Hundreds of oil tankers clog Kurdistan’s mountainous highways every day, a visible sign of a booming but unofficial oil trade. This surge in trucked oil exports to Iran and Turkey comes after a key pipeline closure last year.
Trucking Oil to Avoid Pipeline Shutdown
The Kurdistan Regional Government (KRG) previously relied on the Iraq-Turkey Pipeline (ITP) to export its crude oil. However, an international tribunal sided with the Iraqi federal government in March 2023, halting those exports. The KRG argued for autonomy in oil deals, but Baghdad insisted on central control.
Faced with the shutdown, the KRG turned to trucking oil to neighboring countries. Industry sources estimate that over 1,000 tankers carry at least 200,000 barrels of discounted Kurdish oil to Iran and Turkey daily, generating an estimated $200 million per month. This significant increase in unofficial exports is a major reason why Iraq has struggled to meet its OPEC production quotas in 2024.
The lack of transparency surrounding this trade raises concerns. Local officials report that none of the proceeds enter the KRG’s coffers. The beneficiaries behind this smuggling operation remain unclear, with accusations targeting Kurdish political elites.
Meanwhile, the environmental impact of this heavy truck traffic is substantial. Residents along these routes grapple with damaged roads and deadly accidents involving tankers. Rashid Dalak, visiting the grave of his brother killed in a tanker accident in May, laments, “It’s very painful. Despite damaging our roads and killing our loved ones, no one here has seen a dollar.”
US Monitors Trade Amidst Political Tensions
The United States is monitoring this trade to assess whether it violates sanctions on Iran. The future of the Kurdish oil trade is uncertain and depends on several factors. A potential reopening of the ITP could significantly impact the current operations. Additionally, a resolution to the wider political disputes between Erbil and Baghdad is crucial for a long-term solution.
A senior Iraqi parliamentary official familiar with oil matters recognizes the complexities. While aware of the trade details, Baghdad avoids public criticism to preserve ongoing talks with Erbil. “Putting pressure on Erbil could corner the region and deprive it of funding, which could result in its collapse,” the official commented on condition of anonymity.
This trade has been cited by Iraqi officials as a reason behind the country’s struggles to adhere to OPEC production quotas, a point of contention with Saudi Arabia, the de facto leader of the cartel. Iraq remains committed to voluntary production cuts, according to Iraqi Oil Ministry spokesperson Assim Jihad.
The sheer volume of tanker traffic is causing friction beyond economics. The accidents and road damage are angering residents. However, the trade also offers a vital source of income for the KRG, which has struggled to pay public employees.
Diplomatic wrangling continues as Kurdish officials claim the pipeline closure is part of a broader effort by Iran-backed Shi’ite parties in Baghdad to curb their autonomy. Baghdad denies these accusations.
The situation in Kurdistan highlights the complex interplay between oil resources, political autonomy, and regional tensions. With no immediate resolution in sight, the Kurdish oil trade is likely to remain a contentious issue in the months to come.
Source: Reuters
