 1,000 of these tank trucks are thought to be shipping at least 200,000 barrels of Kurdish oil per day (bpd) to Iran and Turkey.
The transaction is profitable, especially when compared to the difficulties the Kurdistan regional administration has faced in the absence of oil earnings over the past year, even if the price of the crude being smuggled out of the northern semi-autonomous territory is allegedly around $40 per barrel in these shady dealings reports OilPrice.com.
Reuters, whose reporters spoke with over 20 individuals, including oil engineers, oil industry sources, merchants, government officials, politicians, and diplomats, estimated that the smuggling brings in about $200 million a month.
According to some of these sources who spoke with Reuters, the federal and regional governments were probably aware of the oil smuggling. Industry, political, and diplomatic sources told Reuters that after arriving in Iran, the oil is either transported by road to Afghanistan and Pakistan or put onto ships at the Iranian ports in the Gulf at Bandar Imam Khomeini and Bandar Abbas.
According to other sources, there is a lack of transparency regarding the $200 million monthly money generated by these enterprises.
Since the pipeline route to the Turkish port of Ceyhan, which is the semi-autonomous territory of OPEC’s second-largest producer used to ship its oil overseas until March 2023, was closed, the smuggling industry has flourished.
Around 450,000 barrels per day of these pipeline exports to Turkey were shut down in March 2023 following a disagreement over who should approve the Kurdish exports. The exports were stopped last year.
The standoff resulted from a March 2023 International Chamber of Commerce verdict in an energy dispute between Turkey and Iraq over Kurdistan. The International Criminal Court found in favor of Iraq, which had maintained that without authorization from the Iraqi federal government, Turkey should not let Kurdish oil shipments through the Iraq-Turkey pipeline and the Turkish port of Ceyhan.
Right now, the only company authorized to sell crude oil produced anywhere in Iraq is the state oil marketing organization SOMO.
Furthermore, it appears that Baghdadi politicians do not consider the reopening of the pipeline to Ceyhan on the Turkish Mediterranean coast to be a top priority.
One of the six members of the Association of the Petroleum Industry of Kurdistan (APIKUR), the Norwegian company DNO, stated in November 2023 that until they have clarity regarding past-due and future payments as well as sales terms, the international oil companies operating in Kurdistan will not be producing oil for export.
A few businesses have started producing oil again for the regional market.
However, industry insiders told Reuters that, after being approved to purchase the crude, local purchasers sell it to foreign companies through middlemen without their knowledge.
Various Reuters sources believe that the smuggling increases Iraq’s supplies by 200,000–300,000 barrels per day. Iraq, the second-largest producer in OPEC, has privately stated that this trade is one of the reasons it hasn’t been able to cut its output as part of the OPEC+ agreement thus far.
Iraq has consistently promised to demonstrate better discipline moving forward, but it hasn’t cooperated with the present reductions.
Plans for compensation have been planned for both Iraq and Kazakhstan, a non-OPEC producer that is a member of OPEC+ but has also not met its quota. OPEC estimates that Iraq’s overall overproduction between January and March 2024 alone was 602,000 barrels per day.
There is a 4-million-bpd output cap in Iraq. According to OPEC’s secondary sources in its most recent monthly report, which was made public this week, it pumped 4.189 million bpd in June—down 25,000 bpd from May. However, that is around 200,000 bpd more than what the OPEC+ agreement called for.
Last month, GreatGameInternational reported that following Russia’s invasion of Ukraine in February 2022, Western nations imposed severe restrictions on Russian oil imports. This has resulted in a notable global trade shift, with countries such as China, India, and Turkey increasing their oil imports from Russia.
