Baghdad Warns Buyers of 'Stolen and Smuggled' Oil as Iraq-Kurdistan Dispute Escalates

A worker walks down the stairs of an oil tank at Turkey's Mediterranean port of Ceyhan(Reuters)

The Iraqi government has warned international oil companies against buying crude oil exported from Iraqi Kurdistan, saying it will take action against buyers of "stolen and smuggled" oil.

"The Ministry of Oil confirms its warning to the world companies and markets not to buy the oil cargo on the vessel (United Leadership) which is loaded with crude oil extracted from the oil fields of the Kurdistan region," the ministry said in a statement.

The crude oil tanker made global headlines when it departed from Turkey's Ceyhan port in May, loaded with crude oil exported by the Kurdistan Regional Government (KRG) via the newly finished pipeline to Turkey. The oil was exported without the approval of the central Iraqi government in Baghdad.

The United Leadership vessel reversed course after seemingly heading for the United States Gulf Coast, according to ship tracking and market analysts. The reversal has prompted speculation that the exporters have yet to find a buyer.

Iraq's oil ministry said it is tracking the oil tanker and said its cargo left the country illegally and without the permission of Iraq's federal government and oil ministry.

Baghdad has filed for arbitration against Turkey in a bid to prevent Ankara from importing and exporting oil from the KRG without central government approval.

The Kurdish leadership has said its oil exports are in line with the country's constitution and that it has exported oil in trucks via Turkey and Iran for years.

The dispute between Iraq and Kurdistan erupted over Arbil's desire to sell oil via the new pipeline. The bitter standoff has become entrenched and has prompted the KRG to act without Baghdad's approval.

"There is no going back," KRG's prime minister Nechirvan Barzani told parliament in May.

"If we cannot reach a shared understanding, we have other options and we cannot wait forever. Why did we begin selling oil? In order to make Baghdad realise that we can do it," he added.