Iraqi Kurdish oil stoppage halts $6 billion debt repayment to traders - sources

Genel Energy

30/03/2023 13:40

By Dmitry Zhdannikov and Julia Payne
       LONDON, March 30 (Reuters) - A suspension of Kurdistan's
oil exports has halted repayments via crude cargoes of $6
billion owed to energy traders including Vitol and Petraco by
the semi-autonomous Iraqi region, trading sources told Reuters.
    Some 450,000 barrels per day (bpd) of oil exports from Iraqi
Kurdistan to Turkey's Mediterranean port of Ceyhan were
suspended on Saturday after Iraq won an arbitration case in
which it said Turkey had violated an agreement by allowing
Kurdistan to export oil without Baghdad's consent.
    The suspension means Kurdistan cannot repay debts with crude
oil supplies and alternative schemes have not been put in place.
    The world's top trader Vitol and a smaller rival Petraco are
owed some $750-$800 million each, according to three trading
sources, who put Kurdistan's total debts to traders who pre-paid
for crude before the suspension at around $6 billion. Vitol and
Petraco declined to comment. The government of Kurdistan
declined to comment.  
    Following the court ruling, the government in Kurdistan said
that a delegation would visit Baghdad soon to resolve the
issues.
    An Iraqi government spokesman declined to comment on the
debts.
    "Let's work out a breakthrough to the oil exports issue and
then other issues could be addressed under less pressure," he
said.      
    The suspension led to a rise in oil price as the Kurdish
exports represent some 0.5% of global oil supply and are an
important source of crude for refiners in the Mediterranean.
Some oil firms started shutting down production in Kurdistan
this week.
    Over the past decade, Kurdistan has managed to grow oil
exports independently from Baghdad as trading firms provided
billions of dollars in loans to the region in exchange for crude
cargoes and the region built a new pipeline to Turkey.
    Kurdistan held an independence referendum in 2017, but
interventions by the United States and Iran meant it did not
lead to a full split from Baghdad.
    An Iraqi oil ministry legal adviser familiar with the
discussions with Kurdistan said Baghdad wants to run oil exports
 via its state marketing firm SOMO and wants oil sales revenues
to be deposited in an independent bank account.
    The account would be controlled by the Kurdish government
and supervised by Baghdad and would serve for multiple purposes
including debt repayments, the adviser said, citing earlier
proposals.
    "We (the central government in Baghdad) are not paying debts
in billions of dollars for transactions we are not aware of or
involved with," the adviser said. 
    Another Iraqi oil ministry official said no progress has
been yet made on the debt issue.
    Iraq, OPEC's second largest producer, exports the lion's
share of its oil from ports in the south of the country on the
Middle East Gulf.

 (Reporting by Dmitry Zhdannikov and Julia Payne, Additional
reporting by Ahmed Rasheed in Baghdad;Editing by Elaine
Hardcastle)
 ((julia.payne@thomsonreuters.com; +44 207 542 1836;))