U.S. judge bars Kurdish oil from entering Texas port

07/29/2014 4:13 PM

07/29/2014 4:13 PM

Iraq persuaded a U.S. federal judge to order the seizure of $100 million of oil inside a tanker anchored off Galveston that it claims was illegally pumped from wells in Kurdistan.

Kurdish officials “misappropriated” more than 1 million barrels of oil from northern Iraq and exported them through a Turkish pipeline, according to a complaint filed Monday in Houston federal court. U.S. Magistrate Judge Nancy Johnson in Galveston authorized U.S. marshals to seize the cargo and have it moved ashore for safekeeping until the dispute is resolved.

The U.S. officially recognizes Kurdistan as part of Iraq, although the Kurdish people have jockeyed with the Baghdad-based national government for autonomy for more than a decade. Oil revenues from the northern oil fields could fuel Kurdistan’s fight for independence.

“Either they’ll bring the oil into port, where we’ll take possession of it, or they’ll sail off somewhere else,” said Phillip Dye Jr., a Houston-based attorney for the Iraqi Oil Ministry. His clients don’t know who bought the cargo, and he said he had no reports that any oil has been removed from the tanker yet. In a separate court filing, AET Inc. identified Talmay Trading Inc. as the company that hired it to transfer the crude.

The Iraqi government warned Kurdish officials to stop the illegal exporting through Turkey, which began in December, according to the complaint. The crude shipment left Ceyhan, Turkey, on June 23, and has “changed destinations multiple times” while at sea, according to the filing. The ship is anchored about 60 miles southeast of Galveston, outside U.S. territorial waters, according to data compiled by Bloomberg.

If a U.S. refinery accepts shipment of the crude, it will send a signal to the rest of the world that it is acceptable to do business with the Kurdish government, said Carl Larry, president of Oil Outlooks & Opinions.

“It opens the door to some kind of breakup in that region where you could have a separate Kurdistan and Iraq,” Larry said. “It’s definitely going to create that separation, and more people are going to recognize that and respect it.”

Jen Psaki, spokeswoman for the U.S. State Department, said the U.S. government is following the dispute closely. “We believe that Iraq’s energy resources belong to the Iraqi people and certainly have long stated that it needs to go through the central government,” she said.

The Iraqi Oil Ministry asked U.S. marshals to oversee lightering operations to remove crude from the tanker and store it onshore at Iraq’s expense. The proposed arrest warrant filed with the complaint didn’t ask to seize the United Kalavrvta, the Marshall Islands-flagged tanker, which is too large to enter the Houston Ship Channel and offload cargo directly.

The tanker was cleared by the U.S. Coast Guard to proceed with offloading, the agency said.

AET, a Kuala Lumpur-based company that operates Dallas-based AET Offshore Services, said it entered into a lightering contract — transferring cargo between ships — with Talmay Trading of the British Virgin Islands.

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